Under the Dome

Budget Update for 2009-2010 FY

Cynthia Ann Paul

Overall Summary: Earlier this month, the House Speaker agreed to the Senate target (dollar amounts) set back in June of 2009, cutting the total state budget by $1.2 billion.  Here are the general fund targets in the deal, along with each sides’ earlier proposals:

After the targets were set, Conference Committees met over the items of differences between the House and Senate versions of the budget bills and reconcile the differences.  There are drastic cuts throughout all of  the state departmental budgets. 

As of October 12, 2009 - the Governor with no vetoes has signed the following 4-budgets: Community Colleges (HB 4435); Judiciary (SB 249); Military and Veterans Affairs (SB 250) and Education (HB 4438). 

The following 2 budgets have been signed by the Governor with vetoes Corrections (HB 4437) and Transportation (SB 254).

The following 3 budgets have been sent to the Governor and are awaiting action: Natural Resources/Environmental Quality (HB 4446); Agriculture (SB 237); School Aid, K-12 (HB 4447).

-The following 6 budget conference reports have passed the House and Senate and are awaiting immediate effect to be reconsidered: Community Health (HB 4436); Higher Education (HB 4441); Energy, Labor & Economic Growth (SB 243); General Government (SB 245); Human Services (SB 248); and State Police (SB 253), they currently remain on the Senate floor.

Community Colleges (HB 4435)- The budget totals $299.4 million, all in general funds, which is exactly how much the state’s 28 community colleges received in the current fiscal year.  One of the changes the budget went through compared to what Governor Granholm proposed is that it includes $3.5 million to reimburse colleges that lose local funding through renaissance zones.  And the $97 million in federal stimulus funding the House added for workforce development was not included in the final conference report.  The budget does include boilerplate regarding tuition restraint originally added by the House, but the wording was watered down. Originally, community colleges receiving federal stimulus dollars were expected to hold the line on tuition by not increasing it more than 0.5 percentage points above the Consumer Price Index. However, the conference report merely states it is the intent of the Legislature to encourage such action.  Also, the House had proposed having the Legislature study the feasibility of consolidating community college districts, but the conference report went with Senate language that spelled out that the colleges are encouraged to achieve efficiencies through collaborations.

Corrections (HB 4437)- The budget totals $1.93 billion, $1.87 billion of which is paid for in general funds. Overall, the budget cuts $87.5 million in general fund spending, which represents a 4.5 percent reduction from the current fiscal year (and $38.2 million reduction from the Governor’s recommendation). Much of the cuts will be made up by DOC officials cutting various programs to come up with the equivalent of $841 in savings per prisoner, including prisoner health care and education, food service, transportation and facility maintenance.   The conference report concurs with Governor Granholm’s recommendation to close the prisons in Standish, Muskegon and Hiawatha. The county jail reimbursement program will see an additional $4.3 million in funding above the current fiscal year.

Department of Education (HB 4438)- Overall, the budget in HB 4438 totals $112.9 million ($19.4 million in general funds). The general fund increase is $12 million, or 161.2 percent more than the current fiscal year, but all of that represents the department’s takeover of the library.  The conference committee cut library operations by $511,000. Funding for two book distribution centers was restored.  State aid to local libraries will be cut  by $4 million. Governor Granholm recommended the libraries receive $10 million in state aid.  The budget includes transfer of the Library of Michigan to the DOE from the Department of History, Arts and Libraries.  Boilerplate states it is the intent of the Legislature that the library and its related programs are kept together under a state department.   On top of annualizing the May executive order budget cuts, the conference report cuts a variety of program general funds within the department including: $139,900 from special education operations, $115,000 school improvement operations, $62,100 school finance and school law operations, $130,100 State Board of Education and superintendent operations, $45,000 central support, $80,000 subject area content expectation, $112,900 grants administration and school support and $54,500 career tech.  Early education programs also would see a $98,000 hit. Alternative teacher certification program earmarks were completely eliminated, saving $300,000 in restricted.  Information technology support for the department was also pared down.  Conference Committee Chair, Terry Brown, opposed the Conference report.

D.E.Q./D.N.R.: Combined in (HB 4446)  totals $704.3 million, of which $44 million is paid for with general funds. That represents a $4.8 million hit to general fund support for the budget compared to the current fiscal year, or 9.9 percent. Overall, the budget’s gross amount is reduced by $195.7 million or 21.7 percent.  Although the bill maintains separate funding for the two departments, legislators said they had still built in $350,000 in administrative savings to assume their eventual merger. 

On the Department of Environmental Quality side, the bill largely adopts the cuts passed by the House, but with some additions. The House budget contained cuts to specific programs totaling $4.37 million less than Governor Granholm’s recommendation while the Senate passed $6.4 million in cuts, most of which was from an across-the-board cut in general fund money to DEQ programs. The conference report funds the wetlands program for 3-mos., w/ full funding is reliant on further legislation. Governor Granholm proposed the wetlands program be transferred to the federal Environmental Protection Agency.   It also contains a $1.3 million reduction (all general fund) from the governor’s recommendation to air quality programs. Other cuts hit the Office of Pollution Prevention ($281,800), Land and Water Management ($200,000), the Hazardous Waste Management Program ($450,000), the Radiological Prevention Program ($197,000), the Water Division ($1.3 million) and Environmental Investigations ($250,000).  One funding addition the conference report includes is $50 million in federal funding for Great Lakes restoration. Overall, the DEQ budget contains $389 million ($26.95 million general fund).

On the Department of Natural Resources side, the bill contains a $150,900 cut (all general fund) to the Wildlife Management Program that reflects smaller cuts passed by the Senate. The House passed a $345,900 cut. But the conference committee cut more deeply than either the House or Senate in Cooperative Resource programs, slicing $298,500 (all general fund) instead of the $197,400 trimmed by the House and Senate. The budget also reflects the dissolution of the Department of History, Arts and Libraries by bringing over some of HAL’s programs to DNR. And it contains $15 million in added federal funding for Great Lakes restoration.  Overall, the budget contains $315.3 million ($16.7 million general fund).

**Senate Bill 785, which provides additional regulation for the wetlands program and funds it from the bottle deposit money passed both the House and Senate and has been sent to the Governor.  The air quality renewable operating permit legislation that increase certain fees (HB 5220) to keep the program operating and take on additional federal Co2 standards still needs action by both the House and Senate. 

Department of Agriculture (SB 237)- Overall, the bill contains $84.6 million ($30.6 million general fund). It contains a 7.1 percent increase in general fund money from the 2008-09 fiscal year, although overall funding drops by 14.4 percent to reflect declining federal revenues.    The Upper Peninsula State Fair would lose all state funding under the Department of Agriculture budget.  The bill provides $2.5 million in state services fee funds and equine funds for the Office of Racing Commissioner and boilerplate language makes the office part of the department in order to find savings that would go to horse racing lines. In terms of horse racing, the budget contains $6.1 million. Although that’s $1.4 million less than the current year, it is $3 million more than Governor Granholm recommended.  By moving funds from the Department of Human Services and the Department of Community Health, the bill restored the Agricultural Surplus System at about 86 percent of its current funding with $540,000.  The budget rejected Ms. Granholm’s proposal to increase dairy inspection fees by 1 cent for every hundred pounds of milk sold. Instead, the bill would shift $400,000 in general funds and $100,000 in restricted funds to the dairy inspection program and require some increased efficiency to reduce costs. The bill would also put $400,000 of general funds into the agriculture equine fund in order to pay for the bovine tuberculosis program, while reducing funding for the program by $400,000. While the Senate passed a bill that would have cut money for the environmental stewardship program, the conference report gives $400,000 more in general funds to the program to ensure that migrant labor housing inspections and (related programs) are maintained. The bill also provides for $236,800 for conservation districts, money for the department to distribute as it sees fit, and funds agricultural statistics service at the current year level of $65,000 in general funds.

The Judiciary (SB 249)- The judiciary budget is $293,000 below current year spending, but the 2009-10 budget does include a transfer of $1.4 million from the juror compensation fund to the general fund.  By relying on federal Byrne Grant funding, the state’s nine mental health treatment court pilot projects will continue for another year. When both chambers passed the budget originally, their numbers were not far apart $258.8 million ($153.1 million in general funds).  In addition to the mental health courts, the budget includes an intensive probation pilot program for high-risk offenders the Senate originally added. The nearly $1 million in funding would come from an interdepartmental grant from the Department of Corrections. The budget also includes boilerplate allowing the Supreme Court justices to keep their satellite offices.

Military Affairs (SB 250)- The budget is $146.1 million, $36.4 million general fund. The general fund spending represents a 2.8 percent cut from current year and $3.1 million from the governor’s recommendation. The 27.7 percent cut in gross spending is largely from completion of a $40.5 million capital project.  A key change in the budget is a $1 million cut from the service organizations, to match current year funding. But only half of that will go directly to the organizations. The second half of the fiscal year, the money will be converted to five competitive grants and the organizations will have to apply for the money. The budget cut $1.25 million general fund from the two veteran’s homes, but replaced that with federal funds. General funds cut from National Guard tuition assistance, $682,500, was also replaced with federal funds. The plan also cut $100,000 from information technology and $29,200 from the headquarters.  The conference did agree with the governor in adding $190,300 for National Guard retirement payments.  If, at the end of the fiscal year, the department has any money left, that would go toward armory repairs.  Toward future budget cuts, the agreement would urge more joint use of facilities between National Guard and reserve units and would require an efficiency study of the Grand Rapids Veterans Home.

Department of Transportation (SB 254)- Totals  $3.26 billion.  The budget, all restricted and federal funds, is a $1.24 billion cut from current year, though most of that, $887.2 million, is removal of one-time funds from the current year budget. The agreement included a $12 million transfer from the Transportation Economic Development Fund to the general fund to help balance other budgets, but the $9.87 million cut from the Comprehensive Transportation Fund reflected only expected revenue declines. Earlier proposals for CTF cuts were replaced with federal stimulus funds and with money from the rail infrastructure loan fund. Work could continue on a proposed new border crossing between Detroit and Windsor, but only up to $2.5 million in spending could occur and only if the work does not commit the state to any future construction under the Department of Transportation. The ongoing dispute between the Detroit International Bridge Company, which owns the Ambassador Bridge and opposes a new crossing, and the government-led consortium that wants to build a new bridge downriver from the Ambassador.  The department is also required to conduct a traffic study in the region and have a project plan by May 1. The Legislature would then be expected to act on that plan by June 1. The budget also anticipated $110.3 million in state revenue declines and $247 million in federal revenue losses over the next year.

Department of Community Health (HB 4436)- Overall, the budget is 4.8 percent higher, or $604 million, above current year spending.  It totals just over $13 billion, with $2.3 billion paid for with general funds. That represents a drastic 24.5 percent chop to general fund spending for the department, or about $750 million less than what was spent in the current fiscal year. But DCH will also receive $1.7 billion more in federal dollars, or 24 percent, than it is currently.  Medicaid caseload and utilization rates are expected to increase, meaning a $358 million gross, $129 million general fund, hike in funding. Providers would still see an 8 percent rate cut, which includes annualizing the 4 percent cut they got in the May executive order.  Hospitals and nursing homes could see the 4 percent cut in the EO restored through increasing the quality assessment assurance program (QAAP) fee on those entities. Increasing the QAAP also provides more general fund savings of $4 million (this will require separate legislative action).  Non-Medicaid services will continue to be slashed with the budget annualizing the May executive order, which means a $40 million reduction for that program compared to the current fiscal year.  Sixteen of the 27 projects under the Healthy Michigan Fund were abolished in the budget. As was $3.3 million in general fund dollars that went to the AIDS and risk reduction clearinghouse and media campaign, African-American male health initiative, public health physician practice project, targeted initiatives for gonorrhea and chlamydia and the methamphetamine cleanup fund.  Funding for local public health departments will see a $535,600 cut. Several programs for senior citizens will see cuts, including: community services programs ($2.1 million), nutrition services and meals ($1.6 million) and volunteer programs ($771,000).  While it would require a change in federal law, the DCH budget also assumes a savings of $32 million from health plans for managed care Medicaid enrollees receiving federal pharmaceutical rebates.  The budget also relies on $11.4 million in money being transferred from the Medicaid Benefits Trust Fund to the general fund, as well as $3.7 million savings from further reforms to prevent fraudulent Medicaid billing.  Behavioral health drugs would be moved to the preferred drug list under the budget, saving $5 million in general funds. The 25-cent pharmacy dispensing fee increase in the May executive order would be annualized to save another $231,000.  The budget rejects the governor’s proposal to eliminate funding for multicultural services, but it does hold the $6.8 million funding steady. The Mount Pleasant Center for Persons with Developmental Disabilities will be closed by October, saving $3 million in general funds. Funding for room and board of young adults residing in substance abuse facilities would see a $266,000 reduction under the budget. And funding for respite care services for children with serious emotional disturbances would also be eliminated, saving $1 million.  Families using the Children’s Special Health Care Services would see a fee increase, saving the state $1.5 million in general funds. But the program will expand primary care coverage for 4,000 more children with the use of $11.4 million in federal funds. Direct care workers in mental health settings will continue to see a 1 percent wage increase that took effect in February, but the 50 cent increase the House proposed was not included.  It eliminates the Office of Long-Term Care Supports and Services. It assumes $8 million in savings from the estate recovery in the long-term care program (this will require separate legislative action).  Forensic mental health services will receive a $5.3 million interdepartmental grant from the Department of Corrections. Lastly, Auto insurers would have to turn over medical expense information for the state to identify third-party liability to the Medicaid system.

Higher Education (HB 4441)-  Overall, the budget totals $1.6 billion, of which $1.5 billion comes from the general fund. That represents an 8.4 percent general fund cut from the current fiscal year. Universities would see a 0.4 percent cut to their operational budgets, but would also receive funding from the federal stimulus. The Agriculture Experiment Station and Cooperative Extension Service also would be cut by 0.4 percent.  The King-Chavez-Parks grants were maintained, but the part-time independent student, Michigan Education Opportunity and nursing scholarship financial aid programs that were cut.  The Tuition Grant program, which goes to need-based students attending private colleges, also received a cut of 44 percent ($25 million). The Michigan Promise Grant was eliminated, cutting $80.5 million.

Department of Energy Labor and Economic Growth AKA DELEG (SB 243)- Totals $1.42 billion. The budget in gross dollars is actually $31.4 million more than the current budget. But the general fund portion of $55.1 million is $4.49 million less than the current year.  The general fund portion is $20.8 million less than Governor Granholm’s revised proposal and is actually $10 million less than the Senate passed version and $10 million more than the House-passed version.  Governor Granholm wanted to finance the No Worker Left Behind program at $16 million, the budget includes $4.5 million in general funds. The governor had proposed $5 million for the Michigan Nursing Corps, but the budget allocates $300,000 in general funds. It cuts $500,000 in general funds from the Bureau of Fire Safety, setting it down to $2.6 million. The budget also does not include any provision for the increase in liquor fees that Governor had called for to help offset any budget cuts.  It did not include Senate intent language of reviewing to turn the MIOSHA program over to federal control.  It includes Senate language prohibiting ergonomics standards that was modified by the AG’s opinion that the Governor’s statement of this provision being unenforceable does not invalidate it.

General Government (SB 245)- Instead of the 13.1 percent cut originally proposed under the budget agreement struck by Senate Majority Leader Mike Bishop and House Speaker Andy Dillon, the bill would cut funding by 11.06 percent. Counties also would see an 11.06 percent cut, down from the 14.3 percent in the original deal. Detroit would lose $29.75 million under the bill, reducing its revenue sharing take to $239.2 million.  Among other large communities, Grand Rapids would lose $2.4 million, Warren $1.5 million, Clinton Township in Macomb County $820,978, Farmington Hills $703,340, Kalamazoo $1.1 million, Marquette $215,647 and Traverse City $140,654. Most of those communities no longer receiving statutory revenue sharing would see a cut of 4.1 percent.  The Departmental funding in the General Govt. Budget is as follows:

ATTORNEY GENERAL: Operations in the Department of Attorney General would fall by $3 million under the bill.  Total funding for the department would be $73.9 million ($28.8 million general fund). That’s a 3.8 percent general fund reduction.

CIVIL RIGHTS: Overall, the budget contains $13.8 million ($11.1 million general fund). That’s a 6.5 percent general fund cut.  Operations in the department would be cut by $613,700 under the conference report. The conference committee actually cut considerably less than the reductions passed by the House and Senate, both of which were more than $1.1 million.

EXECUTIVE: The budget contains $4.8 million (all general fund).  The budget for Governor Granholm’s office would be cut by 4.3 percent under the bill.

INFORMATION TECHNOLOGY: The department would receive $423.3 million for the 2009-10 fiscal year, actually receiving a small increase of $3.6 million from the current year. The budget contains $6.9 million for a statewide Microsoft Office upgrade, $2.3 million for various needs in the Department of Corrections and $1.7 million for the Department of State Police. No general fund money is in the budget.

LEGISLATURE: Budgets for operations in the House and Senate would be slashed by 10 percent under the budget. Overall, the Legislature would receive $106.3 million for its operations ($104.8 million general fund). That’s a 4.3 percent general fund cut.

LEGISLATIVE AUDITOR GENERAL: The budget for the auditor general would be slashed by 10 percent under the budget.  Overall, the agency would receive $15 million ($11.2 million general fund). That’s a 6.7 percent general fund cut.

MANAGEMENT AND BUDGET: The bill would cut $2 million for building operations services as well as a number of other 10 percent reductions to department activities. Overall, the budget contains $548.7 million ($296 million general fund). That’s a 2.5 percent general fund increase.

STATE: Funding for secretary of state branch offices, central operations in customer delivery and regulatory services would drop by 10 percent under the budget. Overall, the department’s budget contains $209.1 million ($23.3 million general fund). That’s a 6.2 percent general fund cut.

TREASURY: The state’s matching of up to $200 for eligible participants in the Michigan Education Savings Plan would discontinue under the budget for the department. The bill also reduces funding for the Senior Citizen Cooperative Housing Tax Exemption by 12 percent. The cut is much closer to what Governor  Granholm and the House proposed than the Senate, which called for a cut double the size of what the governor and House proposed. The conference report also keeps funding for Lottery promotion intact. The Senate had passed a 10 percent cut.

STRATEGIC FUND: Funding for promotion of the state, which includes the popular Pure Michigan advertising campaign would be cut by 5.5 percent under the budget. The Senate had passed a 10 percent cut in promotional efforts, but the conference committee went with the House cut of 5.5 percent.  And funding for the 21^st Century Jobs Fund would fall by $24.5 million. The bill also contains a 10 percent cut to administrative programs.  Overall, the budget contains $114.6 million ($23.1 million general fund). That’s a 2.2 percent general fund cut.

Department of Human Services AKA DHS (SB 248) – It provides $5.9 billion gross, an increase from the $4.95 billion current appropriation, and $860.3 million general fund, a cut of $361 million from the general fund amount initially adopted for the current year. The plan also uses about $251 million in federal, restricted and private funds, including $21.3 million in American Restructuring and Reinvestment Act funds, to replace general fund spending.  It includes restoration of the Family Independence Program;  the day care assistance program, though with a change in the funding formula and a cut; and an increase in the Food Assistance Program.  It cuts 100 administrative staff and eliminates the Nokomis Challenge Center in Prudenville.  The agreement cut $15.3 million from the day care line, but changed the formula for reimbursing day care providers to provide incentives for training and licensure. The bill essentially treats all licensed providers the same, but provides a tiered system for unlicensed providers. It restored the FIP cash assistance grants, as well as the annual clothing allowance, to their current year rates and added $48.9 million to account for caseload increases.  It also provides for caseload increases in the food assistance program, adding $1.4 billion gross, and provides additional funding, $670,000 general fund, to local food banks. Foster care funding changes would provide both state and private foster care workers the same per diem funding, and the same county share for that placement. The bill provides a $40 per diem for state placements and requires counties to pay 25 percent and reduces the county share for private placements to 25 percent from the current 50 percent.  The bill reduces early childhood and after school programs, but leaves them in place.  Overall the budget cuts $15.5 million from juvenile justice by closing the Nokomis Center and all state-funded community juvenile justice centers as well as the Adrian Center. It also reorganizes the Maxey Center for the relocation of youth at the Woodland and Green Oaks Center.  The DOC, after renovations will use the Woodland Center to house inmates with special mental health needs.

State Police (SB 253)-Gross appropriation $527,312,700.  The Governor, Senate, and House recommended various uniform services efficiencies saving $7,927,400.  The Governor, Senate, and House included additional GF/GP ($4,232,600) and restricted revenue ($789,000) for costs associated with taking over forensic casework form the closure of the City of Detroit Crime Lab, totaling  $5,021,700.  The Senate and House reduced the Governor's recommendation for rental costs for the new State Police Headquarters down to only one month of rent $409,100, reducing the annual cost $3,266,700.  The Governor, Senate, and House included the closure of the Marquette State Forensic lab, but added a placeholder, cutting $360,000. The Governor, Senate, and House included a shift of $5.0 million in GF/GP to restricted revenue (Commercial Mobile Radio Service carry forward funds). The Governor, Senate, and House included a shift of $9,283,100 in GF/GP to Restricted Funds (State Service Fee Fund). The Governor, Senate, and House proposed a fund shift of $3,144,000 across various lines from GF/GP to restricted funding and a shift of $1.9 million in State Service fees to GF/GP. The Governor, Senate, and House's budget reflects reductions to expected appropriated levels of Federal ($2,056,700) and restricted ($2,870,400) fund support. The Senate added $8.0 million in Federal COPS funds from the American Recovery and Reinvestment Act (ARRA) of 2008. The House added $2.7 million in ARRA funds. Neither was included by the Conference. The Senate added IDG funds in support of Forensic Sciences ($3.0 million), secondary road patrol grants ($1.0 million), and for county prosecutors ($500,000). The Conference did not include this. The Governor recommended ending the Capitol Security Guard program. The Senate retained full funding to maintain the program, the House provided $300,000, and the Conference kept  it at $518,000 and 7.0 FTEs to cover the Capitol building needs only, cutting $568,100. The House reduced the Secondary Road Patrol grants by $1.0 million. The Conference did not concur.  The Senate reduced troopers by $8,425,000; the House reduced it by $2,700,000 in order to rehire 55 laid-off troopers. The Conference concurred with the House, cutting $2,700,000. The House included reductions to Unclassified Salaries ($105,700), Executive Direction ($354,600), Management Services ($1.8 million), Training ($100,000), Budget ($150,000), Fleet Leasing ($1,128,800), Justice Training Grants ($1.0 million), Emergency Management ($300,000), Operational Support ($600,000), and Criminal Investigations ($1.0 million). The Conference concurred, but lowered Executive Direction cut to $54,600, increased Fleet Leasing cut by $17,800, removed cut to Justice Training Grants, but included a $500,000 reduction to Standards and Training.

 
School Aid (HB 4447) CR-1 - Totals $12.78 billion with just $31.8 million in general funds (which represents a 59 percent cut). Overall, the budget is $482.8 million, or 3.6 percent, below current year funding for the schools.  Combined with the $450 million in federal stimulus funding for K-12, the overall funding reductions for schools would equal $24.2 million compared to the current fiscal year.  The budget calls for schools to absorb the $218 per-pupil cut without touching the Proposal A portion of the foundation allowance, Durant bond payment, school lunch program and special education programs.  The budget does not include the House’s recommendation of $3 million in consolidation transition grants, which would have given $50 per student to school districts that merged. Declining enrollment grants, renaissance zone reimbursement and Great Start Readiness Program district grants would all be funded at current year levels, but Great Start competitive grants would be reduced by 50 percent.  Several categorical programs would be reduced, including $750,000 from the Early Childhood Investment Corporation and a 25 percent cut to early childhood grants.  And programs that would outright be eliminated are small high school grants, the special education evaluation lending library, the Newsline grant, math remediation grants, Inkster’s financial emergency district grant and district pilot grants. Detroit Public Schools would see an $18.7 million hit under the bill.  The budget maintains funding for so-called 20j schools at the current level. Those schools were the highest-spending districts before adoption of Proposal A.  The committee restored the Michigan Youth Challenge program and the Virtual University.  A cut to the state’s assessment testing costs was reduced from $2.6 million to $1.1 million. The School Aid Fund would be expected to have $40.6 million to carry forward into the 2010-11 fiscal year, which in addition to the federal stimulus balance would give the budget a $225 million balance.  Please note that this conference report failed to the pass the House twice and the conference committee reported out a second conference report (CR-2) that has passed both the House and Senate

CR-2-It lessened the $218 per pupil cut by $53 to $165 per student. It totals $12.9 billion ($31.8 million in general funds).  This reflects a 2.9 percent cut in overall spending for K-12 schools. It passed out of the House on a vote of 66-42 and 20-14 in the Senate. It is  reliant on $100 million in funding lawmakers have yet to agree upon.  Senate Republicans have proposed freezing the Earned Income Tax Credit and film credits as a means of paying for the extra school funding.  The budget created flexibility for schools on how to absorb the cut, but it comes with a caveat that they can’t have that flexibility unless they create a service consolidation plan that reduces school operating costs. The consolidation plan would have to comply with guidelines the Department of Education develops.  Should a district not agree to create such a consolidation plan, then their per-pupil cut would be taken out of the state’s discretionary payments to schools.  The budget will tap the federal stimulus money, but expects a $70.6 million School Aid Fund balance, with $184.1 million in expected available stimulus; the budget assumes a carry-forward of $254.7 million.  It continues to hold the state’s wealthiest school districts harmless from an additional funding cut. The governor had proposed reducing funding for 20j schools (named for the section in the school code) by nearly 20 percent.  Intermediate school districts, which were slated for a 44.4 percent cut in operational funding under the first conference report, instead will see a 20 percent reduction, which is in line with what the governor proposed.   The budget holds several program lines to current year funding levels, including declining enrollment grants, health and science middle college grants, great start readiness program district grants and great parents great start ISD programs.  Several programs will see reductions in funding compared to the current year, including a 50 percent cut in the youth challenge grant, a 25 percent cut in adolescent health center grants, a $750,000 cut to the Early Childhood Investment Corporation, a 25 percent cut to early childhood grants and a 25 percent cut to math and science center grants.  It also eliminates programs like school bus inspections, small high school grants, special education evaluation lending library, news line grant, math remediation grants, financial emergency district grant and district pilot grants.

Continuation Budget, General Fund, (SB 831)- This passed  the Senate and the House and has been signed by the Governor, public act 104 of 2009.  Please note that this only provides 1/12^th of the funding set by the target agreement entered into on September 16, 2009 (that cuts state funding by $1.2 billion) for GF/GP funding for state departments and 1/12^th of the funding for federal, restricted and other revenue sources at the 2008-2009 levels during the month of October.  This passed the House and Senate on September 30^th, through the magic of stopping the chamber clocks.

Continuation Budget, School Aid (SB 252)-This has passed the Senate and the House multiple times with amendments changing the funding levels. It currently remains on the Senate floor awaiting concurrence and immediate effect.  This sets the funding for the first monthly payment to school districts to 1/11^th of the 2008-2009 allocations.  The first payment is due on September 20^th, so the legislature thought it provided a little bit of breathing room to work on the issue, but now we are facing federal penalties and school districts are not receiving their federal dollars.

Supplemental Budget (HB 5403)-With no revenue source unidentified, the House approved a supplemental bill for the 2009-10 fiscal year that would restore some of the sharpest cuts to college scholarships, health care and revenue sharing.  It was denied immediate effect by the House Republicans, but,  the House did hold onto it though.  This supplemental creates two restricted funds, $63.3 million of which would be dedicated to the Department of Community Health, while $197.8 million would go for state aid to local libraries, the Promise Grant and statutory revenue sharing.  The bill restores the 4 percent Medicaid provider rate cuts imposed under the May executive order, as well as funding for Medicaid optional services like dental and chiropractic.  Along with the $4 million in funding restoration for libraries, the Promise Grant would be fully funded, providing students with $4,000 scholarships.  Statutory revenue sharing would be brought back to its post-executive order level, which would cost $73 million. 

On the Revenue Front- The Speaker, Guv. Granholm, (Senator Bishop refused to commit to the agreement) agreed to move revenue bills.  They include a 3% physician QAAP ($52.5 million); a 15% reduction in the MBT tax credits and expenditures ($116.1 million) expand the tobacco tax to other tobacco products ($41million), decrease the earned income tax credit  ($120 million), freeze the indexing of the exemption for personal income tax, expand the liquor sale hours ($13.7 million). Totaling: $398.3 million.  This is to replace revenue sharing to the ’09 level (including counties)- $84.8 million; the promise grant full restoration- $120 million; DCH Health Programs (Medicaid)- $63.6 million; Library aid restoration $4-million.

(Tues.10/6/2009)- The House passed three bills: Freezing the personal income tax exemption at the 2008 level (HB 5352) and saving $55 million and passing a vehicle bill to cut certain Michigan Business Tax credits by 15 percent (HB 5384), instituting a 3 percent tax on physicians (QAAP) that will allow the state to leverage $525 million in federal Medicaid dollars (HB 5386).   It is estimated that if a physician has 4 percent of their patients receiving Medicaid, they will benefit from the tax bringing in higher reimbursements, which would be about 80 percent of doctors in Michigan. The House did not take up an increase on non-cigarette tobacco products (HB 5355)  that  passed out of the Tax Policy Committee. Thursday, 10/8/2009- The House Appropriations Committee reported out a bill to extend the hours of liquor sales (HB 5056).

Thursday, 10/8/2009- The Senate took action on freezing the Earned Income Tax Credit (EITC) using HB 4514 as a vehicle. The measure delays the expansion in the EITC by several years, but does not permanently freeze the EITC at its current level.  It passed on a 20-13 vote, but failed to get immediate effect. This is expected to raise $160 million. The Senate is also looking at making changes to the Michigan film tax credit.  The changes in the state’s film credit scale the credit back but do not cap it.  In addition, it strengthened requirements for film production companies to employ Michigan residents and expanded the credit for building film infrastructure. This is expected to raise $50 million.  The Senate is also considering raising $24.5 million through a tax amnesty; along with more than $40 million in other revenue sources. 

 They are also tying the changes to the phase-out of the surcharge. The phase-out of the surcharge would also begin this year and cost about $159 million.  The phase out of the MBT surcharge (SB 838) passed the Senate 19-14.

 Governor Granholm's Vetoes--

Gov. Granholm signed two budgets that contained vetoes, the departments of Corrections and Transportation.

The Corrections budget, HB 4437, totals less than $1.93 billion, about $1.87 billion in general funds, after Gov. Granholm’s line item vetoes. Those vetoes included a provision to fund the county jail reimbursement program at $16.6 million along with a $4.3 million savings. She said that she supported restoration of the program at the 2008-09 level.  She also vetoed language in the budget that calls for the state to reduce overall spending by $819 for each prisoner. With state prison populations approaching 50,000, an $819 cut per prisoner would have equated to a cut of better than $40 million from the budget. In her veto letter, Gov. Granholm directed the department to find another $20 million in cuts over and above the $120 million in savings the department has already taken.

Dept. Transportation,(SB 254,- Overall, the budget contains $3.26 billion (all restricted funds). That’s a 27.6 percent decrease from the 2008-09 fiscal year. Gov. Granholm vetoed $500,000 for enhancing construction zone traffic law enforcement and the “Give ’Em a Brake” campaign.  She also rejected the appropriation of the money in the Department of Transportation budget from the State Trunkline Fund to reimburse law enforcement agencies for the costs associated with construction zone traffic enforcement.  She vetoed $100,000 to support bus services for lost rider ship as well as marketing efforts to increase awareness of intercity bus service.  She also vetoed language requiring the state treasurer to identify the costs of work based on time and effort performed by the Department of Treasury for state restricted transportation funds. The report would have been submitted to the Senate and House Appropriations Committees, subcommittees on general government, the fiscal agencies, the auditor general, and the state budget director.