News Story

Stimulus Blows Open Billion-Dollar State Budget Hole, 'Guaranteed Catastrophe'

Last fall at a Sarah Palin book signing in the Grand Rapids area, State Rep. Dave Agema sought out a reporter with a gloom-and-doom prediction: The state of Michigan was going to be in deep trouble once the stimulus money ran out.

Now, a recent study by the Citizens Research Council of Michigan shows that the state budget will be without $1.6 billion in 2012 that was from one-time sources of revenue that will help balance the budget in 2011. Jeffrey Guilfoyle, president of the Citizens Research Council, said $1.1 billion was federal dollars, mostly from the stimulus acts.

"My attitude is: So here we know this freight train is going to go off this cliff and all we are doing is nibbling at the edges of the cookie," said Agema, R-Grandville. "It's a guaranteed catastrophe for next year. .. Why isn't something being done? Because nobody has the guts to cut a budget the way it needs to be done."

The study found that the state used $445 million from the American Relief and Recovery Act and another $696 million from the recent stimulus that was to be used for schools and Medicaid. The other types of one-time sources of money are programs like the tax amnesty bill being considered. That would get the state money in 2011 but lose the fees and penalties it could have collected in 2012.

The loss of $1.6 billion hits the state after years of budget cuts, Guilfoyle said.

"You are looking at very big cuts or very big tax increases," Guilfoyle said. "It is going to be a significant challenge. The new governor is going to have a very difficult budget to put together right out of the gate."

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.