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What's next? Budget struggle moves to the House

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.

Back in the House, the newly minted Democratic majority has been busy distancing itself from Gov. Granholm's "two penny" plan to tax services, but without settling on a particular alternative. Rep. George Cushingberry (D-Detroit), chair of the House Appropriations Committee, has said his panel might take all of their allowed ten days to consider the Governor's executive order, already passed by their Senate counterparts, which makes $344 million in state spending reductions (not including school aid). He is said to be angry at the fact that the cuts in the EO were not linked to any agreement on raising revenue to cover the rest of the deficit. Rep. Cushingberry has also proposed legislation to temporarily increase the state income tax to 4.6% from the current 3.9%. (The income tax rate was at that level before Proposal A, which restructured school finance, also lowered the rate to 4.4%. The Republican Legislature and then-Gov. John Engler cut the rate further, to its current level, with legislation passed in 1999.) While some observers take this as a negotiating position, others wonder whether Rep. Cushingberry has "lost his marbles." Other House leaders are talking about taxing a limited number of services, or a smaller increase in the income tax. There is even a hint that they may trade changes in teacher benefits for Republican help on taxes.

Many in Lansing remember with satisfaction, or with pain, two successful recall elections launched against state Senators who supported a temporary income tax increase proposed by then Gov. James Blanchard. It's clear that this history of vitriolic opposition to taxes can be used to undermine those who call for raising revenues. What is not clear is if the mood of the Michigan people is as rigid as sometimes made out. As we pointed out earlier, state polls found that voters' feelings about state spending were complicated: they opposed the services tax, but expressed support for increased spending on higher education and health care for low-income workers.

Press reports from around the nation have started to ask whether the "mantra of 'no new taxes'" is as powerful as it once was. Some are trying to keep the faith alive. A widely reported state poll, performed by Republican consultants Marketing Resource Group, found that 65% of polled registered voters opposed the 2% services tax, and that one third of respondents would consider signing a recall petition against state legislators who backed any tax increase. But details matter: after describing Gov. Granholm's services tax, the survey question noted that the proposal would "increase taxes by $1.4 billion on families and job providers" but failed to mention the budget deficits for schools and state programs. The question on recalls does mention the budget deficit (not schools), but concludes by asking if the respondent would support a recall of a lawmaker who "supports raising taxes in Michigan by $1.1 billion." With lead-ins like that, who can possibly be surprised at the answers they received?

Meanwhile, the full court press is on. Business and anti-tax groups continued to testify against the services tax before the Senate Finance Committee, even after the Republican leadership had pushed the bill out to the Senate floor (to force a vote to kill it). The Governor is holding one last town meeting, in Traverse City, to sell her revenue proposals; these efforts have already been deemed a "failure" by political cognoscenti. And finally, the state Chamber of Commerce and some allies are organizing against two Senate bills, one from a Democrat and the other from a Republican, which would give local school districts more flexibility to ask for local taxes to fund school "sinking funds," used for capital expenditures. The Chamber is enraged by what they see as an attempt to "circumvent the Constitutional limits on property taxes for schools;" the bills' sponsors say school districts need more flexibility now that state funding has become so uncertain.

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