News and Analysis

The recent fuss in the Legislature with budget agreements that weren’t and battling press releases has made it fairly clear that the Republican majority in the Senate is looking for cover on increasing taxes, but Democratic lawmakers are reluctant to give it to them.

The lengths that some lawmakers will go to avoid dealing with the reality of the state’s budget situation was on display today in Lansing. With this week’s conference of state economists expected to find that the budget deficit has grown significantly since January, some lawmakers were touting budget solutions that relied on the lower, outdated, figures. Late this afternoon, Senate Majority Leader Mike Bishop (R-Rochester) issued a press release announcing that an agreement had been reached on the state’s budget deficit, one that did not require new taxes. Sen. Bishop’s statement also noted that the agreement reduced end-of-year cuts to schools to $36 per pupil, down from the $122 per pupil cut Governor Granholm said would be necessary by June 1.

But early this evening, Gov. Granholm and House Speaker Andy Dillon (D-Redford Twp.) issued a joint statement saying that there was no agreement – yet.

Gov. Granholm made it official – aid to school districts will be cut by June 1st unless the Legislature acts. Speaking to the news media, the governor reiterated her frustration with the Legislature’s inaction. “Nobody is more frustrated than I am,” she said. “The Legislature has not filled that hole. The clock starts ticking today.” If other funds are not found, the cuts would amount to approximately $122 per pupil taken out of school districts’ final aid payments, and a further $8 million in cuts to intermediate school districts.

An angry Gov. Jennifer Granholm announced today that she is warning school administrators that they will face $125 per pupil cuts starting June 1st unless the Legislature acts to find new revenue. The Governor laid the blame for the situation on Senate Republicans, who have so far resisted any effort to find new tax revenues to solve the deficits for the current fiscal year. In fact, Granholm indicated that Senate Majority Leader Mike Bishop’s refusal to move on new revenue for this year has so far stymied budget negotiations that are supposed to cover this year and next.

The state Senate yesterday gave its approval to a bill that closes about $300 million of the school-aid deficit for this year, even though it fails to account for $62 million of the deficit originally projected in January. State budget officials say Governor Granholm will sign the bill. Left unresolved is the question of how the growing school aid deficit, now reckoned to be an additional $150 million below the mark, will be handled.

In a late night session so tense that it degenerated into ‘trash talking,’ the state House voted last night not to make per pupil cuts to public schools. While the vote on school aid was unusually bi-partisan, other bills considered last night – aimed at closing the State’s general fund deficit – were voted up or down on nearly straight party lines and occasioned the verbal tussling.

The news just keeps getting better and better. State officials are forecasting that state tax revenue for the rest of the year will end up even below the estimates which were revised downward in January. The state budget director has notified school districts across the state that, unless the Legislature agrees on measures to close the growing school funding gap, the governor will have no choice but to order substantial cuts to school funding – on the order of $90 to $125 per pupil.

Departing from the Governor’s proposals, House Democrats have moved a bill that would increase foundation allowances by only $100 for next year, but give most districts an additional $100 equity payment.

Governor’s proposal trimmed
The amended version of HB4359, the School Aid appropriations bill for fiscal 2008, passed the School Aid and Education Appropriations subcommittee on a party line vote. The bill increases overall spending on school aid by $295 million compared to this year, but comes in $42 million short of the Governor’s original recommendation.

In a deft reversal of spin, Republican lawmakers and allied “opinion leaders” are pushing the notion that Senate Republicans have taken leadership on the budget question, including school aid, by passing their two appropriations bills last week. It’s the Democrats and the Governor, they argue, who should be called on the carpet for not presenting their plans. But it is useful to recall that the Republican plan remained secret until just hours before their two key bills, one cutting general state spending and the other shaving back school aid funds, were pushed to a quick vote on the floor of the Senate. Gov. Granholm’s original plan, which relied on new and restructured taxes but did not cut school funding, was summarily killed off in the upper house. This leaves the Republican leadership in the enviable position of being the “spoiler” on budget issues, able to poke holes and make points without having to take any heat for potential tax increases.

22 March — Negotiations among Democratic and Republican legislative leaders and the Governor broke down this afternoon after the two sides were unable to find common ground about new revenue or addressing both fiscal 2007 and fiscal 2008 at the same time. Shortly afterward, Gov. Granholm issued a new Executive Order that specified $344 million in cuts and savings from the General Fund portion of the budget. Republican lawmakers in the Senate made good on their promise to plug the budget hole without raising taxes. They finally went public with their list of additional cuts, pushing through legislation that cut a further $310 million from the General Fund budget and found reductions for the full amount of the School Aid Fund deficit – $377 million – while only cutting foundation allowances for schools by $57 million, or $34 per pupil.