News (AP) - Federal aid helps, but doesn't fix Michigan budget

By Tim Martin

Associated Press Writer

LANSING (AP) -- Even if extra federal money for schools and health care for low-income residents comes through as expected, Michigan leaders have a lot of work ahead to balance the state budget.

The U.S. House is expected to vote this coming week on providing additional education and Medicaid money for several states including Michigan, a financial aid package that appeared all but dead just a few weeks ago.

The revival of the federal assistance plan would send about $318 million to Michigan schools and another $340 million to $380 million in extended Medicaid assistance for the state fiscal year beginning Oct. 1.

Much of the money would be used to avoid layoffs in public schools. The U.S. Department of Education estimates the cash could help protect more than 4,000 jobs.

"It's a significant number and it will make a difference in terms of school districts being able to re-implement programs and class sizes not having to be expanded," Michigan Education Association spokeswoman Kerry Birmingham said. "But at this point it's difficult to say with any kind of certainty how much money is coming and when, and who's going to get it."

The U.S. Senate has approved the package and it will be headed to President Obama for his signature if the House follows suit as expected.

Michigan's school aid fund already is in decent shape, at least compared to the rest of the state budget. Democratic Gov. Jennifer Granholm has signed the schools budget for next fiscal year into law. It protects schools from further cuts in the state aid awarded to districts on a per-student basis. Districts are expected to get at least $7,162 per student starting Oct. 1.

The fund also is projected to have a surplus of more than $200 million at the end of the next fiscal year. Lawmakers are debating whether that money should be spent to help offset the general fund deficit, using the money for community colleges, universities or other education-related services not included in the school aid fund.

Granholm, Republicans who run the state Senate and Democrats who control the state House each support different spending plans for the next budget year. But all three plans originally assumed the state would get more than $500 million in extended Medicaid assistance -- $120 million to $160 million more than now anticipated -- so the plans will have be altered.

Senate Republicans already have voted to cut $1.3 billion from the state's general fund in the next fiscal year. They're reviewing another $500 million in possible cuts to offset the potential loss of the Medicaid money, according to Matt Marsden, a spokesman for Republican Senate Majority Leader Mike Bishop.

Some of those cuts could be avoided if the U.S. House approves the Medicaid extension and Michigan gets $340 million to $380 million in the deal.

"Let's just see what the House of Representatives does, and then we'll go from there," Marsden said. "Until the House passes it and we know there's a check in hand, we're going to continue moving forward with $500 million in cuts."

Democrats are opposed to many of the Senate-passed cuts, including 3 percent reductions to some state departments aimed at offsetting a scheduled pay raise for union-represented state employees. Democrats oppose Republican-backed cuts to university funding, tax sharing payments made to local governments, social services and other programs.

The budget plan is being negotiated by legislative leaders, including lawmakers on joint House-Senate conference committees. Progress has been held up in part because the Legislature met infrequently this summer before the primary election.

Lawmakers also are waiting to know for sure how much aid is coming from Congress so they can set budget targets.

Michigan has a budget deficit of about $300 million for the current fiscal year, according to estimates from the nonpartisan Senate Fiscal Agency. State leaders haven't agreed on how to plug that hole.

Michigan's constitution requires that the state have a balanced budget. State lawmakers have missed the Oct. 1 deadline to balance the budget in two of the last three budget years.

Published: Tue, Aug 10, 2010