Michigan’s Budget Crisis Governor Jennifer M. Granholm 138 th Annual Winter Convention February 2, 2007

The 07/08 Budget Picture FY 2007: $862 M FY 2008: $2 B MI Faces Nearly $3B Deficit

Why the Shortfalls?  Challenged economy = less revenue  Loss of SBT revenue  Growth in Medicaid caseloads  Growth in Human Service caseloads  Growth in prison population

FY 2007 Funding for State Gov’t $42 Billion Total Budget; State Controls $9 Billion

FY 2007 General Fund Only $9.2 Billion Total ($3 Billion Shortfall)

Potential Cuts to Solve the Shortfall Emergency Financial Advisory Panel: Eliminate All Funding for Community Colleges and Universities AND All Mental Health Services Eliminate Health Care for Seniors, and Children AND Release All State Prisoners Cut $2,000 Of Education Funding for Every Student at Every School OR

Doing More With Less Cuts Every Year  Resolved $4 billion in budget shortfalls  Nearly $3 billion in cuts  Fewer state employees today than at any time since 1973

State Government is Smaller

Domestic Auto Market Share Below 50% Source: Center for Automotive Research.

Auto Industry Restructuring  GM buyout offer accepted by 13,500 Michigan employees; 4 Michigan facility closings announced so far.  Ford buyout offers have been expected by 38,000 nationally; wants to cut 14,000 salaried jobs (4000 have taken buyout);  18,500 Delphi workers have taken buyout; 5000 returning to GM; 4000 legacy workers remain.

Revenue at Extreme Historic Lows

Note: Nominal Net Revenue. Totals exclude transfers and savings from adjusting statutory revenue sharing payments to local governments drops due to SBT repeal. General Fund Revenue Down From 1996

Revenue Down 30 Percent Since 1999 Totals exclude transfers and are adjusted to 2006 dollars using U.S. CPI-U.