With a deadline looming, Michigan’s budget falls $6 billion short. It could ease budget shortfalls, if Congress cooperates.
LANSING, MI — Michigan’s budget faces considerable challenges posed by the novel coronavirus pandemic, and some means of addressing those problems have been hampered by federal leadership.
Chris Kolb, state budget director, has noted that the over $6 billion budget shortfall created so far by the pandemic is not a result of mismanagement on the state’s part, but of the kinds of issues facing every state in the country. He also compared that shortfall to the Great Recession.
“Michigan is a well-managed state with a good credit rating and a healthy rainy day fund. Our revenue shortfall is a direct result of COVID-19 and the economic toil it has taken. This is a 50-state problem,” Kolb told reporters at a press conference.
There are two primary challenges the state faces in addressing this burgeoning financial crisis: money and time.
Michigan Needs Money, And the Freedom to Spend It
Gov. Gretchen Whitmer has been calling for financial support from the federal government. But against this stark budget shortfall, President Donald Trump has threatened to withhold the state’s funding.
That threat followed Michigan’s support for voting by mail, which Trump falsely claims is rife with fraud, The ‘Gander reported. This was the latest installment in Trump’s long feud with the women in leadership positions in Michigan. The ongoing feuds have also potentially slowed the rate of supplies to the state early in the pandemic.
That threat has the potential to exacerbate the existing projected shortfalls.
There are other ways to ease the financial burden created by the shortfall, however.
Exhausting the state’s entire rainy day fund barely scratches the surface of the problem, Gov. Whitmer testified to Congress. But combining that with Coronavirus Relief Fund (CRF) money the state already has could handle $4 billion of the $6 billion shortfall. There’s just one problem: Michigan can’t use that funding.
“The good news is that we do have some money there in CRF funds to use to help the state. The bad news is how we can use that money,” Kurt Weiss, state budget office spokesperson, said to Up North Live. “We’re looking for more guidance. We’d like to have more flexibility in how we can use that money.”
That guidance would come from Congress. The State Senate approved a resolution June 11 to ask for that flexibility from Congress, encouraging the state’s Congressional delegation to take action.
“Michigan’s economy was humming along; all the economists were forecasting continued growth and then this hit. This is all really a direct result of COVID-19,” Weiss said. “It’s very difficult to cut your way out of that.”
That still leaves a large hole in the state’s budget, but the size of that hole is indeterminate. Without guidance about using CRF funding or a commitment of support from the federal government, the amount of money the budget shortfalls represent is unpredictable.
Despite that, the first deadlines in the budget process are fast approaching.
Michigan Needs Time, And the Freedom to Spend It
The first deadline in the budget process is the rapidly-approaching July 1 requirement that the Legislature introduce a budget plan.
“We need more time to put forward a constructive budget,” State Senate Appropriations Committee Chairman Jim Stamas (R-Midland) told Education Week. “It’s challenging without knowing what our revenues are at the moment.”
To that end, legislators and Gov. Whitmer are considering extending the July 1 proposal deadline to gain a better idea of what money the state will be able to work with to address its shortfalls, be that in the form of excess coronavirus funding, the rainy day fund or federal relief.
“By delaying it past July 1, it gives us more time to see what the revenues will look like in August and also to see what the federal government’s going to do in regard to either flexibility in existing funding or providing additional aid to the states,” Weiss told Michigan Radio. “The ideal scenario is to have budgets done sooner than this, obviously, so schools can know what their money is going to be, what funding they’re going to have, so certainly we hope this is not a new normal, but COVID-19 has just presented some tremendous challenges for the budget.”
That impact on schools could be substantial. As Education Week notes, schools start their own budget process July 1, and State Sen. Wayne Schmidt (R-Traverse City) cautioned 25% cuts to K-12 education are possible as a result of coronavirus-induced shortfalls, reports Bridge.
And while support from Congress, if permitted by Trump in spite of his pledge to hold up state funding, could be a relief to those schools, it is unlikely that Congress will act until at least after their July 4 recess. Similarly, guidance allowing Michigan to use excess coronavirus funds to ease budget concerns is unlikely to be decided in time for the July 1 deadlines.
Even if Michigan delays the start of its own budget process, this uncertainty leaves schools in the lurch.