The State Budget Office, working in conjunction with departments across state government, announced today that no layoffs of state workers will result from the implementation of federal sequestration, given the current information received from the federal government. The budget office completed its program by program analysis resulting in estimated program cuts of $150.5 million in fiscal years 2013 and 2014.
Total program reductions in fiscal year 2013 are estimated at $59.2 million, with another $91.3 million in reduced spending projected for fiscal year 2014.
"We've said from the start that Michigan would not be replacing lost federal dollars with state dollars due to sequestration and that still holds true," said Gov. Rick Snyder. "We support getting the nation's fiscal house in order, though across-the-board cuts like this are not the way to go about it. We took a much more thoughtful approach here in Michigan in putting the budget in balance."
The most significant direct impact to clients occurs within the Department of Human Services, where the annual allowance for children's clothing will be eliminated. The clothing allowance of $137 per child is currently provided each August to 21,000 children. The Department of Community Health will implement reductions to programs aimed at serving seniors as well as other grant program areas such as nutrition services and injury and disease prevention.
Reductions in education funding will total just over $54 million, where schools districts will face sequestration cuts next school year in areas such as special education services, Title I funding, career & technical education, after-school programs, teacher quality grants, and other categorical grants. School districts will need to adjust their budgets this summer to compensate for reduced federal revenues at the beginning of the next school year.
"The good news here is that we have our fiscal house in order and Michigan is in a good position to manage these cuts because we already made the tough decisions to get our budget in structural balance for the long term," said State Budget Director John Nixon. "The past groundwork we've laid for fiscal responsibility makes Michigan well positioned to adjust and keep moving forward."
The majority of the cuts resulting from sequestration come by way of federal grant reductions that in turn impact local entities that benefit from the grants. Federal grant reductions can be implemented in two ways. In cases where the agency has not yet awarded local grants or contracts for the current year; awards will be made at a reduced level. In cases where agencies are currently spending prior year federal grants, program cuts are made to fit within the reduced federal spending guidelines. As an example, reductions of $573,100 will occur for grants within the Department of Environmental Quality that have not yet been awarded.
In the current fiscal year, 42 percent of the state budget comes from federal funds, which translates to approximately $20 billion of the $48.2 billion state budget. Sequestration reductions of $150.5 million represent less than four-tenths of one percent of the total budget.