DALLAS -- Michigan Gov. Rick Snyder believes the $232 million he's asked of state lawmakers will be enough to tackle both the short-term health and long-term safety concerns of Flint residents in the wake of the city's water contamination crisis.
Snyder testified Thursday at the third congressional hearing held in the wake of the Flint crisis, on a day during which Standard & Poor's revised its outlook on Michigan's AA-minus general obligation bond rating to stable from positive, in part because of Flint.
Snyder said that nearly $67 million has already been appropriated to address health and safety concerns of Flint residents.
"Not a day or night goes by that this tragedy doesn't weigh on my mind…the questions I should have asked… the answers I should have demanded… how I could have prevented this. That's why I am so committed to delivering permanent, long-term solutions and the clean, safe drinking water that every Michigan citizen deserves," Snyder said, reiterating his past apologies for the state's inaction in stemming the crisis sooner.
The financial burden the Flint crisis could create for the state government, coupled with state help being proposed for the fiscally distressed Detroit Public Schools, prompted Standard & Poor's to revise its outlook Thursday.
Strains from Flint and Detroit's schools "will limit the state's ability to build reserves over the next two fiscal years," said Standard & Poor's credit analyst Carol Spain. The revised outlook also applies to Michigan's A-plus appropriation-backed debt rating.
Michigan faces significant political pressure to contribute funds toward both Flint and DPS, Spain wrote. "Michigan currently has the wherewithal to support projected additional costs and maintain the current rating," she added. "But if costs related to the Flint water crisis or distressed local credits escalate, there could be credit pressure."
At the hearing, Rep. Peter Welch, D-Vermont pressed Snyder for assurances that he is seeking enough money for Flint.
"You have asked for $232 million but we don't know what it is going to cost," said Welch.
"We just don't know," he said. "We are in the wild blue yonder here. There is an open ended problem where we are going to be hemorrhaging lives and futures unless we really double down now. "What assurance do parents have that those future unknowns will be met?"
The crisis began after the city, under oversight of an emergency manager appointed by Snyder, broke off from the Detroit Water and Sewerage System in 2014 when its contract to receive Detroit-supplied water ended.
The city began pulling water from the Flint River and intended to use it until later this year, when it links to a new Karegnondi Water Authority pipeline. The Flint River water wasn't property treated and corroded pipes throughout the system, creating contamination that remained even after the city switched back to Detroit water.
Snyder testified that his administration has appropriated what he believes is appropriate to cover the costs of Flint's water crisis.
On Feb. 10, Snyder proposed a one-time investment of $195 million in his fiscal 2017 budget proposal to help restore safe drinking water to Flint. The funding would come on top of $37 million already approved from a supplemental budget action, bringing total state funding for Flint to $232 million.
"I guess there are few cities the size of Flint getting that type of money and I am glad it is happening," said Rep. John Duncan, Jr., R-Tenn.
Michigan has a $600 million surplus and an over $380 million emergency fund, but the burden of Flint and the schools is expected to halt the state's positive momentum in building reserves that had fueled positive credit momentum.
"It is hard to say what impact any of this will have on the state's finances because the timing to resolution may be quite long," said Douglas Offerman, a senior director at Fitch Ratings, said in an interview.
"The number of unknowns is significant," he said. "What is known is that at this moment the state's fiscal position is pretty solid certainly relative to what it has been over the last decade. That means the state has some flexibility to responds even without looking at revenue and expenses it has relatively high balance at the moment."
On Feb 25, Moody's Investors Service published a report that said the additional spending being proposed for Flint, Detroit schools, and transportation could end up devouring the revenue growth Michigan expected in its fiscal 2017 budget.
Moody's rates the Michigan bonds Aa1 with a stable outlook. Fitch Ratings rates the bonds AA with a stable outlook.
Snyder's requests for additional federal funding have so far been denied although bills are pending in Congress that would provide financial help. Only $5 million of federal money has been pledged directly to the Flint water crisis under a federal emergency declaration.
