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Michigan's Government Showdown -- or Shutdown?

September 28, 2007

Michigan’s colleges and universities, already down millions in deferred state payments, are facing an incredibly uncertain fiscal climate. As legislators in Lansing bicker over a $1.75 billion statewide deficit, the threat of a government shutdown starting on Monday looms.

And college leaders aren’t only looking forward with nervousness, they're likewise looking anxiously back -- to ensure the restoration of about $138.7 million included in last year's appropriation for universities, and $25.8 million for community colleges, delayed because of the budget crunch until the start of the new fiscal year October 1.

“It’s so fluid right now,” says Gregory Rosine, senior vice president for university advancement and legislative affairs at Western Michigan University. The university expected to receive a mid-October payment of $11 million in deferred state funds, in addition to another $11 million or so from the upcoming year’s appropriation. Right now it’s unclear how big a check Western Michigan can expect next month, though it’s safe to say it’s probably in the $0 to $22 million range.

“We’re talking about $22 million – that’s a lot of money,” Rosine says. “We put a budget together on the assumption and set tuition on the assumption that we were going to have this deferred payment come back to us.”

"In order for us to go forward into the academic year, we would like to have a good idea of what our budget is going to be, what our appropriation from the state is going to be. And the longer that remains uncertain, clearly the more difficult it is to plan," adds Steve Webster, vice president for governmental affairs at Michigan State University.

College officials say their institutions, which are able to collect tuition directly from students without a state intermediary, have no plans to immediately shut down in the event of a government shutdown (which, Webster says, he thinks is unlikely to happen). But even assuming lawmakers do agree on a budget -- most likely at this point a short-term budget -- bigger issues may still lurk in the background.

Democratic Gov. Jennifer M. Granholm’s recommended budget originally included a 2.5 percent increase in funds for higher education -- but that increase was predicated on an increase in revenue. And with lawmakers unable to agree on tax increases -- the two main proposals being to expand the sales tax base so that it includes some service industries, and to increase the income tax from 3.9 to 4.6 percent, the latter being the level before a series of tax cuts under recent Republican Gov. John Engler’s administration -- it’s probably safe to say that college leaders aren’t counting on any funding increases, Rosine says.

The “best-case scenario,” says Michael Hansen, president of the Michigan Community College Association, is that the colleges “get their delayed payment restored and no increase this year.” Asked about his thoughts on the chance of a government shutdown, Hansen says that while “it’s not over 'til it’s over,” the tone of the discussions in Lansing is worrisome. “The sides are now bracing for a shutdown and trying to figure out who benefits politically from that," Hansen says. "That’s the most disgusting thing I’ve ever heard, if the situation has devolved into who gains politically by a government shutdown.”

James J. Duderstadt, president emeritus and University Professor of Science and Engineering at the University of Michigan, says that he expects the legislature will come up with a solution before Monday -- but only on paper and not in practice.

“Probably what they’re going to do is find some way to paper it over,” he says -- with state leaders writing what looks like a balanced budget only to come back in another few months to announce cuts. “My belief, and it’s shared by a lot of people, is that what you’re seeing right now is the endgame of a bitter political battle which is very likely to lead to the same thing it’s led to in the last several years, which is just postponing the serious issues -- like getting an adequate tax base.”

Duderstadt traces funding woes for Michigan higher education to the 1980s, when Japanese imports first posed serious threats to Detroit’s automobile industry and universities lost about a third of their state support. While appropriations bounced back a bit during the 1990s, when demand was high for American-made sports utility vehicles and equity markets were booming, tougher times and lower taxes have since combined to hurt public higher education, Duderstadt says.

Per-student higher education appropriations at Michigan’s public universities have fallen from $6,840 in 2000-1 -- $8,154 when adjusted for inflation -- to $5,852 in 2006-7, according to the Presidents Council for the State Universities of Michigan. And while the state ranks 26th in terms of per-student appropriations, again according to the Presidents Council data, Michigan was the fourth-slowest state in terms of increasing its higher education spending in the past decade.

Furthermore, Duderstadt says, “We have not had, in Michigan higher education, a significant capital outlay bill since 1995, for over a decade now.”

But Erik Guenard, dean of business services at Gogebic Community College, in Michigan’s Upper Peninsula, says he sees in the state’s pro- economic development attitude reason for optimism -- and he expects Gogebic to get its $700,000 in deferred appropriations back in any budget breakthrough. “I do feel pretty good about it because the state right now has been talking about turning the economy around and the only way to turn the economy around is through education of the citizens," Guenard says.

“We want to be seen as a state that is on the move, that is using three research universities to fuel the economic engine," says Terry Denbow, vice president for university relations at Michigan State. “We are concerned about the image and reputation of an entire state."

“The bottom line is that Michigan is calling a timeout that it doesn’t have -- and there’s always a penalty for calling a timeout that you don’t have."

 

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