Granholm Underscores Depth of State's Fiscal Crisis

Contact: Heidi Watson 517-335-6397

February 2, 2007

LANSING - Governor Jennifer M. Granholm today said Michigan is facing its most challenging fiscal crisis in recent memory due to the convergence of a weakened economy, the lack of business tax revenue, and spending pressures the state can't avoid. 

Granholm said the state is facing a $3 billion deficit, approximately one-third of the discretionary spending the state has available.  In her remarks, she underscored that after four years of cutting state spending - she has cut nearly $3 billion to resolve $4 billion in deficits - the state faces difficult choices to resolve the fiscal crisis.

"The days ahead are going to be challenging for everyone who cares about this great state of ours," Granholm said.  "The crisis we face has been decades in the making and cannot be changed overnight even though we have the most aggressive economic plan in the nation, a plan to diversify the economy, create new jobs, retrain displaced workers, and give every child a college education or technical training they need to be successful in the 21st century."
Speaking in Grand Rapids before the Michigan Press Association, Granholm said it is commonly accepted - even by the Emergency Financial Advisory Panel report released earlier today - that Michigan's economy is fundamentally different because of changes in the global economy that have led to serious and lasting changes in Michigan's manufacturing-based economy. 

The governor noted the auto industry is heavily concentrated in Michigan, and when the auto industry is challenged, Michigan is affected more than any other state.  Since 1993, the domestic share of the Big Three automakers has dropped 21 percent, which has translated into a loss of 246,000 manufacturing jobs since 2000.
Granholm said the result of these changes is less revenue coming to the state at the same time the number of people needing services from the state is rising.  Granholm pointed to three areas creating spending pressures on state government: a growing number of Medicaid cases as the elderly population increases, the growing number of human services caseloads as more families find themselves in crisis, and the increased costs of housing more prisoners. 
Granholm will deliver her State of the State Address on Tuesday, February 6, which will be followed by her 2008 budget recommendation on Thursday, February 8.