Big cuts coming if feds don’t bail out Michigan, Gov. Gretchen Whitmer says

LANSING – Gov. Gretchen Whitmer on Thursday warned Michigan will have to dramatically cut spending and services if the federal government doesn’t send block grants to Michigan and other states facing massive budget shortfalls due to the coronavirus pandemic.

Michigan faces a budget shortfall of $3.2 billion this fiscal year and $3 billion in the next fiscal year as tax collections drop and unemployment payments skyrocket due to the coronavirus. The total shortfall is more than half of the $11 billion general fund budget for this fiscal year.

“We can't do it on our own. We need a partner in the federal government,” Whitmer said Thursday.

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“This is a crisis unlike anything we've ever seen. I know I've said that many times, but the enormity of this is substantial.”

That help may come “in the next couple of weeks,” but it’s not certain, she said. Direct aid for states and cities that are struggling under the financial pressures of the virus has been a point of contention as Congress negotiates the next virus-related stimulus package. 

The HEROES Act, which would appropriate $500 billion for state governments, has passed the Democrat-led U.S. House and is awaiting consideration in the Senate. It’s been criticized by Senate Majority Leader Mitch McConnell as a “big laundry list of pet priorities.”

Michigan, including specific funding for Detroit and Michigan’s four largest counties, received $3.8 billion from the CARES Act, which passed in late March. But that money can only be used to respond to the pandemic, not to supplement declining tax revenues.

Nor can the money pay for existing state government operations, “which is the number one thing we need,” budget spokesperson Kurt Weiss told Bridge earlier this month.

But if the federal government doesn’t deliver, it’s not clear what would be cut. 

Asked several questions about how the state would handle a massive budget shortfall should no federal funding become available, Whitmer wouldn’t say specifically and returned repeatedly to her call for more federal help. 

However, it would likely hit fundamental government services such as education, public safety and health care. 

“With a general fund that has been flat for more than 20 years, there’s very little left to cut from state government without impacting essential and critical services and programs,” said budget director Chris Kolb. 

“I believe that our legislative leaders agree that this is an unprecedented challenge, unlike anything we've seen in our lifetime.”

After an embattled budget negotiation that went to the 11th hour last year, the governor’s office and the Legislature struck a deal that would require lawmakers to submit a budget proposal by July 1. 

That deal is likely off the table this year, Kolb said. 

There will be another revenue estimating conference during the summer to further evaluate the impact of the virus on the state revenues, and officials will have to wait to see whether the federal government comes through with more funding. 

“So the budget timeline is going to have to be different,” Kolb said. 

Whitmer said she’ll work to protect funding for police and fire departments, local governments and schools and to find funding for vaccine research, paid sick and family leave and the state bonding program for roads, though it’s unclear how that could happen without federal help.

Senate Majority Leader Mike Shirkey, R-Clarklake, has said he will also work to avoid any budget cuts for Michigan schools this year and hopes federal officials will pay for the $1.2 billion shortfall. Whitmer said Thursday that’s also her “top priority.”

“That's the enthusiasm I'm looking for in my partners here in Michigan, and our partners at the federal government who represent all of us,” Whitmer said.