Few facts available about budget talks

14 March -- News reports from Lansing about the budget negotiations are bringing many hints but few hard facts. There are reports that House Speaker Andy Dillon (D-Redford Twp.) and Senate Majority Leader Mike Bishop (R-Rochester) are nearing agreement on a package of budget cuts and accounting changes that would plug the gap in the current fiscal year budget, including school aid, without new taxes. Reportedly, the package funds school foundation allowances as originally budgeted but includes cuts in "categorical spending" programs for schools.

This would separate efforts to close the current budget hole from debates over spending cuts and new taxes aimed at future years.

At the same time, some Senate Republicans have signaled that they are not ruling out new taxes for fiscal 2008 and beyond, if they are paired with budget cuts and other spending reforms (including changes to teacher health benefits and pensions - see our last post). Precisely what kind of revenues they have in mind is unclear. Public support for the Governor's proposed 2% tax on services remains tepid, at best, and legislative Democrats seem to be searching for alternatives. There has been some talk of increasing the income tax instead, while on the other side of the aisle some lawmakers have mooted the idea of introducing a full 6% tax on services while doing away with the Single Business Tax and not replacing it.

The lawmakers are preparing to negotiate with Gov. Granholm when she returns from her European trip, when she is expected to prepare a new executive order aimed at balancing the current fiscal year's budget.