A bill passed by the state Senate that would leave only $33 million remaining in Michigan’s “rainy day” fund is, at best, a quick solution that will keep the budget stabilized while the economy climbs to higher levels.
At worst, it could be a disastrous decision that will mean tremendous hardships ahead.
The legislation passed 37-0 in the Senate and has been sent to the House.
Under the bill, the fund would be nearly drained to provide $335 million for the current state general fund, $350 million for the state school aid fund and $207 million for the general fund for the next fiscal year.
The rainy day fund had $1.2 billion reserved in fall 2000.
The huge amount slated to be taken from the fund makes us cringe. What happens this time next year if the state is having the same revenue shortages?
There is no sure sign the economy is set to regain a solid footing, and if there is no cash available for future hard times, cuts will be deep and widespread.
To make matters worse, the bill is coupled with a measure to protect a scheduled single-business tax cut.
Under current law, the cut can’t take place if the rainy day fund drops below $250 million. The bill would do away with that restriction, meaning the tax could still drop by 0.1 percent on Jan. 1 - at a cost of $80 million to the state.
If the state keeps cutting taxes while revenue drops, where will the money come from to build the rainy day fund up during these slow economic times?
And where will lawmakers find the money to balance the budget next year?
The answer will probably mean education will find its way to the chopping block - first at higher education, then moving down to K-12 public schools.
Those areas of state spending have managed to escape budget cuts - so far. But if finances become too tight, surely every available cost that can be spared, even for a while, will be suspect.
Such a future is bad news for anyone planning to attend college in Michigan. MSU has already announced an 8.5 percent tuition increase, just a year after a hike of 8.9 percent.
The depletion of emergency funds is simply a dangerous and risky venture - a short-term solution to a problem that may linger longer than most would like to believe.
While the solution may make things easier for the time being, Michigan lawmakers are making a high-stakes gamble with its future - and the rest of us will be left with the tab.
