State budget & taxes

*The state House remained deadlocked this morning on revenue measures intended to plug the $1.7 billion hole in the state budget, including the school aid fund.* House Speaker Andy Dillon had warned members to "bring their sleeping bags."

*As bills make their way through both houses of the Legislature, it is becoming clear what kinds of "reform" measures the Republican caucuses in both houses will demand in return for allowing a vote on new or increased taxes.* In the House, a bill is set to come to the floor which would limit health care plans offered to teachers by local districts, pegging them to the plans offered to the non-unionized civil service. In the Senate, a package of bills would encourage public employers, including schools, to band together into large pools to negotiate for health insurance. The Senate plan has attracted bipartisan support as well as support from public sector unions, with the notable exception of the MEA(Michigan Education Association). ("See our earlier coverage.":http://www.miparentsforschools.org/node/76) Changes to the teacher's retirement system just recently passed the Senate ("see earlier story":http://www.miparentsforschools.org/node/85). Some other bills recently introduced in the House make it clear that the effort to score political points will not end soon.

Late Friday, Michigan's top lawmakers hammered out a deal which both prevents last-minute cuts to schools and closes the current year's deficit without a tax increase, but at a cost. Most of the cuts from the regular state budget went to fund increases for health care and prison beds, both of which are projected to increase because of the poor economy. To fill the overall gap, the Legislature intends to sell rights to some future tobacco settlement fund revenues ("securitize" these revenues), among other things. Closing the current year's deficit without a tax increase is evidently part of an agreement with Senate Republicans not to block a vote on an income tax increase for fiscal 2008.

Much as the Hubble Telescope expanded the known universe, the May revenue estimation conference expanded the "known deficit" for Michigan government and schools. Top state economists agreed that revenues earmarked for school aid for the current year (2006-7) will be $153 million lower than estimated in January - or about $560 million less than originally budgeted for school aid last year.