Granholm's call for school aid cut raises the stakes
Districts express alarm; GOP says governor is overreacting
April 27, 2007
LANSING -- An irate Gov. Jennifer Granholm put the heat on Republican lawmakers Thursday, announcing she would cut money to public schools by $125 per pupil unless the GOP agrees to a tax increase to make up for falling tax revenues.
School officials said the cut would force them to tap emergency reserves or borrow money to balance their budgets -- difficult options with just six weeks left in most districts' school year. If money isn't restored in the new budget year, they said, layoffs and program cuts loom.
"I'm assuming most districts are going to be able to at least keep open their classrooms," said Mike Flanagan, state superintendent of public instruction. But he said some may cut transportation or lay off administrators for the rest of the school year.
Granholm said Michigan's continued weak economy, which translated to lower-than-expected tax revenues, forced her decision. New data, she said, show that the state fell $136 million short of March sales tax projections. She plans to officially notify school districts Monday of the aid cut. The Legislature will have one month to find cash to avoid the reduction.
Granholm's announcement fueled partisan discord over a state budget crisis whose solution has eluded Granholm and lawmakers since she announced in January that reduced tax collections had put the state $900 million in the hole.
Republicans accused Granholm of using alarmist tactics to force a tax increase and insisted the immediate budget problems could be solved through spending cuts.
Granholm also said she would notify physicians and hospitals of reduced state payments for treating Medicaid patients because of a general fund deficit she said has grown to $500 million.
Granholm implored several hundred school officials at a Lansing conference to urge their state senators to raise taxes and avert the cutbacks. She said she has cut state spending so much that further cuts will harm education, public safety and health care.
Senate Republicans have opposed tax hikes for the fiscal year ending Sept. 30, although they hinted they would consider new or higher taxes for 2007-08 along with more cost-cutting. Many House Democrats also have shunned a tax increase unless significant numbers of Republicans agree to one.
Granholm, visibly angry, told reporters that Republicans are stonewalling budget negotiations with extremist views against taxes.
"We need revenues to be able to save our schools," she said. "I'm angry at Senate Republicans for having purely an extremist ideology of never, no way ever, regardless of how it impacts Michigan, will they ever consider revenues. That philosophy is damaging to Michigan."
Senate Majority Leader Mike Bishop, R-Rochester, dismissed Granholm's label as unproductive name-calling. Bishop, in a statement, said the House and Senate have cooperated to erase part of the budget deficit.
"The governor seems intent on derailing the bipartisan progress via her obsession with a massive tax increase on Michigan families," Bishop said. "Republicans and Democrats have both demonstrated in legislation that the current-year deficit can be balanced with cuts."
Warren Consolidated Schools Superintendent James Clor said a $125-per-pupil cut would cost his district of more than 15,000 students about $1.9 million. He said the district's $13-million reserve would last three months.
"This is a shock, that it has to happen instantly," Clor said. "I hope it's a move that Granholm has to do to have these senators and legislators wake up."
He added, "What happens to districts that have no savings? Do they just close on that date? What do you do if you have no money?"
Avondale Schools Superintendent George Heitsch said a $125-per-pupil cut would cost his Auburn Hills district more than $400,000, which he said would be lumped onto next year's deficit.
Asked whether it would force an early end to the school year, he said, "We would not want that to happen."
This week, the Senate sent to Granholm a House bill that lops $300 million from the School Aid Fund deficit, mostly through accounting maneuvers. The bill still left a $62-million school budget hole. Granholm said she plans to sign it.
Combined with the March revenue shortfall, the School Aid Fund will remain $198 million in the hole when state economists meet in May to officially announce new revenue projections.
Earlier this month, Granholm and the Legislature cut $344 million from the current year's budget.
Sen. Nancy Cassis, R-Novi, chairwoman of the Senate Finance Committee, which oversees tax issues, said Granholm hasn't done enough to trim such growing costs as health insurance and pensions for Michigan school employees. She said the governor's criticism of Republicans makes it more difficult to reach a budget compromise.
Cassis said a tax increase might be considered as a last resort for the 2007-08 fiscal year, adding that school funding may have to be scaled back, though not as much as Granholm's $125-per-pupil cut.
Contact CHRIS CHRISTOFF at 517-372-8660 or christoff@freepress.com.
Copyright © 2007 Detroit Free Press Inc.
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April 27, 2007
Daniel Howes
Daniel Howes: Jig is up on fat school funding
You'd be irritated, too, if you'd been re-elected governor in a landslide last November
And your party, in control of the state House for the first time in a decade, dissed your plan for a 2-percent tax on services in about as much time it took you to propose it.
And your speaker, a private equity shark-turned-Democrat, didn't buy it either. Then he and the guys heading the tax policy committee recast a replacement to the Single Business Tax that Republicans, automakers, key chambers of commerce and other business leaders greeted with the kind of respect and qualified consideration that made you look, well, like an outsider.
And your tactic of whipsawing more revenue from the Senate GOP so you can plow it back into the entitlement maw that is Michigan's public schools didn't work. So the answer, just months after magically coming up with $220 more in (pre-election) per-pupil funding, is to take more than half of it back, call the Republicans "extremists" who "won't consider revenues" and bank that the public buys the charade.
But here's the bipartisan problem facing Gov. Jennifer Granholm, Speaker Andy Dillon, D-Redford, and Senate Majority Leader Mike Bishop, R-Rochester: The cash burn consuming Michigan public-school funding won't stop unless something changes fundamentally.
Almost every penny of the cash Granholm found last fall, minus the $125 per head she's promising to pull back, wasn't headed to "the kids" anyway. It was destined for negotiated health care benefits and retirement fund payments whose rates are dictated by state bureaucrats.
Here's an example that should be familiar to Bishop. In the current year, according to estimates prepared for the Rochester school board, the 14,800-student system has an estimated payroll of $57.95 million for 847 teachers. The district pays pay an additional 17.74 percent, or another $10.3 million, into the state teacher retirement system.
By the 2008-09 fiscal year, estimates show, Rochester schools expect to be paying 21 percent of payroll (up from 14.87 percent in '04-05) into the system. That's $13.2 million on top of an estimated $62.9 million in payroll for a total of $80.9 million (including payroll taxes), or easily more than $100,000 per teacher.
The point here is not an emotional one, although it will surely be made that, or that teachers are "the problem." It's that the system, absent either massive revenue expansions through growth (unlikely near-term) or annual tax grabs (more likely), is financially unsustainable -- even in comparatively wealthy Rochester.
Rochester's payments into the state retirement system are expected to be 28.1 percent higher by the 2008-09 year than today, while salaries are expected to increase 8.5 percent over the same period.
Compare that to your 401(k) at work, where employers typically contribute 4 percent or 6 percent of salary as a "match" to employee contributions. As salaries grow through raises and promotions, the contributions grow even if the percentage doesn't because to increase wages and, at the same time, increase the percentage match would outrun the ability of almost any business to keep up.
But that's exactly what's going on in many school districts across the state. It's not the only challenge among countless others facing Granholm and the Legislature, but it's a major one pressuring state and local budgets every year -- and it needs to change.
Daniel Howes can be reached at (313) 222-2106, dchowes@detnews.com or http://info.detnews.com/danielhowesblog. Catch him Fridays with Paul W. Smith on NewsTalk 760-WJR.
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