LANSING – Saying it was clear that the national economic situation would hurt state revenues, Governor Jennifer Granholm said in a Thursday press conference that she would issue an executive order cutting the 2008-09 budget this year – sources said the cuts would be from $300 million to $600 million.

The decision on the amount of the cut will be decided after the University of Michigan’s Research Seminar in Quantitative Economics is held later this month, Granholm said.

Cuts to the current budget had been expected, and administration officials had recently said that discussions with department directors over preparing for potential cuts had been growing more intense.

“It’s very clear we will have a very challenging year ahead of us,” Granholm said at a press conference on Thursday.

The stock market collapse and the resulting decline in consumer confidence has helped drive automotive sales lower. General Motors and Chrysler have been in discussions on a merger, which could result in at least one healthy automotive company but clearly mean a drop in jobs in the state. If a merger does not happen and one or more of the auto companies declares bankruptcy, the picture for the state will become even gloomier.

One state economist said that while “we don’t have a forecast, yet we at least know which direction the state is going in: down.”

In an interview last week, Mitch Bean, executive director of the House Fiscal Agency, said the state could see unemployment spike over 10 percent, a figure it has not seen since the early 1990s.

Even in that, Granholm said there is another uncertainty that the state will have to consider and that is how much Congress may allocate to the states as part of an economic stimulus package. Since the states are all facing potential budget crises they have asked for assistance in dealing with such issues as Medicaid, she said.

Congress is looking at a stimulus package, although there is discussion of doing a smaller package this year and then a second, larger, package once President-elect Barack Obama is sworn into office in January.

Until those factors, the RSQE conference and the stimulus package, are resolved the state will not know how much to cut, Granholm said.

Once an executive order cutting the budget is issued it has to be approved or rejected by the two legislative appropriations committees.

Another uncertainty is determining how much the state might have to cut is how much the state might realize in a revenue carry-forward from the 2007-08 fiscal year. Officials are expecting a larger carry-forward than previously anticipated because revenues were above forecasts.

October revenues, which accrue to the 2007-08 fiscal year and have not yet been reported, appear to have come in slightly above forecasts, sources said. That should help offset some level of cuts.

Even so, sources said administration officials are using cuts of between $300 million and $600 million as a working estimate. Timing will affect that number, as will ongoing factors in the economy. “If GM declares bankruptcy that number will change real fast,” a source said.

Also not known at this point, sources said, is how the cuts will be allocated between departments, school aid and colleges and universities.

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