May 28, 2007
After a rare and marathon session on Friday, House Democrats avoided a shutdown of state government and avoided cuts in health care, education by eliminating most of the $800 million deficit in the current budget that ends in three months with just spending cuts and other measures.
The deal on Senate Bill 436 ensures there are no cuts to the per pupil foundation grant,
Medicaid and it avoided a government shutdown. Despite a majority of Michigan residents supporting a tax increase to avoid further cuts that have given us less state employees since 1973, there will be no tax increase for this year’s budget that ends Sept. 30. However, there is still a $300 million deficit left to find to balance the budget. Apparently, that will be done with a mix of further reforms, one-time fixes and accounting changes. Lansing insiders say the basic structure of that plan is mostly agreed upon, but the exact details are still being worked out in sessions that begin tomorrow.
They will only have two session days to get it done because the annual lobbyist orgy called the Mackinac Policy Conference begins Wednesday.
The tax cuts that have taken place every year for the last 15 years has required numerous “one-time” fixes to balance the budget over the last 5-6 years as the state’s largest employer lost market share and put a huge dent in tax revenue coming in to state coffers. Wall Street has made it pretty clear it will again look unfavorably on any more one-time fixes, and it will further lower our credit rating that will cost the state more money to borrow money for future projects. However, the good news – or bad news depending on your point of view – is there cannot possibly be anymore one-time fixes left, and lawmakers will have to find a permanent, structural fix to the annul budget problems.
The other piece of good news is the cuts will only steal $50 million from the future instead of $300 million the Senate GOP initially approved taking from the 21st Century Jobs Fund. The 21st Century Jobs Fund – part of the Michigan Economic Development Corporation –was created with strong bipartisan support to stimulate and diversify our economy and create jobs. It has only been around a few months, and experts said it would take up to three years of investment to start creating jobs. This is not tax money, and it comes from the tobacco settlement money.
The crisis continues, and the Legislature has to balance next year’s budget that begins Oct. 1 that is expected to have a $1.8 billon shortfall, and a replacement of the Single Business Tax (SBT) that accounts for some $2 billon in revenue.
Clearly, we cannot cut ourselves out of this economic crisis, and tax cuts for the past 15 straight years has proven that. After House Democrats and the Governor compromised on spending cuts, it’s time for the Senate Republicans to compromise. The Senate GOP has said they will not block a vote on a tax investment; wow, really big of them. One thing that has been proposed is increasing the state income tax from 3.9 percent to 4.4 percent. That is expected to cost the average family less than the cost of a cup of coffee a day, about $1 a day.
It’s interesting to look at how the bill setting the deal, SB 436, was passed. It passed in the Senate 26-10 and the House voted 69-37 in favor.
Livingston County’s Legislative delegation voted 1-2 in favor. Sen. Valde Garcia voted for it, but the House delegation, Chris Ward and Joe Hune, voted no. Hune and Ward voted against their own party. House Republicans voted 35-14 for the bill, but Hune and Ward were not only in the overall minority but they were in the Republican minority. That vote needs some explanation.