Wednesday, September 09, 2009

Michigan Governor Reveals Budget Cutback Proposals

September 9, 2009

Michigan budget battle brought out into the open

Governor, GOP, House Dems set to tangle


LANSING -- Gov. Jennifer Granholm has taken heat for keeping secret her plans to avoid a projected $2.8-billion deficit in the state budget.

Tuesday, she tipped her hand and showed how far apart she is from Senate Republicans in a budget deal.

Granholm's proposal would raise $685 million in new revenue and cut $572 million in spending. She would use $973 million in federal stimulus money to partially plug the budget hole, and carry $482 million of the federal money to the spending year that begins Oct. 1, 2010.

Her plan also would phase out an unpopular business tax surcharge over 3 years.

Senate Republicans in June pushed their budget-cutting plan through the Senate -- past protesting Democrats -- without new taxes and with $1.2 billion in spending cuts ($300 million of the cuts ordered by Granholm this fiscal year and carried over into next).

The big tax hits proposed by Granholm: $89 million from tickets for concerts and professional and college sporting events (from a 6% ticket tax); $21 million from vending machine sales; $55 million by freezing personal exemptions on income taxes, and $83 million by reducing the state earned-income tax credit for low-income families.

The higher tax on non-cigarette tobacco would generate $45 million more. Numerous business tax exemptions would be repealed.

Hardest hit by Granholm's cuts: $150 million from the Department of Community Health, $100 million from the Department of Human Services and $74 million from revenue sharing -- half the cut to communities that Senate Republicans proposed.

The ticket tax proposal got a lukewarm response from fans attending Tuesday night's Britney Spears concert at the Palace of Auburn Hills.

"If they put an extra tax on concert tickets, I don't know if I go to any anymore," said Emmily Johnson, 25, of Troy.

Patrick Keller, 26, said while he's not crazy about the proposal, "I guess I'd rather not have a tax on gas, or something I buy all the time."

If the release of Granholm's plan didn't improve chances for a budget deal by the Oct. 1 deadline, at least it made the battle more public.

Granholm, Senate Majority Leader Mike Bishop of Rochester and House Democrats agreed not to publicly disclose details of their budget negotiations, although Republicans have called on Granholm and Democrats to reveal their proposals.

"This is a step forward for the people of Michigan to know what the governor is proposing," said Matt Marsden, spokesman for Bishop.

Marsden then drove a wedge into the discussion, saying Granholm's plan for tax hikes is bad medicine.

"We increased taxes in 2007. Clearly things did not improve," Marsden said.

In a statement, House Speaker Andy Dillon of Redford Township took a hard swipe at Granholm's release of the proposal.

"The governor should know that showboating a proposal that has no chance of passing is not a way to solve the state's fiscal crisis," he said "All parties need to put theatrics and demands aside and get back to the hard work of negotiating a budget solution."

The $150-million cut in the Department of Community Health would come largely by reducing Medicaid payments to doctors and hospitals, Emerson said.

Of the $685 million in new revenue, $546 million would go to the general fund, and $139 million to the School Aid Fund, which provides most of the money for public schools.

Granholm's plan also includes revenue increases for the 2010-11 spending year. She and lawmakers are wrangling over a 2-year budget plan, instead of the usual 1-year budget.

Granholm said the Senate cuts would result in cuts to police and fire departments.

"The Senate cuts are dangerous to Michigan," Granholm said. "The Senate has proposed eliminating the Michigan Promise scholarship. I think that's dangerous to Michigan's future."

Granholm would not trim the $4,000 college scholarship paid to most successful students.

Contact CHRIS CHRISTOFF: 517-372-8660 or Staff writer Brian McCollum contributed to this report.

Additional Facts:

What the dueling budgets propose

Senate Republican plan

-Cut $1.2 billion from state general fund and schools, including:
$110-million per-pupil reduction to schools.

-$165-million cut in revenue sharing to cities.
-$140-million elimination of Michigan Promise scholarships.

Granholm plan:

-Raise $685 million in new revenue, including:
-6% sales tax on tickets to concerts, pro and college sporting events ($87 million).
-25-cent per pack increase in cigarette tax ($54 million).
-6% sales tax on vending machine sales ($29 million).
-6% tax on service contracts ($28 million).
-1-cent tax per bottle of water sold in Michigan ($18 million).

Cut $572 million, including:

-$150 million from Department of Community Health.
-$74 million from revenue sharing.

Wednesday, September 9, 2009

Granholm budget proposal: Cut $2B, hike taxes $1B

Plan draws opposition as state faces Oct. 1 deadline to balance budget

Mark Hornbeck / Detroit News Lansing Bureau

East Lansing -- Bottled water, tickets to live events and pop out of a vending machine would be taxed and smokers would pay more under a budget plan Gov. Jennifer Granholm released for the first time Tuesday.

The plan calls for nearly $2.2 billion in budget cuts, $1.09 billion in tax hikes and tax credit reductions and about $2 billion in federal stimulus money spending in the next two years.

But fellow Democrat and House Speaker Andy Dillon, in a rare public clash with the governor, called the plan "showboating" and "theatrics" and said it has "no chance of passing."

Granholm's plan is one of the proposals offered in budget talks. She and legislative leaders will work behind closed doors to strike a deal before the new fiscal year starts Oct. 1.

Under her plan, Granholm would cut government spending by 12 percent and reduce business tax loopholes -- including controversial film credits -- by a similar proportion.

As previously reported, the governor would raise the cigarette tax by a quarter to $2.25 a pack; assess the 6 percent sales tax on tickets to live entertainment, vending machine sales and service contracts such as landscaping; and slap a 1 percent tax on bottled water.

In exchange, she proposes phasing out the 22 percent Michigan Business Tax surcharge over three years, beginning in 2011. Revenue sharing that local governments use to fund police and fire protection and other services would lose $74 million.

Also, $22 million would be squeezed out of the governor's pet 21st Century Jobs Fund used to attract business, and $12 million would be trimmed from a pot used for road improvements to support economic development, state budget officials said.

The governor does not propose any reduction in the $4,000 Promise Grants for students who complete statewide high school exams and go on to college.

The document does not detail how the tax hikes and spending cuts would affect individuals, but a 1 percent tax on a $1.50 bottle of water would be a penny and a half; a 6 percent levy on a $50 Red Wings ticket would amount to $3.

In the school aid fund, the governor is proposing $290 million in cuts each year, according to state Budget Director Bob Emerson. Divided by the state's 1.6 million students, that amounts to $181 per pupil in each of the two budget years. The state would use $800 million in federal recovery cash for school aid, budget officials said.

Senate Majority Leader Mike Bishop, R-Rochester, has called for the governor to reveal her budget-balancing plan for weeks. She said this proposal has been on the table in talks with legislative leaders since Aug. 6.

"We have a lot of cuts, some loophole closings and some reforms that will not result in savings for this year," Granholm said after a grand opening ceremony for an IBM applications center at Michigan State University.

Granholm and legislative leaders are working against an Oct. 1 deadline to balance a budget that is $2.8 billion out of whack. Leaders are looking at a similar hole in 2011.

Matt Marsden, spokesman for Bishop, said the budget balancing can begin in earnest.

"We were asking her to come out from behind closed doors. If she's finally done that, great," Marsden said.

Granholm said the House was preparing to pass budget bills starting today. But Dillon said that's news to him. "The governor should know that showboating a proposal that has no chance of passing is not a way to solve the state's fiscal crisis," he said. "All parties need to ... get back to the hard work of negotiating a budget solution."

The Senate has passed $1.2 billion in budget cuts, including elimination of the Promise Grants and reductions to many human services programs.

The spending reductions laid out in Granholm's document add up to $464 million in the budget year starting Oct. 1 and $518 million in the following fiscal year. But Emerson said these cuts are in addition to the $500 million in cuts the governor proposed in her budget plan in February. The spending reductions would be carried over to 2011.

Her plan calls for $684.8 million in tax credit reductions and tax increases in the budget year that starts Oct. 1 and $662.9 million in the 2011 budget year.

She would cut the film credit by 12 percent, or $7.8 million in 2010 and $19.8 million in 2011. Filmmakers qualify for a 42 percent tax credit, and the 12 percent cut would bring that to 37 percent. Other tax credits would be reduced by $130 million in 2010 and $156 million in 2011.

Her plan calls for a liquor license fee increase, a fee for allowing bars to stay open extended hours, a doubled tax on tobacco products other than cigarettes and a freeze in the amount of personal exemptions from the state income tax. The exemption, indexed to inflation, is $3,600. (313) 222-2470

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