What the heck does the federal budget have to do with Michigan?

I had the real privilege of speaking at the Michigan Forum on Jobs and Human Needs on Saturday, March 6, 2001. Sponsored by a great mix of labor, faith, peace and student groups, the event was held in Lansing, Michigan, the state's capital, which is located within Ingham County.

Many of the conference organizers are affiliated with Our Nation's Checkbook (ONCB), a national budget priorities organizing campaign run amazingly well out of Friends Committee on National Legislation and supported by NPP's information.My task was to answer the question: What the heck does the federal budget have to do with Michigan?

Read on and see if I was successful!

In Michigan, like in every state in the country, folks pay taxes to the federal government, and states, communities and individuals receive funding from the federal government.

In 2006, Michigan taxpayers contributed $70 billion tax dollars to help fund our nation's government. The government returned $67 billion in the form of goods, services, funding for local programs and initiatives.

In 2009, Michigan taxpayers paid $56 billion and received $74 billion in return – a bump due to the American Recovery and Reinvestment Act or Stimulus program.

Like nearly every state in the country, in 2009, Michigan was in the midst of a recession. Not only did the state government need the extra funds to help close a spending gap, individuals in local communities – facing unemployment or under employment – needed an expanded safety net in the form of food stamps, job training, youth services, unemployment compensation, money to return to school and more. In short there's more demand and less money to meet it.

Why couldn't Michigan borrow money and take care of its own needs?

Because by and large, Michigan cannot borrow to close spending gaps. Most states have balanced budget clauses that do not allow legislatures to run a deficit to meet needs. So the state either has to cut spending or generate more revenue.

The federal government operates differently. In 2009 the federal government sent economic stimulus funds to the states, like Michigan, experiencing shortfalls.

Let's take a look:

How did the federal dollars “come home” to Ingham County in 2009?

In 2009, Michigan received $4.6 billion in Social Security Disability funding. Ingham Country Received $132 million.

What was the impact on programs dedicated to young people and students?

In 2009 Michigan received $9 million in Upward Bound funding. Ingham County got $424,214.

Also in 2009 Michigan received $781 million in Pell Grant funding. Ingham County got $59 million.

That was 2009, what's happening today in Michigan?

Once again, let's look at four realities:

#1: State tax Revenues are still down – below pre-recession levels.

#2: Costs continue to rise – more kids in public school, more in public colleges, more people needing subsidized health insurance.

#3: Federal aid is drying up; after increasing to $68 billion in aid in FY2010 and $59 billion in aid in FY2011, federal stimulus funds to the states will see a sharp decline to roughly $6 billion in FY2012.

Yet even with 2011 stimulus money to help – Michigan, like most other states nationwide had a budget gap this year which resulted in significant cuts. A state inevitably passes its problems to the city. Michigan's problems are Lansing's problems.

Lansing also continues to experience decreased revenues – both from the state and its own revenue sources. This continues to have an impact on both people and infrastructure, such as your fire station, and on municipal employees through reductions in hours.

And, #4: Federal lawmakers are currently considering budget cuts and caps to a piece of the federal budget pie now called non-security discretionary spending. It's the spending you and I know as funding for education, health care, human services, law enforcement, infrastructure and more. It does a lot at the state level and yet it represents only about 12% of the overall federal budget.

Again, we're talking about non-security discretionary federal spending and it's in danger of being cut in FY2011 and cut and capped in FY2012 in the name of annual deficit and overall debt reduction.

Let's talk about the proposed cuts to non-security discretionary spending in the 2011 budget debate.

The House of Representatives has passed HR 1 which significantly reduces total discretionary spending and focuses the vast majority of the cuts on non-security discretionary spending.

Because we're nearly half way through the year, the “savings” will have to be realized in fewer months, which means that the cuts will be deeper for the rest of the year than they would have been had they begun on October 1.

If HR 1 passes, what would it mean for Michigan?

HR 1 would cut $40.6 million in funding for education for the disadvantaged and $34.4 million in funding for school improvement to Michigan. In real terms, education for the disadvantaged means Title 1 funding for schools in low-income communities, adult literacy programs and more. School improvement funds are dedicated to programs like 21st Century Learning Centers, which provide academic opportunities to low income students after school hours to improve performance.

What would happen to Pell Grants?

HR 1 would cut Michigan funding for Pell Grants by $202 million, affecting upwards of 337,000 students.

What's the projected impact on public housing?

HR 1 would cut nearly $24 million dollars in funding to Michigan dedicated to low income or public housing. The Public Housing Capital Fund, which helps local housing agencies make repairs to low income housing stock, would lose $18.8 million. The HOME Investment Partnership Program would lose $4.9 million. The HOME Program provides states and local communities with block grant funding for rental assistance and the acquisition and rehabilitation of affordable housing stock.

Mindful that October 1, 2011 is fast approaching and so is the projected FY2012 budget, let's now take a look at the impact of the fiscal year 2012 budget blueprint on Michigan.

States like Michigan and cities like Lansing are already counting on FY2012 federal dollars. Michigan is projected to receive $1.6 billion in federal School Aid funds for public education. This, of course, would add to money contributed by the state. In fiscal year 2012, Lansing is projected to receive $2.1 million in CDBG funding and part of a $17.4 million, 3-year HUD grant to demolish vacant and foreclosed homes.

But all of this hangs in the balance as we're just beginning the FY2012 budget process.

The Obama Administration introduced the $3.7 trillion dollar budget with associated revenue projections on February 14, 2011. There are literally hundreds and hundreds of federal programs which are projected to “land” in Michigan. For example, as part of its scrub of the 2012 federal budget, Congress will examine Health and Human Services funding.

What's in store for Head Start and LIHEAP?

In the 2012 budget, Michigan is projected to receive $273.3 million dollars for Head Start. That's an increase of 10.3%. Michigan's funding for the Low Income Home Energy Assistance Program, or LIHEAP, is projected to be cut by nearly 53%.

And what about Section 8 and Community Development Block Grants?

Congress will also look at the projected $47.2 billion in HUD-related spending for 2012. For Michigan, this translates into $361 million in Section 8 money, a 4.3% increase, and $131 million in CDBG funding, a projected 31% cut.

In short, within the 2012 federal budget, there are a handful of winners and a lot of losers. The majority of losers are now classified as non-security discretionary spending. President Obama estimates a $400 billion savings over a decade of squeezing these domestic programs. He does this in the name of deficit and debt reduction.

Our nation's debt must be dealt with, but as we discuss it with our elected officials, let's be mindful of the following:

#1 While the Obama Administration considers cuts and a 5-year cap on so-called non-security discretionary spending, the Department of Defense base-line budget will not only keep pace with inflation, it is projected to grow out past 2016.

#2 And, while the Obama Administration hopes to realize $400 billion in savings from the 5-year cap, projected Pentagon, war and nuclear weapons spending for this year alone is nearly $730 billion – again, this is for one year. With Homeland Security and Veteran's benefits, this so-called security spending represents more than 65% of all discretionary spending and well over one-quarter of all federal spending.

#3 And, a bi-partisan task force found that our nation could make smart cuts to security spending – saving $960 billion over a decade – and still be secure. $960 billion in savings is in a different league than $400 billion.

#4 And finally – and the numbers tell this plainly when we look at them – the story of our nation's federal spending is not the story of an unbridled checkbook. Outside of the bump for stimulus, discretionary spending has remained modest in the last decade. What's changed is an increase in spending for need-based mandatory programs which expanded during the crisis, reduced revenue because of a stagnant economy, a dramatic escalation of military spending and tax policies which have privileged corporations and the wealthiest Americans.

If faced with a choice between doing without $2.5 billion in revenue due to off-shore drilling write offs or a $2.5 billion cut to fuel assistance for the poor, how many people would choose to cut heating aid?

That's the kind of question we must be asking. That's what's at stake. It's our federal budget, it's Lansing's federal budget and all voices are needed in our current debate.