According to several news accounts, the Michigan Legislature has balanced the budget for this fiscal year (ending on September 30, 2007), by shifting funds, delaying payments to Universities and Colleges, and borrowing $400 million on future payments from the tobacco settlement fund. Medicaid and school funding will not be cut, but other programs will be cut, including the Healthy Michigan fund and the 21st Century Jobs fund. The legislature did not raise taxes, but the state must pay more later to address the state's problem with a structural deficit, which has been made worse by the state's current actions. Ann Arbor's State Senator Liz Brater, in a recent email to constituents describes the harmful effect on the state from the Legislature putting off difficult decisions:
Because of the use of gimmicks and one-time fixes for so many years to balance the budget, the bond rating agencies have downgraded the state’s bond rating. For the third time this year, Wall Street has downgraded Michigan's credit rating. Standard and Poor's has recently lowered Michigan's General Obligation Credit Rating to AA- from AA. As with previous downgrades from Fitch and Moody's, S&P cites delays in securing budget agreements and the legislature's elimination of the Single Business Tax without replacement revenue as key factors. This results in increased borrowing costs to state and local government and schools, further straining our fiscal position.Other articles that you might want to look at, now that you are incredibly excited about state budgets and credit ratings, include:
Borrowing, funding shifts keep state afloat in 2007 by Peter Luke and
Can Michigan survive its lawmakers' folly? Legislators fiddled while state burned, an editorial from the Ann Arbor News.
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