Budget negotiaions collapse; Senate rams through alternative

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.

The Governor's EO cut spending substantially more than her original order (killed by the Senate Appropriations Committee in January), though it still relies on some accounting changes to achieve its reductions. Senate Republicans declared their intention to approve the EO and then proceeded to push through their own package of budget cuts.

SB 221 contains their changes to school aid: along with $262 million in savings from changing how retirement assets are evaluated, Republicans cut a further $135 million in school spending and transferred $10 million from the state lottery that had originally been budgeted for advertising. The bill specifically limits the cuts to school districts to $34 per pupil, worth about $57 million. The remainder of the cuts come from yet-to-be-determined reductions in payments to intermediate school districts (ISDs), line-item reductions in special education and Durant settlement payments, and the elimination of a number of small grant and pilot programs.

The Republican leadership was nervous enough about the vote to call one of their members, Valde Garcia (R-Howell), back from National Guard maneuvers in Arizona. The school aid cuts passed on a 20-18 vote, with one vulnerable Republican - Roger Kahn (R-Saginaw) - joining 17 Democrats in voting against the measure.

Sen. Garcia had to leave before the vote on SB 220 was taken, which contained the remainder of the promised cuts from the General Fund portion of the budget. That bill passed on a straight party-line vote of 20-17. The bill contains $255 million in "hard cuts" to community health spending, revenue sharing to local governments, and economic development. Democrats were quick to criticize the list of cuts that had been secret until recently; "I'm not surprised it took so long to release these cuts," said Sen. Liz Brater (D-Ann Arbor), "I'd be embarrassed too."