Granholm Sets 04 Budget Cuts

March 7, 2003
| By Katy Rent |
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LANSING — Facing a $1.7 million budget deficit in FY2004, Gov. Jennifer Granholm announced what she called “tough” budget cuts yesterday.

With a mix of solutions including spending reductions and revenue enhancements, the governor looks to close the $1.7 billion shortfall mostly by declaring war on waste and inefficiency, she said.

Her plan includes $403 million in revenue enhancements, $122 million in cost avoidance associated with proposed criminal justice policy changes, and $937 million in spending reductions. The state House and Senate now must consider the governor’s proposal.

Specifically, spending reductions will cut Medicaid waivers by $110 million and other Medicaid programs by $64 million.

Higher education took a 6.5 percent cut, or $154 million, because, the governor stated, higher education funding is perhaps not as critical in the same way that preparing a child for college may be.

Revenue sharing to local units of government will see an additional 3 percent, or $44 million, cut in discretionary payments this year. In addition, revenue sharing used specifically to enhance growth projects will be cut by $72 million.

Grant reductions will be made to the tune of $61 million, translating into a 50 percent cut in grants to arts organizations. She stated she made this decision based on what was “vital” to the state.

Administrative savings, including employee concessions, will amount to $217 million. These will reduce the cost of government without reducing services, she said. In the process of renegotiating all government contracts with outside vendors, asking them for at least 10 percent reductions, the administration even reduced the cost of the budget book by some 50 percent by doing away with binding.

The Merit Scholarship Award saw some changes as well. In total the Merit Scholarship program was reduced by $61 million, leaving it at $500 for 2004 and beyond. The governor, however, preserved the scholarship for those students who were promised it this year.

The Life Sciences Corridor took a $35 million hit, leaving it at a $15 million level for 2004.

In addition, the general fund subsidy to the School Aid fund is replaced with $198 million in resources available as a result of the revenue sharing action.

The revenue enhancements involve closing $109 million in tax loopholes, where the administration was also able to raise some additional fees to achieve approximately $200 million in additional revenue.

Revenue enhancements also involve recognizing $152 million in sales tax revenues associated with the continuation of previous revenue sharing cuts, $119 million from increases in various fees or fines, a $10 million transfer from the employment contingency fund, $2 million from the sale of the Detroit Plaza Building, and an $11 million transfer from the reduction earmarked for vehicle-related sales tax to the Comprehensive Transportation Fund.  

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