LANSING – Significant cuts are in the offing for the Michigan 2009-10 budget, Governor Jennifer Granholm said Tuesday, and nothing is off the table in terms of resolving the fiscal plan including cuts to K-12 school aid and consolidating departments.

No cuts to school funding should be needed for the remainder of the 2008-09 fiscal year, Ms. Granholm said at a press conference, and she was hopeful the general fund for 2008-09 budget could be balanced without another round of executive order cuts.

But with a potential $1.4 billion general fund deficit for the upcoming fiscal year,

Granholm said 2009-10 will be “extremely challenged.”

Still, she said as troubled as Michigan’s budget is the state is still in better shape than many of its sister states with a national recession that many economists have judged to be the worst since World War II.

Because the state has been forced to undergo budget cutting for seven years now it is in better shape to handle continued cuts than are many states who are facing significant budget cuts for the first time in years, Granholm said.

The estimates set last week by the Revenue Estimating Conference would leave the state with a general fund shortfall of $157 million for the remainder of this year, a memo by the Senate Fiscal Agency said, presuming that a $457 million carryforward from the 2007-08 fiscal year is used.

The same memo estimated that a 2009-10 budget predicated on current allocated expenditures would be as much as $1.4 billion in the hole.

Administration officials are hopeful that a federal stimulus package will be approved before Ms. Granholm releases her budget in February so its effect can be factored into that proposal. Officials have estimated the portion of the stimulus package that could go toward balancing the budget could total $1.6 billion.

In reference to the current year, Granholm did not rule out having to issue more executive order cuts – a series of cuts were issued and approved last month – but hoped that the additional revenue held over from the 2007-08 fiscal year could mitigate much of the need for any additional cuts.

The upcoming fiscal year is a different matter altogether, and Granholm said several times that major cuts would be needed in the budget.

Asked specifically if a deficit of that magnitude, though it is for the general fund budget and not the School Aid Budget, would mean cuts for school aid, Ms. Granholm said, “All bets are off.”

The $1.4 billion deficit was calculated for the general fund budget, but the K-12 School Aid budget does get some general fund monies which Granholm could direct back to the general fund budget.

Plus, a second memo from the SFA said that under the state’s current formula the per-pupil grant would be reduced by $73 for 2009-10.

Asked as well if she would look at combining departments to help resolve the budget issue, Granholm said, “Nothing is off the table.”

She repeated, however, that the state would need to make changes to its corrections system to help control costs there.

The Council of State Governments is scheduled to release a report on proposed changes next week. Granholm said she has reviewed some of the preliminary suggestions which are all right, but added they do not yet go far enough to help the state control its costs.

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