Cuts to general fund state appropriations for higher education institutions may be necessary to make ends meet this year, Gary Olson said Tuesday.

“In the end, we are not going to be able to balance the 2009-10 budget with keeping community colleges, universities and K-12 whole; I just don’t see how the numbers are going to work,” the director of the Michigan Senate Fiscal Agency said at a presentation in the Charles V. Park Library. “How big the cut is just depends on what other cuts we make.”

Olson said lawmakers will look at other options such as eliminating the Michigan Promise Grant to help lessen the direct impact to universities.

“When we put the forecast together in January 2009, we thought we had a conservative forecast of both the U.S. and the Michigan economy. While it was conservative, it certainly wasn’t conservative enough,” Olson said.

According to a report he provided, the state lost 2.7 million jobs in the last four months, the second-largest four-month decline in history. Though lawmakers originally predicted a 4.6 percent decline in payroll jobs for 2009, Olson said, a revised budget by the Senate Fiscal Agency next week will predict an 8.8 percent decline for the same year.

Olson said the job losses, combined with a depressed auto industry and a downtrodden housing market, have lawmakers in a fix.

Before general fund and general fund appropriation reductions were made Tuesday, Olson said, the state budget was in deficit between $900 million and $1 billion.

“Absent the federal stimulus money, I’m not quite sure what we would have done,” he said.

He said stipulations from the federal government require the state to at least attempt keeping appropriation money for higher education the same through 2010-11.

“That money we have to do that is not going to be enough in that we have to use that for K-12 as well and community colleges. We are going to run out of that money,” Olson said. “We are going to run out of this federal money much quicker than we thought, and we will be forced-it’s clear to me- to reduce funding to higher education below the current level.”

This, Olson said, is assuming Governor Jennifer Granholm does not implement tax increases, which she and other state officials have said they do not want to do.

“Major, major challenges for the government and the legislature,” Olson said. “If you have a billion dollars out of $8 billion in general fund spending in 2009-10 supported by one-time federal funds that are not there the next year, you’ve got a recipe for disaster in 2010-11.”

Other options

The 40 percent film tax credit that is designed to lure directors of big-picture productions to Michigan is one issue in need of attention, Olson said. Although it generates positive attention on the state and helps the hospitality industry, it will take $130 million out of the general fund revenue base in 2009-10.

“That’s 130 million of net revenue loss after we factor in the state taxes that are going to be collected from the films that are made in Michigan,” he said. “It will never pay for itself. It will be a drain on the state budget as long as the film credit exists, or until we get rid of it.”

Mary Graham, a CMU editorial specialist in the Park Library, said after the presentation, the negative impact of the tax credit was surprising, given all the positives she has heard about it.

“It was an eye-opener to me, I was frankly apalled,” Graham said. “I’m so disappointed.”

Rick Kurtz, chairman of the political science department, questioned cost savings available by consolidating state agencies that have been restructured.

Olson said Granholm has asked Lt. Gov. John Cherry to come back with a recommendation to reduce the number of state departments from 18 to eight. He said he wasn’t sure how significant the impact would be.

“The way you are really going to save money is by eliminating programs,” he said. “The only thing we can say for certain is the budget will be balanced. That’s a constitutional requirement.”

university@cm-life.com

E-mail the author: Heidi Fenton