January 31, 2003
Friday, January 31, 2003
GRAND RAPIDS – In a speech today before the Michigan Press Association, Governor Jennifer M. Granholm outlined more than $4 million in immediate administrative budget cuts she has ordered in the Executive Branch of government. She also outlined directives that could save more than $100 million each year. The State of Michigan is facing a budget deficit of more than $150 million for the fiscal year ending this September and a larger deficit of $1.8 billion next fiscal year.
“ Michigan government has been spending beyond its means for too long,” said Granholm. “The account is overdrawn; we’ve got to quit writing the checks whenever we can.”
Granholm today directed the Department of Management and Budget to enact the following changes immediately:
The Governor also announced that she has directed every department of state government to reduce its vendor contracting expenses by at least 7 percent – a potential savings of more than $100 million. She will order a hiring freeze for most unfilled positions within state government, pause all management bonuses for those employees who had been eligible, and pause per diem and travel payments for state boards and commissions.
“ These cuts may not be huge,” said Granholm, “and they certainly won’t fill the entire budget hole – but as every family knows: in tight budget times, every penny counts.”
In her remarks to the press association, Granholm detailed the “road the state has traveled to this budget crash.” She pointed to an unexpected $142 million drop in tax revenue in the two months between November 2002 and January 2003 as the reason for the shortfall in the state’s school aid fund.
“ Everyone saw the budget problems coming,” said Granholm, “even the prior administration. They came up with a series of one-time tax shifts and band-aids that appeared to give the schools enough to pay their bills this year. But halfway through the year, the revenues quit coming in, and the picture changed dramatically. If we didn’t act, the checks would start bouncing.”
State law requires a balanced School Aid Fund. Granholm was forced by law to issue a proration letter to the Legislature earlier this year indicating that the School Aid Fund would have to be cut to account for a shortfall in revenue.
In terms of the state’s General Fund, Granholm argued that Michigan has been spending nearly $1 billion more than it has been taking in for the past two years.
“ There are no more band-aids,” she said, “and no more one-time fixes. When you spend more than you take in, your budget is structurally imbalanced. It’s up to us to make the tough choices to balance the books.”
Granholm used her remarks to underscore that “every department, every agency, and every citizen” will feel the pain of the coming budget cuts. The required cut in the School Aid Fund trimmed school budgets by 1 percent overall. She is negotiating an Executive Order that will result in a total cut to the General Fund of 4.7 percent this year.
“ I want to be honest with the people of Michigan,” said Granholm. “The next few years are going to be difficult. This deficit represents nearly a quarter of the state’s General Fund budget – we’re not going to be able to do all the things people have gotten used to. We could shut every Secretary of State office, shut down the Michigan State Police, close the doors of the Legislature, cut the Executive Office, and close every state court in Michigan and still not have enough to make up the budget shortfall.”
Granholm did say there is good news, however, in the budget picture.
“ There is opportunity in adversity,” she explained. “This is a chance for Michigan to take a different look at how we develop our budget. The state has a budget of almost $38 billion – that’s a huge amount of money. This is an opportunity for the people to take a critical look at how they really want to spend it.”
Granholm expects her Executive Order to be approved by the Legislature next week. She will deliver her first State of the State on February 5.
