More budget cuts

As I write this message, Governor Granholm is conducting a press conference where she is announcing an additional cut to school aid for 2009-10 of $127 per pupil which will go into effect in 30 days unless the Legislature finds a way to overcome the revenue shortfall we face. This cut is in addition to the $165 per pupil reduction contained in the school aid bill that was passed 2 weeks ago and in addition to the elimination of all Section 20j funding that was implemented through a line item veto three days ago.

This latest action simply underscores the huge budget deficit faced by Michigan that results from several billion dollars of permanent, special interest tax cuts that were enacted when the economy was booming that are now exacerbating the effects of the economic downturn. Unless the legislature comes up with a fix to this structural deficit the Governor has no choice but to reduce funding to schools and other units of government.

Current law requires that the Treasurer notify the Governor if the actual revenue collections are less than the estimated revenue on which the budget is based. In that case the Governor is required to notify the Legislature that payments to school districts will be reduced on a per pupil basis in 30 days unless the Legislature adopts a solution to the revenue shortfall. In other words, the budget is out of balance and the Governor is forced to make the reduction unless the Legislature finds another way to balance it.

Unfortunately, Senate Majority Leader Mike Bishop (R) – Rochester announced earlier this afternoon that the “official” revenue estimate shows a surplus in the school aid fund, apparently trying to justify doing nothing to fix the problem. The official estimate to which he refers is the estimate of the Revenue Estimating Conference that was held last May on which the budget was built. It is this revenue estimate that is grossly out of touch with reality and that does not come close to reflecting actual tax collections that are occurring in the State.

All of the insiders know that the Michigan law forces the Governor to make budget reductions if the actual revenue is less than the budget estimated. They also know that it’s up to the Legislature to decide whether fix the problem or allow the axe to fall. It has 30 days to act and the clock is ticking.