LANSING, MI – Governor Granholm has vowed she will veto any budget plans that cut money for schools, and asked the Legislature to expand Michigan's sales tax to stabilize funding for K-through-12 education. The governor presented her final budget proposal to lawmakers Thursday.
This was likely Governor Granholm's final appearance before a joint meeting of the House and Senate appropriations committees. The presentation got off on a cordial note as almost everyone in the room stood and applauded the governor when she was introduced. After that, she quickly got down to business.
"With state revenues at their lowest now like the private sector, Michigan, like all aspects of government, has to continue to reduce its size and cost," Granholm said.
But the governor says money for schools, community colleges, public universities, and early childhood programs would be funded at current levels under her budget plan, and not cut again as they have been in previous years.
"Remember, schools took huge cuts in the budget years they're operating in right now. That's enough," Granholm said.
The governor also says revenue sharing to local governments should not be cut again. She says money for worker retraining would be expanded based on the expectation of more federal funds.
She also wants to cut Michigan's sales tax rate to 5.5%, but expand the scope of the tax to cover services and not just products. She says that would bring in the growing services sector of the economy and stabilize school funding.
"We have to address the structural deficit and modernize the tax structure," Granholm said.
She also says she wants to phase out a charge that was tacked onto the fledgling Michigan Business Tax in 2007 after her last proposal to tax services tanked
Much of the governor's presentation focused on the need for reform and restructuring.
She reiterated how plans to compel teachers and other public employees to retire and put new hires into a less-generous benefits plan will save taxpayers money. She says that's one way to build a leaner government that reflects the times. The deficit for the coming fiscal year is pegged at about $1.8 billion - that's one-tenth of the combined school aid and general fund budgets.
"Our efforts to grow a 21st Century economy are hampered by a state government and a state tax structure that's designed for the 20th century. So we have to re-invent state government. We have to further cut state spending," the governor said.
The governor's plan seeks to rein in corrections costs. She expects to close more prisons this year and wants to restore good behavior credits that shorten the prison sentences of inmates.
The governor offered a new version of the Michigan Promise scholarship that was scrapped by the Legislature last year over her objections. Her new version would be a $4,000 tax credit that would go to college graduates who remain in Michigan and take jobs here.
Lobbyists for schools, universities and local governments who attended the hearing were pleased that their state funding would not be cut. But business groups expressed disappointment that the governor's efforts to streamline government aren't more aggressive.
"We think there's a lot more that can be done," said Brad Williams of the Detroit Regional Chamber. "The governor mentioned a new state employee health plan for new employees. We `think that can expand to all employees. In the private sector, people on average are paying 20 percent of their premiums and that's not the case with state and public employers right now. We didn't hear any mention of consolidating school districts, sharing services between local governments and those need to be part of the final solution."
With a divided Legislature, Governor Granholm will have to get the support of Republicans for her plans. But Representative Chuck Moss says he wanted to see more cost-cutting and reforms that will yield savings.
"I'm ready to work, but if she says it's tax hikes or the highway, which is what it's starting to sound like, that's going to be a tough sell," Moss said.
The governor said she won't tolerate an impasse in finishing the budget and, unlike previous years, she ruled out a continuation spending plan if negotiations drag past the deadline.
The governor challenged lawmakers to defy recent history and get the budget wrapped up by this summer so schools, local governments, and universities with fiscal years that begin July first can plan with confidence. She endorsed a constitutional amendment that would dock future lawmakers and governors a day's pay for every day past July first that the budget isn't done.