In late December, I sat in my office and read the Senate Fiscal Agency’s Economic Outlook and Budget Review for fiscal years 2007-08, 2008-09, and 2009-10.
Admittedly, I am a geek when it comes to economics. My two classes in macro economics and monetary economics with Professor John Reifel, Ph.D., an economics professor at Grand Valley, were among my favorite business classes. Even for a geek, I probably should have waited until after Christmas to read the report. It is a sobering assessment of Michigan’s near term economic picture. As I write this, I feel more like Scrooge than good old Fezziwig.
The term “recession” is used 44 times in the report. The term “depression” is used five times.
No doubt, this Senate report will form the Senate’s opinion for their discussion on the economic and budget prospects for Michigan over the next couple years. By the time you read this, the January Revenue Consensus committee meeting between the economic gurus in the Senate, House, and Governor’s office should have had their scheduled January 9 meeting.
The following are some “highlights” from the Senate’s report:
First some good news:
"... the FY 2007-08 GF/GP (General Fund/General Portion) budget will close the year with a $442.5 million balance. The FY 2007-08 SAF (School Aid Fund) budget will close the year with a $247.1 million balance."
In other words, the State’s fiscal year which ended September 30, 2008 had a budget surplus of revenues over expenditures. This is good news in that the State’s fund balance will help cushion the blow.
Now here’s the other news: According to the report's Table 1, the State of Michigan's unemployment rates are anticipated to be 8.2% in 2008, 10.6% in 2009, and 11.3% in 2010. In other words, the Senate economists are anticipating significantly more job losses in our state in the next two years.
In case you were wondering what to budget for school aid for 2009-10, the report goes on to say, "A review of the issues that the Governor and the Legislature will face in developing the FY 2009-10 State budget leads to the conclusion that, absent additional revenue, very significant reductions will have to be made in the GF/GP (General Fund/General Portion) appropriations to ensure a balance between estimated revenue and appropriations. A look ahead at the FY 2009-10 SAF (School Aid Fund) budget leads to the conclusion that a freeze in the level of SAF appropriations at the current-year level is likely.”
In addition:
"School Aid Fund revenue from all earmarked taxes and the lottery will total an estimated $11.37 billion in FY 2009-10, which represents a decline of 0.6% or $63.1 million from the revised estimate for FY 2008-09. This projected decline will be due primarily to declines in the income and State education taxes, coupled with only very weak growth in the sales and use tax revenue." (In Table 6 of the report, fiscal year 2008-09 School Aid Fund revenues are projected to be $272 million less than what was previously projected in May 2008.)
Given the economic realities, this is where we, members of the Michigan School Business Officials, must offer honest and prudent assessments of school budgets for the coming year. After the Revenue Consensus, the Governor’s budget release, which normally occurs in early February, will be the next benchmark for determining what to expect not only in terms of state foundation allowances, but also categorical grants, MPSERS retirement rates, and projected statewide enrollments.
The ancient Greek Sophocles said, “Nobody likes the bringer of bad news.”
So, I do not anticipate that we in the Michigan School Business Officials will win any popularity contests this year. The responsibility of MSBO members in bad economic times is more important, not less. In the next few months as we prepare budgets for 2009-10, please remember to look to MSBO for sound and reasoned advice for dealing with difficult financial times. Also, remember one thing: we are here for Michigan’s 1.6 million children who are served on a daily basis in Michigan’s public schools.
The full Senate Fiscal Agency Report may be found at:
http://www.senate.michigan.gov/sfa/Publications/BudUpdates/EconomicOutlo...
Oh yeah, my “musical theme” for this month is intended to remind you of our responsibility to advocate for sensible budgets on behalf of children:
“Sunny Day
Sweepin' the clouds away
On my way to where the air is sweet
Can you tell me how to get,
How to get to Sesame Street?”