STIMULUS FUNDING in JEOPARDY! (NO-Not the Game but because of it!)

State examines whether waiver is needed to keep K-12 stimulus funding

Granholm administration officials are looking at whether Michigan may need to seek a waiver enabling it to keep federal stimulus funds for K-12 education.

The possibility is being considered as state officials examinewhether state funding levels for K-12 education are likely to drop below the “maintenance of effort” compliance levels required by the federal stimulus package, or the American Recovery and Reinvestment Act.

State Budget Director Robert Emerson said at a press conference on Tuesday that any further reductions, beyond those in the school aid budget signed by Gov. Jennifer Granholm on Monday, could jeopardize the federal stimulus funding.

Michigan used about $600 million in federal stimulus funds as part of the fiscal 2009 school aid budget and has allocated an additional $450 million as part of the current-year school budget, leaving about $183 million reserved for use in fiscal 2011.

If Michigan were to be out of compliance with the ARRA, it could potentially have to repay the money. A waiver, however, would avert that and other states have sought and received such waivers.

Emerson and Granholm said there is the potential that Michigan will need to enact additional per-pupil cuts, beyond the $165 per-pupil reductions in the just-signed budget.

Emerson said state Treasurer Robert Kleine and officials at the House Fiscal Agency and Senate Fiscal Agency were meeting on Tuesday to determine the state's current revenue outlook.

He and Granholm said the current school aid budget was underfunded by $60 million, based on May revenue estimates. But the state Treasurer has also indicated that, based on the latest revenue data, the shortfall in the school aid fund could be as high as $264 million.

Granholm on Monday vetoed $54 million in spending measures in the $12.9 billion K-12 budget, including $51.5 million in supplemental payments to districts that get among the highest per-pupil payments statewide.

Taking into account Granholm's veto, that could leave a current-year shortfall as high as $210 million, which could translate to additional, across-the-board cuts of as high as $120 per pupil, unless the Legislature provides additional funding, Emerson said.

At the Capitol press conference, Granholm and an array of education officials from across the state urged lawmakers to pass additional sources of revenue.

Granholm said education is the “thing most important for our economic recovery” and warned of “additional cuts, potentially soon.”

Also on Tuesday, the Senate sent Granholm six remaining budget bills that include controversial cuts like an 11.1 percent reduction in state revenue sharing and an 8 percent cut in Medicaid providers' reimbursement rates.

In a letter accompanying the bills, Senate Majority Leader Mike Bishop, R-Rochester, warned Granholm against vetoing items in the bills with the expectation that the Legislature would pass new sources of revenue to reinstate the vetoed items.

“Please remember that any line item veto you exercise will result in the total elimination of those programs,” Bishop wrote. “Do not veto portions of these budgets with the expectation that money will be reappropriated at a later date to fund the vetoed programs.

“There is not sufficient support in the Senate Republican caucus for tax increases and for you to think otherwise is a mistake.”

Bishop said the final fiscal 2010 budget represents a “bipartisan and bicameral effort that was achieved after months of tough negotiations.”