LANSING – While in dollar terms total state spending was slightly higher in the 2009-10 fiscal year than it was in the 1999-2000 fiscal year, a paper from the Michigan Senate Fiscal Agency analyzing the state budget during that period said overall spending did not keep up with inflation during that time.

Overall state spending declined in most areas during that 10-year period, the analysis shows, while growth in state spending was driven particularly by large increases in the departments of Community Health, Corrections, State and Energy, Labor and Economic Growth.

The paper also said that while the total number of state employees has fallen by more than 8,000 over the past decade, actual state employment costs have increased driven by increases in health care and retirement costs as well as increases in basic wages. The increase in wages tracks largely with the increase in inflation during that period.

“The principal causes of increased spending are related to employee economics and caseload adjustments, with the most obvious cases being the Department of Corrections and the Department of Community Health. Unless changes to current policy are made, it is unlikely that significant spending reductions will be realized in these budgets. In fact, spending in these areas is likely to increase. Furthermore, making comprehensive changes to current policy may prove difficult due to maintenance of effort (MOE) requirements and recent legal settlements,” the paper said.

The study compared just state spending in 1999-2000 and 2009-10 without taking into account such factors as the 2009 federal stimulus bill (which added 13.2 percent to the general fund and 4.2 percent to the School Aid Fund).

In 1999-2000, the state spent a total of $24.6 billion on all departments and education funding. That year was possibly the pinnacle of the state’s economic expansion during the 1990s, and the Legislature that year approved $581 million in supplemental spending, and the state’s Budget Stabilization Fund had $1.26 billion.

By 2009-10 the figure stood at $25.4 billion, an increase of $761 million, or 3.1 percent. But the economic circumstances were completely different. The BSF is essentially empty. The state has had to execute a series of major budget cuts during the previous decade to help keep the budget balanced.

While total state spending is up by 3.1 percent over the decade, the paper said, total inflation as measured by the Detroit Consumer Price Index was up by 20.5 percent for the same period, meaning a loss in total purchasing power for the state during that time.

Spending was reduced overall in 15 departments and budget areas during the decade, the paper said, while it was increased in 12 areas.

Capital outlay saw state spending drop by nearly 100 percent during that period, from $28.7 million to just $300,000. But other sections of the budget saw sizable drops as well.

State spending in the Department of Education (most of its overall spending is driven by federal funds) fell by 58.9 percent during the decade, from $65.35 million to $26.86 million. Spending on the Department of Agriculture fell from $94.1 million to $61.8 million, a decline of 34.3 percent. Spending in the Department of Technology, Management and Budget fell by 22.8 percent from $473 million to about $365 million.

But some of the changes can be attributed to some specific factors. The change in Capital Outlay spending is due largely to a change to how funds are allocated for projects. Because of the state’s fiscal condition, general funds are almost never allocated for Capital Outlay projects, the paper said. Instead, funding comes through the State Building Fund.

In 1999-2000, the Department of Agriculture saw some of its biggest spending, in part because the Legislature allocated additional money to help deal with worries about bovine tuberculosis. If those additional funds are taken out of the department’s base expenditures, then the cuts to Agriculture spending are much smaller in terms of percentage, though significant nonetheless.

Spending on higher education fell by 16.2 percent, from $1.83 billion to $1.5 billion during the decade. The bulk of the cut came in student support, the paper said, and the vast majority of that in the end of the Michigan Promise Scholarship. Cuts in student support have come even as enrollment at the state’s 15 universities has grown by 13 percent during the decade. The paper considered this growth significant especially given the state’s overall economic condition, rising tuition costs and the state’s declining population.

Spending had also declined on community colleges, by 2.2 percent, from $306 million to $299.4 million, while the student population at community colleges has grown by 50 percent during the past decade.

Despite the state’s ongoing economic woes, the Department of Human Services saw spending drop by 19l.7 percent, from $1.29 billion to $1.04 billion. There are two main factors for that: federal spending has increased offsetting the need for state spending, and daycare subsidies have dropped significantly. The decline in daycare subsidies is due in part because of a declining birthrate in the state.

State spending did increase in some significant areas during the decade. Probably most significantly has been the increase in spending the departments of Community Health and Corrections.

Community Health spending increased primarily because of Medicaid increases, which far outstripped non-Medicaid related cuts. Spending on the department increased by 26.9 percent from $3.05 billion to $3.9 billion.

The Medicaid population has grown in the last decade from 1.06 million to 1.82 million. While Medicaid spending has increased by 30 percent, it would have increased even more, the paper said, except that the federal Medicaid match rates has been increased which has saved the state an estimated $1.5 billion.

Spending in Corrections has increased by 29.1 percent during the decade, from $1.5 billion to $1.95 billion. A total of $500 million of the spending increases goes for the increase in employee costs. Other factors include an overall increase in the number of people the state has to monitor through probation and parole, even though the number of people actually incarcerated is down. Another factor, the paper said, is the increase in overall corrections health care costs.

The Department of State had the largest percentage increase, up 58.9 percent during the decade from $117.4 million to $186.6 million. The increase is almost wholly total to the Transportation Administration Collection Fee.

But state spending in the Department of Transportation dropped by 1.7 percent, from $2 billion to $1.97 billion.

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