The state of Michigan, like many states across the country, is facing a projected revenue shortfall of billions of dollars—upwards of $6 billion according to the state’s most recent revenue estimating conference. Now, the state faces a two-fold problem—how to avoid cuts before this fiscal year ends, and what to do about the projected shortfalls next year.
Income and sales tax revenues plummeted during the coronavirus pandemic leaving the state in a tight spot to pay for big ticket budget items like education and public safety in the upcoming fiscal year.
In the foreground, the state’s schools face another looming budget crisis. Their fiscal year begins July 1st, and with state lawmakers poised to delay the budgetary process they’ll be forced to turn in budgets not knowing if there will be cuts for this year, and the size of shortfalls next year.
Governor Gretchen Whitmer has been vocal about the dire budget situation for months—calling on congress to allot more aid money to states, and to give states more discretion when spending money they’ve already received to deal with the COVID-19 epidemic in their state.
“We need additional flexibility and resources from the federal government. We have a $3 billion dollar crisis and it’s because of COVID-19,” said Whitmer in a May 28 press conference.
$3 Billion Untouchable Dollars
The state has also received nearly $3.9 billion in aid from the federal government through the CARES Act & Coronavirus Relief Fund. But some state lawmakers say they need further guidance from the federal government on how to spend that money.
Kurt Weiss, a spokesman for the state’s budget office said “The way the language reads now you can only use that money for direct response to COVID related activities or COVID relief.”
Weiss noted approximately $800 million of the $3.9 billion went to large counties including Detroit, Wayne, Macomb, Kent and Oakland—overwhelmed by the pandemic.
But, “When it comes to addressing our revenue shortfall, it doesn't help us,” said Weiss.
Earlier in the month, state senators on both sides of the aisle passed a resolution imploring the U.S. Congress to “help the state of Michigan, schools, and local governments address revenue shortfalls during the COVID-19 pandemic.”
State lawmakers also passed a bill to spend $880 million of the CARES Act money on direct COVID relief, which the Governor is expected to sign. Members of the State House also unanimously voted to delay the budget deadline beyond July 1st this year, until the state has a clearer picture of revenue shortfalls and if it will receive more federal aid.
Backfilling Budget Holes
In the meantime, Republicans in the state legislature have interpreted the federal guidance differently. On Tuesday they rolled out a “Return to Learn” plan centered around a one-time injection of $1.3 billion of federal relief dollars to the state’s schools.
In an interview with WWMT’s Mikenzie Frost, State Senate Majority Leader Mike Shirkey (R-Clarklake) said “We were very careful to flyspeck the guidance that came from the federal government.” He continued, “I think that we were using it exactly as intended maybe using a little creativity at the same time, but I’m very confident we will prevail on that.”
Shirkey cited conversations with the Michigan congressional delegation saying “they have all agreed that based on our interpretation we should be fine.”
I asked @SenMikeShirkey about the reality of the state using the federal dollars on schools since there has been such a push to give states the flexibility to spend the #COVID19 federal money where they need it.
"We were very careful," he says.
MORE ⤵️ pic.twitter.com/gKbPp4Tr78
— Mikenzie Frost (@MikenzieFrost) June 23, 2020
Peter Spadafore, executive director for external relations at the Michigan Association of Superintendents and Administrators, said he was “very pleased to see the plan recognizes school’s need more money, not less money,” but said he’s curious to see if the state can secure the flexibility from the federal government to use the CARES Act money for schools.
Spadafore noted the plan did not solve any problems for the impending budget deadline. Meaning, schools will have to “rely on very educated guesses in terms of pupil count, looking at the numbers on paper, and trying to make decision based on what we think is the most reasonable amount of money to be spending now.”
School budgets have been drafted in previous years when the state was facing a potential deficit but, “Generally speaking, they're not this bad,” said Spadafore.
Instead of planning in terms of whether per pupil funding will fluctuate by $50, now school’s will be forced to turn in budgets wondering “Will the reduction be $400 or $600?” said Spadafore.
In a statement a spokeswoman for Governor Whitmer announced the Governor would have more to announce on her “Michigan’s Return to School Road Map” before alleging Republicans had merely duplicated another plan.
“It is disheartening to see that their proposal was nothing more than a copy of the DeVos-funded Great Lakes Education Project one-pager,” the statement read.
Lawmakers plan to leave Lansing for nearly a month this Friday returning back to Lansing in late July ahead of another revenue estimating conference in August. Congress is still deliberating over a fourth stimulus package which has stalled in the Republican controlled U.S. Senate.
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