Budget talks begin in earnest

20 March -- Leaders from both houses of the Legislature finally sat down to negotiate with the Governor over their competing plans for closing the current state budget deficit. House Speaker Andy Dillon (D-Redford Twp.) and Senate Majority Leader Mike Bishop (R-Rochester), along with other key lawmakers, met with Gov. Jennifer Granholm in private for several hours today. When they emerged from the meeting, they agreed that the talks had been "productive," but all of them declined to provide any specifics.

It's unclear how they will resolve the two primary points of dispute in the effort to close a nearly $1 billion budget shortfall for the state's General Fund and School Aid Fund combined. Gov. Granholm's proposals tackle both this year's shortfall and anticipated revenue declines for the next fiscal year with one package of budget cuts, new taxes, and one-time accounting changes. The Republican leadership has opposed linking the problems for this year and next, presumably because tackling them together strengthens the case for new taxes. Democrats in the Legislature have generally backed Granholm's proposals, though Speaker Dillon is seen as being luke-warm to the Governor's tax proposals.

The second issue is the classic one between using cuts or new taxes to balance the budget. The Governor and legislative Democrats argue that the state has been cutting its budget for several years now, and that continuing to reduce state services during an economic downturn is counter-productive. Republicans argue that there is more that can be cut, and that much deeper cuts need to be made before new taxes are considered. While the Republicans have not made public their alternative proposal, it apparently relies on a further $700 million in cuts for this year to balance the budget without new taxes. On his way to the meetings, Sen. Bishop said: "We have got to dramatically downsize government, and we have to do it today." He didn't specify which parts of government he wanted to downsize.

The fate of school funding in all this is unclear. The Governor's proposals use accounting changes and new taxes to prevent any mid-year cuts to schools; she also find the money to propose an increase in funding for fiscal 2008. Earlier this year, Republican lawmakers said they would not promise to protect school funding, though more recently Sen. Bishop has said he does not want to cut the current year's foundation allowance. This would seem to imply that the lion's share of the cuts they propose must come from the General Fund part of the budget. Republican leaders have remained silent on their plans for school funding next year.