Michigan’s Constitution requires a balanced budget to be in place by the beginning of the state’s fiscal year in order to continue operations. The new fiscal year starts on October 1. While Lansing is abuzz with ideas on how to make ends meet for 2009-2010, the budget is not completed and much work remains. In 2007, similar circumstances resulted in 11th hour decisions (including general tax increases) to narrowly avoid a government shutdown. The Legislature and Governor Jennifer Granholm are hoping to avoid such drastic measures this time around…but how close are they?

Projected revenues are currently an estimated $2.8 billion over expenditures for the 2009-2010 fiscal year. Leaders are looking at a similar shortfall for 2010-2011; and, much of the negotiating to-date has included efforts to address portions of the 2010-2011 budget.

The Senate, under Republican control, passed a budget plan in June, calling for $1.2 billion in cuts beyond the Governor’s original plan from January. While this was a productive first step in negotiations, it included many items found unpalatable to the Democratic House of Representatives and the Granholm administration. The Senate plan included the elimination of Promise Grants ($4,000 to students who complete statewide high school exams and go on to college) and reductions to many human services, K-12 education funding and revenue sharing to municipalities.

Since that time, the Senate has been calling on the Governor and the House of Representatives to formally propose their budget plans and begin negotiations in earnest. Many sources have indicated the hold-up includes items in the 2010- 2011 budget.

Under increased pressure, the Governor released the details of her proposal this week. Her 2009-2010 fiscal year plan calls for $464 million in General Fund cuts, $973 million in federal stimulus monies and $685 million in new revenue.  Similar numbers are proposed for the following year’s budget.

Her cuts include closing numerous business tax “loopholes,” such as the film credit available for the Michigan Business Tax (MBT) and $22 million from the 21st Century Jobs Fund. She doesn’t touch the Promise Grants. The revenue portion of the Governor’s proposal includes, among other items, new taxes on bottled water, tickets to live events, and pop from vending machines, along with an increase in the tax on cigarettes and other tobacco products.

Shortly after the Governor released her proposal, the House of Representatives responded with their plan for revenue enhancements of $543 million in order to eliminate the 22 percent MBT surcharge during the 2009-2010 fiscal year. Among the items championed by the House and, specifically, House Appropriations Committee Chair George Cushingberry, is a five percent increase on satellite TV, a 50-cent-per-month charge on cell phones and a two percent excise tax on fast food.

With less than 15 business days remaining until the September 30 deadline, the Governor and legislative leaders (Senate Majority Leader Mike Bishop and Speaker of the House Andy Dillon) are clearly far from agreement, raising eyebrows among pundits in Lansing who wonder if this is déjà vu.


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