Legislature debates budget before beginning break

LANSING, MI – At the state Capitol, the House and the Senate met until past midnight before beginning a two-week summer break. Much of the day and the evening were spent debating the budget. Nothing was resolved, and the discussions mostly outlined the stark differences in how Republicans and Democrats would address the state's budget crisis.

Republicans are calling for much bigger cuts than Democrats say they can accept. Meanwhile, schools, hospitals and universities that rely on taxpayer funding wonder what fate awaits them when the state finally adopts a spending plan.

AUDIO: Public universities, community colleges, K-12 schools, and local governments all have budget years that begin July first, but very few hints on how much money they'll have to spend. The state has a different budget deadline - October first. Usually, there are some agreements in place by early summer that offer some guidance. But not this year.

Summer Minnick of the Michigan Municipal League lobbies for local governments at the state Capitol.

"I'm getting a tremendous number of mayors, finance officers, city managers calling and asking what we can expect, and it's the most difficult environment since I've been advocating for municipalities to give an accurate answer," Minnick says.

Minnick says that's because of the uncertainty facing the economy, the freefall in tax revenues, and because of big differences between Republicans and Democrats on how they should deal with a $1.7 billion deficit in the coming fiscal year.

Three years ago, Democrats and Republicans deadlocked on the question of raising taxes to balance the budget, and pushed past the October first deadline. That forced the state briefly into a shutdown. Legislative leaders say they're anxious to avoid a repeat of that episode, but, if anything, the state's financial picture is worse now than it was in 2007.

"We don't want to get into a shutdown scenario," says Senate Majority Leader Mike Bishop. He says that's why Republicans on his side of the Capitol spent this past week coming up with a plan to "right-size" government with big, painful cuts to college scholarships, health care, and state payments to schools and local governments.

"We've gone through a bloodletting process where we've cut $1.4 billion out of the state budget," says Bishop. "We've put ourself in the position of closing the budget hole without a tax increase."

Bishop says some programs might be restored once the economy improves. Many Democrats say the Republicans' cuts are cruel or short-sighted, and would particularly hurt poor people with mental illnesses, Medicaid health care providers, and students trying to afford college. Republicans say the Michigan Promise scholarship is exactly the sort of program that represents luxuries the state can no longer afford in a budget crisis. The scholarship gives $2,000 to every student who completes two years of post-high school education, and another $2,000 up front to students who score well on the state's college entrance exam.

Democrats say it's exactly the sort of long-term investment the state needs to make in its workforce and its economic future. But many Democrats say Governor Granholm's vision of a universal college scholarship that goes to poor, middle-class and wealthy families may not survive this year's budget fight.

"The future for the state of Michigan is education," says House Speaker Andy Dillon. "There seems to universal consenus that if we're going to grow five and 10 years out, we've got to make certain that we have an educated workforce, so we are not going to give up the fight to make certain that we have support for our students and our universities, whether that means we go to some means testing to save some money, I'm open to that."

The purpose of the marathon session was not to settle these arguments, but to set up the next stage of discussions between Governor Granholm and legislative leaders, and then by teams of House and Senate negotiators that will work against the October 1 deadline.

Right now, there's about $500,000 separating the Republican and Democratic plans -- and some very strong opinions on exactly what should be done to balance the budget.