LANSING – The Michigan budget shortfall facing Gov. Jennifer Granholm and the Legislature for the 2010-11 fiscal year shrunk by more than $300 million, and the state’s public schools will likely receive an infusion of cash, as nearly $700 million in federal money is headed to Michigan as an aid package to the states received final passage Tuesday from the U.S. House.

Officials were still calculating exactly how much additional funding from the Federal Medical Assistance Percentages program would go to Michigan, but the governor’s office put it at more than $300 million and the Senate Fiscal Agency at $353 million. That’s less than the $559 million that Ms. Granholm and the Legislature assumed Michigan would get from a six-month extension of the higher FMAP rate, but now the state’s spending hole for 2010-11 rises by $206 million instead of $559 million.

The governor’s office said the state also would receive $300 million in funding for K-12 schools to help preserve 4,700 teacher jobs while the SFA put the number at $326 million.

“I want to thank members of Congress, particularly those in Michigan’s congressional delegation, who voted for this legislation that will not only provide vital services but also prevent further job losses, which would harm the economic recovery,” Granholm said in a statement. “I now look forward to working with the Michigan Legislature to quickly resolve the state budget in a way that continues to diversify our economy, educate our children and protect our citizens.”

But the action, while it should help Granholm and the Legislature complete the 2010-11 budget, will only push the eventual problem on solving the budget on to the state’s next governor and the 96th Legislature when they take office January 1. The FMAP extension will expire in the middle of next year, and there’s no assurance of federal money continuing to prop up the School Aid budget, meaning an even greater headache for officials trying to assemble the 2011-12 fiscal year budget.

The FMAP situation has held up final action on the 2010-11 budget. The House and Senate have all passed their own versions of budget bills, but those were done prior to the U.S. Senate holding up action on the FMAP extension as Republicans resisted the additional federal spending. Officials had resisted proceeding with deeper cuts until they knew the full extent of the additional hole since there remained the possibility of passage of an FMAP extension in some form.

SFA Director Gary Olson said the education funds are strictly limited to K-12 and cannot be used even for public universities or community colleges. He said the law requires the state to submit a plan to the U.S. Department of Education within 30 days.

Olson said the funding also requires states to spend on education in the 2010-11 fiscal year what they spent in the 2008-09 fiscal year. Olson said that would require Michigan to spend another $243 million of the $326 million it receives, mostly likely having to go into the foundation allowance. He said officials were examining whether the spending would have to go into the foundation allowance or could go into the so-called categoricals that earmark funding to specific programs.

With the 2010-11 School Aid budget already signed into law, Olson said he expected a supplemental would be coming to allocate the funds.

Matt Marsden, spokesperson for Senate Majority Leader Mike Bishop (R-Rochester) said majority Senate Republicans likely will caucus on the situation when the Senate convenes Wednesday. Bishop had prepared a list of additional spending cuts to account for the loss of $559 million, but now members will reassess where to go with the FMAP decline smaller than expected. The congressional action will alleviate the need for additional cuts, Marsden said.

Granholm had said she was preparing a revenue proposal to make up for the loss of $559 million. Granholm spokesperson Tiffany Brown did not return a request for comment on how Tuesday’s developments would affect that proposal.

The bill passed on a mostly party-line vote and Michigan’s delegation split along party lines with all eight Democrats voting yes and all seven Republicans voting no.

“Today’s legislation combines the most toxic ideas of the past two years – more spending, higher taxes and more debt,” U.S. Rep. Mike Rogers (R-Brighton) said in a statement. “To make matters worse, this borrowed money comes to Michigan with dangerous strings attached. It actually forbids our state from cutting spending and reducing our own debt. At the end of the day, this bill is a budget gimmick built to borrow money from overseas today and leaving our children to pay it back with interest tomorrow.”

Rep. Tom McMillin (R-Rochester Hills) called the funding a travesty.

“Governor Granholm may be excited about taking money from our future generations, but I’m not,” he said. “All in all, well over $500 million of federal money to bail us out for this coming budget year – just kicking the problem to the next administration and refusing to make reasonable reforms now. When will Lansing actually deal with the political class and their Cadillac benefits and generous pay increases, when our taxpayers are taking pay cuts, getting laid off and paying more for their benefits?”

But President Barack Obama, in prepared remarks scheduled to be delivered before the vote, denied that the bill was deficit spending.

“It will help states avoid laying off police officers, firefighters, nurses and first responders. And it will save the jobs of teachers like the ones who are standing with me today,” he said. “Now, this proposal is fully paid for, in part by closing tax loopholes that encourage corporations to ship American jobs overseas. So it will not add to our deficit.”

And U.S. Rep. John Dingell (D-Dearborn) blasted sentiment like what Rogers voiced.

“Governors across the country face declining revenues at the same time the economic downturn has left more of their citizens looking for help,” he said in a statement. “My colleagues across the aisle will use their best political spin to characterize this legislation as fiscally unsound. They have stated that this is just another bailout for special interest groups. My friends, this couldn’t be further from the truth. I don’t know when our school children became a special interest group. The reality is many Republicans would rather avoid making tough decisions, cross their fingers and hope just saying ‘no’ helps their election prospects in November.”

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com

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