Next Year’s State Budget Projections Underscore Need for Revenue

by Douglas M. Paterson, MPA, Director of State Policy, Michigan Primary Care Association

On Monday, January 11, Michigan economists met to determine the revenue number that will be used to craft the budget for the State’s 2011 fiscal year.  Staff of the House Fiscal Agency, Senate Fiscal Agency and Treasury came together and presented information showing the state budget is in good shape for the current year, but big deficits are projected in the 2011 budget as revenues keep dropping.

Senate Fiscal Agency director Gary Olson said the state faces a $1.6 billion-plus deficit in the budget that starts October 1, because Michigan is less likely to get federal recovery money and the state’s poor economy is holding down tax revenue.  He expects a $1.2 billion shortfall in next year’s general fund and the school aid fund to be about $423 million short.  This equates to about $268 per student.

Olson also stated that Michigan is no longer a wealthy state, having fallen to 37th in per-capita income in 2008 and likely falling to 40th now.  He also said that taxes are taking a smaller percentage of residents’ income, having dropped under 7 percent compared to around 9 percent a few years ago.

Although revenues appear to have plateaued, because the current year budget uses almost all of the federal stimulus funds that have come into Michigan, much of that money will not be available in 2011 leaving the $1.6 billion hole.

The legislature only has two means address this hole, cutting spending drastically once more or addressing the need to raise revenue. 

Because Medicaid is one of the largest single areas in the state budget requiring state funding as match to federal funds, it will be almost impossible for Medicaid to stay intact as it is now if cuts in the magnitude of $1.6 billion are implemented.  For this reason, the Michigan Primary Care Association has joined other organizations in a coalition named “A Better Michigan Future” to insist that revenues MUST be part of the solution to next years’ budget.  

“A Better Michigan Future” will unveil a new campaign in the near future, and MPCA will be asking our members to aggressively engage in the efforts of this campaign to educate the public and influence policymakers on making revenue part of the solution. For information about “A Better Michigan Future” and to view the platform that we will be advancing, please visit abettermichiganfuture.org.

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