Across the country, state governments are grappling with how to sharply trim budgets amid the worst recession in decades. But nowhere is that debate more intense than in Michigan, where officials are scrambling to close a $2.8 billion deficit and avert a government shutdown at midnight on Wednesday.
In the last year, this state has endured the collapse of its core automotive industry and dozens of affiliated businesses. Now, Michigan's unemployment rate is 15.2%, the nation's highest. The state's tax revenues have plunged by more than 22%. And even leafy, seemingly upscale suburban neighborhoods have become hubs of foreclosed homes and shuttered businesses.
Managing Michigan's crisis is the state's governor, Jennifer M. Granholm. Talking recently with TIME in the parlor of her second-floor office in the state's capitol building, Granholm said that preventing a government shutdown before midnight Wednesday, the end of the state's fiscal year, "is going to require a level of cuts that people have not had before."
Those cuts could focus on funding for a range of public services, from health care to libraries and prisons. The impact on the state could be dire. There are concerns that cuts to prisons and police departments, for example, will lead to an increase in crime. And one of the Granholm administration's chief goals doubling the number of Michigan college graduates could be derailed by plans to cut a program that awards up to $4,000 to any student who finishes two years of college.
"I'm not saying don't cut. But at some point, you hit a tipping point, and it becomes dangerous to the future of our state," Granholm said.
Since assuming the governorship in 2003, Granholm has moved to broaden Michigan's industrial base into such areas as energy and robotic technology an effort that aims to tap into the skills of the state's sizeable population of scientists and engineers. "For 100 years, we've been focused on the automobile," says Granholm. "So we have an identity crisis."
But carving a new identity for Michigan has been tricky. Just two years ago, Michigan's government shut down for several hours when lawmakers could not pass a budget. At the end of last year, Granholm issued the first of two executive orders halting new hires and promotions, and limiting travel. Unsurprisingly, her legislative proposal to raise some $600 million with new fees and taxes from a new license allowing Sunday liquor sales, and an increased tax on tobacco products like cigarillos has failed to gain support.
If a budget deal is not reached by midnight Wednesday, the governor has indicated she will sign a temporary budget that will give officials another 30 days to resolve differences. "No one wants to see a shutdown," Granholm said. "People want to see this resolved."