1 / 26

Michigan’s Fiscal Crisis

Michigan’s Fiscal Crisis. Michigan’s Fiscal Crisis Is In Its Fifth Year. Revenue decline began in 2001 State revenues are nearly 30% lower than in 2000 State revenues are at their lowest level since 1970. State Actions to Address the Crisis.

meda
Download Presentation

Michigan’s Fiscal Crisis

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Michigan’s Fiscal Crisis

  2. Michigan’s Fiscal Crisis Is In Its Fifth Year • Revenue decline began in 2001 • State revenues are nearly 30% lower than in 2000 • State revenues are at their lowest level since 1970

  3. State Actions to Address the Crisis • $6 billion in one-time (non-recurring) revenue measures in just four years • Rainy Day Fund and Medicaid Trust Fund are depleted ($1.3 billion and $561 million) • Program reductions totaling $2.5 billion since 2001 • Higher education cut 14% in two years • Revenue sharing cut 15% in three years • Medicaid reduced by $375 million since 2002 • State workforce reduced by 14% in three years; smallest workforce since 1974 • School Aid Funding reduced by $360 million since 2003 (calendar year)

  4. Revenue Reductions Associated with Multi-Year Tax Cuts Compared to Michigan’s Annual Deficits 3.5 3 2.5 2 1.5 1 0.5 0 3.2 Tax Cuts/Revenue Losses .3 Deficits Covered by: 1.7 Fees and Taxes Program Reductions $ in Billions 1.3 1.3 1.4 1.3 1.4 One-time Reserves and Adjustments .1 1.1 .2 .3 .4 .9 .4 .4 1.2 .6 1.0 .5 .5 .7 .1 .4 .4 1999 2000 2001 2002 2003 2004 2005 YTD Executive Budget Fiscal Year Prepared by Michigan League for Human Services

  5. Michigan’s Cumulative Multi-Year Tax Cuts Compared to Cumulative State Deficits 8 7 6 5 4 3 2 1 0 7.6 Cumulative Tax Cuts 1. 6.3 Deficits Covered by: 5.9 2.9 .6 Fees and Taxes 2.4 4.5 Program Reductions $ in Billions One-time Reserves and Adjustments 3.2 3.1 3.7 .3 .7 2.1 3.3 1.8 .3 1.2 2.1 .6 1.4 .4 .1 1999 2000 2001 2002 2003 2004 2005 YTD Executive Budget Fiscal Year Prepared by Michigan League for Human Services

  6. Why Do Michigan’s Fiscal Problems Persist? • Federal fiscal policies have adversely affected states (e.g. loss of federal fiscal relief, internet sales, No Child Left Behind) • Cost to Michigan 2002-2005 -- $5.5 billion or nearly 7% of General Fund budget • Multi-year state and federal tax reductions have reduced Michigan’s revenue generating capacity • Five year reduction in personal income tax rate • Phase out of the Single Business Tax • Phase out of federal estate tax • Since 1999 revenue losses from these tax cuts equate to over three-fourths of the $7.7 billion in deficits since their enactment • Since 1993, there have been 70 tax policy changes that equate to a cumulative reduction in K-12 funding of $1.974 Billion

  7. Impact on Education: Pressures on School District Budgets • Unfunded mandates & associated costs • According to a national study released in April 2004, unfunded federal mandates, including No Child Left Behind, cost the states more than $29 billion. The study found that federal unfunded mandates hit the Michigan and Alabama budgets the hardest of all 50 states. (National Council of State Legislatures) • Increases in insurances and benefits • Michigan’s school retirement costs jumped from 12.99 percent to 14.87 percent this year, which equates to about $105 per student in extra costs. • Health insurance premiums have increased 22 percent in the last year alone • Necessary capital improvements • Increased costs for special populations • Increased employer responsibility costs

  8. Ten Year History Changes from 1994-95 to 2004-05 Foundation Allowance +34% Diesel Fuel +77% Heating +90% Health Insurance +129% Electricity +131% Retirement Contribution +197% All School Employees Salaries +43%

  9. Predicting the Future: Budget Problems Will Continue • Michigan’s revenues will not keep up with the normal growth in government programs and services (i.e., a structural deficit) • Michigan’s current tax structure cannot generate sufficient revenues • Cutting spending is not the answer (W.E. Upjohn Institute for Employment Research: $1 billion in reduced spending equals a loss of 23,000 jobs statewide) • Further tax cuts are not the answer: Michigan is not a high tax state

  10. External Causes of Michigan’s Budget Problems • Weak Economy • Stock Market Decline • Michigan’s Deteriorating Share of Auto and Light Truck Market

  11. How Weak is the Economy? Michigan’s Recent Statistics: -50th in Personal Income Growth -50th in Unemployment Rate -50th in Employment Growth (Decline for Michigan) -50th in Index of Economic Momentum (Population, Personal Income, Employment)

  12. Michigan’s State and Local Tax Burden As A Percentage of Total Personal Income Michigan's National Ranking: 1983 5th 1993 12th 2003 29th 2005 est. ~31st Michigan's Midwest Ranking: 2003 6th 2005 est. ~7th Midwest Average U.S. Average Prepared by Michigan League for Human Services Michigan Data Source: Tax Foundation

  13. Did You Know??? Contrary to popular belief, the Michigan lottery only accounts for about 5 percent of school funding in Michigan each year. The majority of school funding (73 percent) comes from revenues generated by the state sales tax, 6 mill homestead property tax, and other specific or earmarked taxes.

  14. General Fund Budget 83% of General Fund Spending in 4 Areas: • Higher Education ($1.8B) • Community Health — Mental Health, Public Health, Medicaid ($2.5B) • Corrections ($1.7B) • FIA — Family Services, Juvenile Justice, Public Assistance ($1.1B) All Other General Fund Programs - $1.5B

  15. Genesee County’s Education System: Everyone is Affected in FY 2004-05 • The State budget cannot be balanced on cuts to schools • Schools cannot continue to absorb revenue cuts • Cuts in local district budgets add up to $35,833,364 • Local districts are using nearly $11 million in fund balance • GISD is using over $9 million in fund balance to support local district programs • Proposed cuts in Section 81 funding equals nearly a $660,000 reduction to Genesee Intermediate School District • Total cuts equate to over $47 million county-wide

  16. Everyone Has Been Affected • Cuts in local district budgets for FY 2002-2003 added up to $21,172,763 • Local districts used nearly $2.5 million of fund balance in FY2002-03 • Cuts in local district FY2003-04 added up to $28,881,928 • Local districts used nearly $8.9 million of fund balance in 2003-04 • Total cuts for over a three year period, plus use of fund balance equals a loss of over $109 million dollars to local school districts.

  17. What is a $109 Million Cut? Funds Students Flushing 30,919,801 4,332 Swartz Creek 31,258,689 4,186 Clio 28,511,687 3,662 Lake Fenton 17,738,995 1,451 --------------- --------- 108,429,172 14,091 Total Governmental Funds for the Year Ended June 30, 2003.

  18. Where Is Flushing? Per Student Funding From All Sources: 2002-2003 National Average $8,019 State of New Jersey $12,202 State of Michigan $8,494 Flushing $7,128

  19. Flushing Schools2005-2006 Revenue: New Revenue $175 per pupil $772,100 foundation allowance Expenditures: Retirement rate increase of 1.47% $294,247 on current salaries of $20,016,866 (14.87 to 16.34%) Health Insurance increase 11.1% $391,571 on $3,527,673 $685,818 Remaining balance for all other $ 86,282 expenditure increases* *Equates to 0.2% of GF expenditures

  20. Genesee County’s Education System:Everyone is Potentially Affected Further cuts pose a serious threat to the viability of county -wide programs • Technology infrastructure • Early Childhood Programming / Birth to 5 • Special Education County-wide Programs • Special Education County-wide Transportation • Before & After School Programs • Career Technical Education / Regional Instructional Programs

  21. Schools Not Only Victims Flushing Twp Allocated Road Funds 2002 $400,000 2003 $200,000 2004 $180,000 2005 $100,000 2006 $80,000 projected 2007 $50,000 projected

  22. Schools Not Only Victims City of Flushing State Revenue Sharing Funds: 2000 $892,837 2001 $895,151 2002 $871,029 2003 $839,074 2004 $754,120 2005 $748,274

  23. Take Action!!! • Spread the word about the reality of the State’s budget crisis • Family / Neighbor / Friends / Co-workers / Other Parents • Write, call or e-mail your legislator • Legislature needs to keep its promise to adequately fund the services that are expected and required by citizens • Local governments and schools cannot absorb cuts to revenue while costs increase • Significant impact on children when schools are not a priority

  24. Key Talking Points • Revenue Sharing • Education Funding • Tax/Revenue Restructuring

  25. Information Sources • Michigan League for Human Services • Michigan Association of School Boards • Michigan School Business Officials • City of Flushing • Flushing Township • Genesee Intermediate School District – Office of Business Services • Presentation by Tom Clay, Director of State Affairs • Citizens Research Council of Michigan

More Related