LANSING – The anticipated loss of Federal Medicaid Assistance Percentage funds could leave the state with a general fund deficit of more than $525 million in the 2010-11 fiscal year, a memo from the Senate Fiscal Agency warns.

The memo based its estimate on the proposed budget that has so far passed the Senate and which includes a series of cuts to programs such as revenue sharing.

Governor Jennifer Granholm has warned that failure to approve a six-month extension to the FMAP program by Congress could result in some $560 million in cuts alone to the state.

So far Congress has failed to approve the FMAP extension, which will affect most states. Governors in other states have warned of major budget cuts and layoffs if the funds are not appropriated. They have been held up as part of legislation that would also extend benefits for the long-term unemployed in an effort to try to minimize the expanding U.S. debt.

While the memo said there was still a chance the FMAP funding would be approved, the SFA said the assumption of the expanded funding should be removed from the budget forecast.

The memo now puts the total general fund revenues for the 2010-11 fiscal year at $8.1 billion. That includes slightly less than $7.1 billion the May revenue estimating conference forecast, $537 million in a revenue sharing freeze, $377 million in revenues from a use tax on health maintenance organizations, $15 million in enhanced tax enforcement and shifting $45 million in short-term borrowing costs to the School Aid Fund. The revenues also anticipate a cut of $39.5 million in revenue sharing payments and $59.5 million in fund transfers to the general fund.

Total general fund expenditures in 2010-11 are forecast at $8.636 billion, which includes the nearly $560 million in lost FMAP funds and an estimated $37.2 million for the children rights lawsuit the Department of Human Services is dealing with now. The net expenses of $8.636 billion includes an estimated $98 million offset from state employee retirement changes, presuming that proposal is enacted.

“It will now be up to the governor and the Legislature to develop an agreement to eliminate this projected budget deficit,” the memo said.

In looking at the 2010-11 School Aid Fund would have a surplus of $237 million, the memo said. For the current 2009-10 fiscal year, the SAF is expected to have a balance of $371 million. That surplus has become an issue in the effort to resolve the current general fund budget deficit, which the memo said totals $303 million.

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