Executive Order Issued to Address State Budget Deficit

Press Release

Executive Order Issued to Address State Budget Deficit

State of Michigan Flag Spending reductions to government operations outlined, essential services to protect citizens maintained

State Budget Director Bob Emerson today presented Governor Jennifer M. Granholm's Executive Order 2009-22 to a joint session of the House and Senate Appropriations Committees to help eliminate a shortfall in the 2009 state budget caused, in large part, by the massive restructuring in the domestic auto industry.

Executive Order 2009-22, the second issued during the current fiscal year, reduces spending by nearly $350 million, achieving $304 million in the general fund savings. The reductions will reduce services in some areas of government but will allow the state to protect critical functions of state government like education, health care, support for families in crisis, and job creation efforts.

Granholm issued Executive Order 2008-21 in December reducing fiscal year 2009 spending by $134 million. At that time the Granholm indicated additional actions may be necessary to address the on-going economic challenges.

"The national recession has plunged our domestic auto industry into a severe crisis that has resulted in a sharp decline in state revenues," said Granholm. "These cuts are necessary, but they will not undermine our commitment to protect citizens and work to create jobs during these very tough times. Michigan government can no longer afford to be all things to all people and just as businesses and families are being forced to cut back on spending so, too, is state government."

According to state officials, the state budget is the product of the worst economic downturn since the 1930s. State general fund revenues are projected to decline 21 percent from actual FY 2008 collections. When adjusted for inflation, the decline in revenues is 23.5 percent, by far the largest one-year decline in at least 50 years and twice the 11.5 percent decline recorded in the severe recession of 1981.

The action taken today preserves critical safety-net services for Michigan families, including Medicaid eligibility and child welfare programs along with funding for higher education, community colleges, and school aid.

"While these spending reductions are essential to meet our constitutional obligation to balance the budget, we have maintained critical services that Michigan citizens must rely on during this recession," said Granholm. "We expect to have to make more cuts like these in the future, which are the very type of wrenching cuts we have worked so hard to avoid in the past."

The executive order calls for temporary layoffs for all state employees in non-essential positions that will result in a shutdown of most state government operations on six days between now and September 30. Those days, for which state employees will not be paid, will be announced in the near future to allow citizens and state employees to plan accordingly. In addition, the executive order will result in a number of state employee layoffs, including Michigan State Police troopers.

Many of the executive order budget cuts advance spending reductions outlined in the governor's 2010 budget recommendation, which called for $670 million in spending reductions and $230 million in additional revenue from the closing of tax loopholes. Revised revenue figures for the current and upcoming fiscal years will be released when the Revenue Estimating Conference convenes May 15.

"In addition to these cuts we will use federal Recovery Act dollars to address the cyclical budget problems we're experiencing, which is what the Recovery Act was intended for," Emerson said.

Under state law, once an executive order is presented, the appropriations committees have 10 days to either approve or disapprove by a majority vote (without amendment) the reductions contained within the order.

Source