Editorial: Michigan can't wait for a federal bailout

Michigan can’t count on Washington to solve its budget crisis. While there are things the federal government can and should do to help, the state will almost certainly have to bear the brunt of the burden of balancing its budget with far fewer revenues.

Last week, revenue estimators projected a $3.2 billion budget shortfall for the fiscal year, which ends Oct.1. The estimate for 2021 is only slightly better, with the shortfall pegged at $3 billion. 

That’s a staggering amount of lost revenue to account for, especially for this fiscal year, when there is less than five months left to adjust General Fund spending and six weeks before the school fiscal year ends.

After the projections came in, Chris Kolb, the state budget director, said Michigan is hoping the federal government will come to the rescue. The House has passed a $3 trillion COVID-19 aid bill that includes $500 billion for state governments and $375 billion for localities. But it’s gone nowhere in the Senate.

The immediate worry in Michigan is for schools, whose fiscal year ends June 30. The School Aid portion of this year’s shortfall amounts to $1.2 billion.

Both Gov. Gretchen Whitmer and Senate Majority Leader Mike Shirkey, R-Clarklake, have said they want to hold education harmless from budget cuts.

That will be difficult unless Congress approves a bailout. 

Michigan is sitting on a $1.2 billion rainy day fund, but can only use $287 million of it this year, unless the Legislature changes the law.

Schools have not been able to cut their budgets with layoffs during the two months of school closures because Whtimer’s executive orders mandate they continue paying their staffs.

Shirkey suggested Wednesday that unspent federal funds sent to Michigan to cope with COVID-19 issues be diverted to schools. He estimates that amount at $300 million to $400 million. Washington would have to loosen restrictions on the money before it cold be tapped for schools.

And even if it did, it would fall well short of covering the school aid shortfall, let alone the $2 billion drop in General Fund revenue.  

The reality is that painful decisions must be made now. The state can’t bet on Washington’s help.

And yet the governor, according to Shirkey, has not sent the Legislature her priorities for adjusting the budget. The state budget office did not return calls for comment.

The state has made only minimal cuts, mostly through temporary layoffs. It’s run out of time to act more aggressively.

Legislative leaders and the administration must convene an emergency session immediately to set priorities and negotiate the steep spending cuts that will be necessary to keep the state afloat until tax revenues return to normal levels.