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For the second time this year, Michigan's governor, Jennifer Granholm, has ordered emergency cuts to deal with the huge budget gap. The meltdown of the auto industry has forced the governor to make some tough choices. And that came on top of year after year of budget cuts in a state that leads the country in recession.

Governor JENNIFER GRANHOLM (Democrat, Michigan): When I first became governor -I've had to cut every single year since I've been governor. Every single year we've had to cut hundreds of millions, if not billions, of dollars. And so, this year will be no different than before.

INSKEEP: That was Governor Granholm on this program two weeks ago. She said then that everything was up for grabs except K through 12 education and health care for vulnerable citizens. But payments to doctors are among the items she's had to cut, as Michigan Radio's Rick Pluta reports.

RICK PLUTA: Public employees will take unpaid holidays, the state will layoff police officers, government payments to doctors and hospitals will be reduced. Governor Jennifer Granholm's 23-page order details hundreds of spending rollbacks that purport to save the state of Michigan a little more than $300 million.

Robert Emerson is Michigan's budget director, and it was his unpleasant job yesterday to deliver the bad news to state lawmakers.

Mr. ROBERT EMERSON (Budget Director, State of Michigan): This is a horrible thing that I present to you today. The cuts here are devastating to a lot of organizations, institutions, and people in the state of Michigan. Very little will go without some harm.

PLUTA: But Emerson says Michigan would be a lot worse off with a billion dollars from the federal recovery package. It will be used to take care of the lion's share of the state's shortfall. Stimulus money will also help avert bigger cuts to Medicaid health coverage for low-income families, and shield K12 schools, public universities and community colleges from rollbacks.

But that's no comfort to the city of Lansing's Mayor, Virg Bernero, whose office sits across the street from the state capital.

Mayor VIRG BERNERO (Mayor, Lansing, Michigan): This isn't just a run of the mill cut, where they're warning us in the budget year, hey, you're going to get less. This basically, we're out on the lake with one oar, with one paddle, and now they're punching a hole in the boat and saying good luck.

Unidentified Woman: It's going to be (unintelligible)…

PLUTA: Next door is Lansing's police headquarters, where dispatchers send officers across the city to respond to calls.

Unidentified Woman: (Unintelligible)

PLUTA: Bernero was hoping to use federal recovery funds to add a couple of officers to his force. But he says now stimulus funds that were supposed to create new jobs are instead being used to backfill spending cuts.

Mr. BERNERO: This basically countermands, this basically negates the stimulus. I call this the anti-stimulus package. Whatever good was done with the stimulus, the state wants to make sure they come and whack us and take away whatever benefit we had from the stimulus. So, yeah, it's the anti-stimulus; you can call this the anti-stimulus package.

PLUTA: Michigan is no alone in using stimulus money to help address budget troubles. A report released last month by the National Conference of State Legislatures says states collectively cut almost $40 billion to balance their budgets this year. But since then, the economy has deteriorated and 43 states are now facing new shortfalls, totaling $60 billion.

Arturo Perez is a budget expert with the conference. He says all those states are using stimulus funds to help balance their budgets.

Mr. ARTURO PEREZ (Budget Expert, National Conference of State Legislatures): The states have taken action across the board, mostly relying on budget-cutting measures as compared to revenue-raising measures, to balance their budget. The federal stimulus monies has then probably the only bright spot in the current situation, otherwise the situation would actually be much worse.

PLUTA: Many states, including Michigan, are predicting even bigger shortfalls in the coming year. Michigan's budget director warns that the state could spend every penny of stimulus money it has coming and still not retire its deficit.

And the problem gets even bigger in two years when states won't have federal recovery money to patch their budget problems, which could really make 2011 the year of the anti-stimulus.

For NPR News, I'm Rick Pluta in Lansing, Michigan.

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