Federal aid helps Michigan fill $2.2B hole; more sought

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LANSING — Michigan lawmakers will return to session to pass a multibillion-dollar plan to resolve the deficit caused by the coronavirus shutdown — with a mix of spending cuts, a drawdown of the state’s savings and a big influx of federal rescue aid.

The framework of the deal was announced three weeks ago by Democratic Gov. Gretchen Whitmer and Republican legislative leaders. But now, negotiators are ironing out specifics in hopes of patching the remaining $2.2 billion budget hole this week before turning their attention to another major shortfall in the fiscal year that starts in October.

The first step is being made much easier thanks to $3 billion from the coronavirus relief law.

K-12 schools will see their base per-student grant reduced by $256 billion but then more than offset with $512 million to cover COVID-19 costs they previously incurred or will face while preparing to reopen, as of now, in late August and early September. The agreement includes similar maneuvers for university, community college and local government funding.

There appears to be a wink-and-a-nod understanding that the money — combined with fund shifts — can be used creatively to effectively address budget shortfalls despite restrictions in the federal rescue package. Whitmer and legislators have been urging Congress to provide spending flexibility.

The state deal includes a $500 “hazard” bonus for each teacher. One sticking point is it does not include a one-time pay hike for other workers like cooks and janitors.

The Michigan Education Association, the state’s largest education union, is “advocating that these funds be divided fairly among all school employees — not just teachers — in recognition of the efforts of education support professionals throughout this pandemic, including sanitizing facilities, making and delivering meals, and completing other critical work to keep students learning,” said President Paula Herbart.

As part of the agreement, the state will pull $350 million from its $1.1 billion “rainy day” fund. It is just the second time that will have happened in 15 years and will be the most shifted out in 18 years.

A key thing to watch for is details on $490 million in “savings” included in the framework and the impact on state workers and department budgets and programs. About 31,000 employees, two-thirds of the workforce, have taken temporary layoff days since May — some earlier. The furloughs could be extended beyond the end of this week, at the same time an extra $600 a week in unemployment benefits they have been getting will expire unless the payments are renewed by Congress and President Donald Trump.

Both the state budget office and legislative staff were tight-lipped about cuts, citing ongoing talks. Whitmer is expected to issue an executive order with reductions to departments after previously ordering them to restrict discretionary spending, while some related moves will require lawmakers to vote.

Once legislators complete the 2019-20 supplemental budget — the goal is this week — they will confront a projected $3 billion shortfall for the budget year that begins in more than two months. The strategy is to press Congress for additional funding in the next relief package, though the parties in the nation’s capital are divided over how much aid to send to cash-strapped states and cities that are pleading for money.

Time is not on the side of K-12 districts and charter schools that face uncertainty over their 2020-21 funding while working on reopening plans that depend on what phase their region is in under Whitmer’s return-to-school road map.

“Everybody’s focused on the idea of getting schools back open again. That’s the focus of every single administrator in every school district in Michigan right now. But they can’t answer all the questions that need to get answered until they have budget certainty,” said Robert McCann, executive director of the Tri-County Alliance for Public Education — a coalition of Detroit-area superintendents.

The group has estimated schools will need at least $1 billion more to operate in the pandemic while the school aid fund could see a $1.1 billion shortfall next fiscal year.

“This is going to start moving from a problem to a crisis very quickly in the next few weeks,” McCann said.

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