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Granholm Says State Faces $560 Million Budget Shortfall Without FMAP Extension

June 30, 2010

Governor says resulting budget cuts will directly impact well-being of Michigan families

LANSING - Governor Jennifer M. Granholm today said that if Congress fails to appropriate funds to extend federal Medicaid assistance (FMAP), Michigan will have to make yet another round of deep budget cuts to erase a $560 million shortfall in the state budget for the 2011 fiscal year.

"Inaction on this issue will force this nation into a double-dip recession and strike another severe blow to our state," Granholm said.  "State budget cuts will have to be made that directly impact the well-being of Michigan citizens and their families."

Granholm said closing the $560 million budget gap could mean:

  • cuts of up to 30 percent in payments to physicians and other health care providers who treat 1.8 million Medicaid beneficiaries, further limiting access to quality health care and greatly reducing federal funds that flow in the state economy;

  • additional cuts in mental health services;

  • reductions in safety net programs that provide basic living expenses to more than 82,000 low-income families;

  • further reductions in funding to local governments for critical services like police and fire protection;

  • deeper cuts in state funding for colleges and universities.

"There are those who simply say that state government must cut more," Granholm said.  "But after nine straight years of job loss and budget deficits, the only things left to cut in Michigan are the critical services that struggling families count on to survive in this tough economy."

Granholm pointed out that since taking office in 2003, her administration has resolved more than $10 billion in budget deficits, and she's cut more as a percentage than any other governor in the nation.

"We now have nearly 11,000 fewer state employees than in 2001 and have negotiated more than $650 million in employee concessions," Granholm said.  "We've cut the number of state departments by 25 percent since 2003 and closed 14 prisons and prison camps.  We've renegotiated state contracts, sold off excess property and improved energy efficiency to save another $1.5 billion."

"We've done all this to protect people with a social safety net - the critical services people need most when times are tough," Granholm said.
But even with this focus on protecting critical services, the governor said the state still has had to:

  • cut Medicaid provider rates by 8 percent and eliminate several optional Medicaid services;

  • reduce mental health funding for Michigan citizens who rely on it by more than 15 percent last year alone;

  • cut aid to Michigan cities, villages and townships by more than 16 percent since 2004, reducing funding for services like police and fire protection;

  • reduce university funding by nearly 10 percent since 2002 while tuition costs have risen by 88 percent;

  • cut student financial aid by $135 million last year, further impairing access to higher education.

"The bottom line is that regardless of what choices the Legislature and I will have to make to fill this budget gap, Michigan citizens will be harmed," Granholm said.

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