Senate pushes through budget plan after negotiations fail

The state Senate approved a Republican plan to balance the current fiscal year's budget along party lines last night after negotiations on a compromise proposal broke down. The measures include cuts to schools of $36 per pupil, transfers from restricted funds, and pushing some expenses into next year. Senate Republican leaders wanted to pass a plan to close the current year deficit without increased taxes, while Gov. Jennifer Granholm and House Democratic leaders wanted new revenues to be part of the package to help with both this year and next.

The Senate bills (SB 436 on the general fund, SB 437 on the school aid fund) include cuts and government restructuring measures which had been negotiated among Gov. Granholm, Senate Majority Leader Mike Bishop (R-Rochester), and House Speaker Andy Dillon (D-Redford Twp.). But the sticking point was new revenues to help meet the much larger deficit numbers widely expected to emerge from tomorrow's revenue estimation conference. Instead, the Senate Republican proposals close much of the additional gap with transfers from restricted funds, including around $300 million from the 21st Century Jobs Fund. Democrats argued that this move would violate the law creating that fund, and gut efforts to create new jobs just when those funds were most needed. Money in the jobs fund has been committed to various projects with private firms but not yet been distributed.

The transfer to the School Aid Fund lowers the cuts districts face to $36 per pupil, down from an estimated $122 per pupil that the budget office predicted would need to be cut without legislative action. The general fund gap is closed with a transfer of the remainder of the jobs fund, reducing revenue sharing to local government, and delaying the entire August payment to universities and community colleges into the next fiscal year.

Republican leaders acknowledged that the measure has little chance of passing the House in its current form, but they insisted on making good on their promise to balance this year's budget without new revenue. Democrats respond that the provisions to shift spending to next year, remove money from the jobs fund , and make last-minute cuts to schools, do not represent a real solution to the deficit problems. The Governor and Democratic leaders continue to oppose any cuts to schools, and complain that some of the savings generated by the Senate plan simply pushes problems into next year.