Gov Budget Plan Includes Tax Amnesty, Cuts
Michigan Governor Jennifer Granholm’s plan to eliminate a budget deficit includes a tax amnesty plan, expanded liquor sales hours, department spending cuts and some surplus money intended for schools.
The governor Wednesday afternoon outlined a plan that included no tax increases but requires state agencies to trim their budgets, on top of cuts Granholm proposed earlier in the year. Lawmakers are facing an estimated $302 million shortfall during the current budget year and an additional shortfall of $484 million for the budget year that begins Oct. 1.
“Tough cuts, tough reforms and a tough budget – all necessary,” Granholm said.
The lack of tax increases appealed to Republicans in the Senate, but GOP leaders said they want more detail on some parts of Granholm’s plan before making any commitments.
The latest proposal is a key step in the final budget bargaining between the term-limited Granholm and legislative leaders, many of whom will be gone from state government completely or in new jobs at the beginning of next year. Most of her plan must be approved by both the state Senate, which is controlled by Republicans, and the Democrat-run House to become law.
The governor said the plan could be accomplished without state employee layoffs, even though part of her proposal calls for 3 percent administrative spending cuts in state agencies and some unspecified cuts in various state departments.
Granholm said there was “a lot to like” in the plan, including its protection of education funding. The state already has a plan for the next fiscal year that should prevent schools from further cuts. Michigan also is getting more than $300 million in unexpected federal assistance for schools.
Under the new plan, more than $200 million of a previously projected school aid fund surplus would go toward community college funding for the current fiscal year. The rest of the current year shortfall would be made up with additional federal funding related to prescription drug coverage in Medicaid and Medicare.
Filling the hole in next year’s budget is more complicated.
Michigan will get roughly $380 million in additional Medicaid help from a plan recently based by Congress, well short of the more than $500 million that state leaders expected to receive when they crafted preliminary budget proposals.
Granholm’s plan also calls for a tax amnesty program that would waive penalties for delinquent state taxpayers. Her administration estimated that could raise more than $80 million by persuading people to pay back taxes who otherwise wouldn’t.
Some lawmakers questioned whether the plan would really raise that much and they’re awaiting more details on how it would work.
Democratic House Speaker Andy Dillon said he’s “not a big proponent” of the tax amnesty plan but he wouldn’t fight it if it’s part of a budget agreement.
Granholm’s plan also calls for changing some unclaimed and abandoned property procedures to raise about $168 million, another proposal Republicans want more details on before they’ll commit.
She would expand liquor sale hours and competitively bid some aspects of the state’s liquor distribution system.
The budget plan also assumes savings from a yet-to-be passed state employee retirement incentive plan, similar to one that’s already been approved for public school employees.
Granholm also proposes creating a $50 million incentive pool for a competition among school districts that consolidate or share services such as transportation and food service, and putting $100 million into the state’s “rainy day” or budget stabilization fund.
Republican Senate Majority Leader Mike Bishop cautioned there are a lot of details needed and work to be done before a final budget is approved.
“But my immediate response is I’m very grateful that the governor didn’t pursue a general tax increase,” Bishop said. “I’m grateful she’s put some ideas on the table that we can work with, I think, and she’s got some real cuts to state government which I think are very important.”
© MMX WWJ Radio, All Rights Reserved. The Associated Press contributed to his report.