Governor urges Lansing to avert shutdown

Budget talks adjourn until 1 p.m. today.

Mark Hornbeck, Gary Heinlein and Charlie Cain / Detroit News Lansing Bureau

LANSING -- Lawmakers and Gov. Jennifer Granholm continued into early Friday to try to reach a deal that would avoid a partial state government shutdown next week, reporting enough progress that they could get some sleep.

Both the Republican-led Senate and Democrat-led House broke about 1 a.m but were expected to reconvene at 1 p.m. It appeared negotiators may be getting closer to a deal to fill a $1.75 billion shortfall in the next budget year through tax increases and spending cuts.

"I believe rested heads do a better job," said Senate Appropriations Chairman Ron Jelinek, R-Three Oaks, who was confident a deal would be completed by Sunday.

"It's not done," he said. "It's been started. The devil's in the details."

Granholm told a statewide television audience Thursday night that she's unhappy but optimistic about negotiations to balance the state's budget, and also warned that many state services will be shut down at midnight Sunday if lawmakers can't put partisan interests aside.

"Like you, I'm angered by these months of inaction," a resolute Granholm said, using a five-minute speech during the evening news to directly address residents.

On Thursday, Granholm said progress had been made in the previous 48 hours.

"There are signs we are on the verge of achieving an historic agreement on a budget that makes Michigan competitive and that protects our people," she said.

Her speech, followed by the rebuttal of Senate Majority Leader Mike Bishop, capped a day in which partisan finger-pointing intensified, budget talks continued, and the House and Senate remained in session.

In his address, Bishop did not suggest the sides were nearing accord. He urged the governor to endorse a Senate-passed plan to provide for emergency spending approval while negotiations stretch into October.

"Take the threat of government shutdown off the table," he said. "Do the right thing; do not shut this government down."

Bishop, R-Rochester, later told reporters that the two sides were close to an agreement, but declined to be specific.

On Thursday afternoon, he said if it appeased the governor he would be open to shortening the 30-day continuation to as little as three days. Granholm said a continuation budget would only continue deficit spending.

Granholm put the blame on the Legislature, while Bishop pointed a finger at the governor. Specifically, the governor said the Legislature is shirking its one constitutional responsibility, and Bishop countered that Granholm is infusing the budget talks with politics.

Granholm, speaking from her ceremonial office at the state Capitol, repeated a warning she has sounded in recent days.

"Until legislation is passed that protects people and the priorities that are critical to making Michigan competitive, the possibility of a government shutdown remains real," Granholm said.

She said while state parks and Secretary of State offices will close, "our prisons will keep felons behind bars. We'll maintain vital services for our most vulnerable."

A detailed list of shuttered services is to be available today at www.michigan.gov.

Granholm offered no clues as to how the state would pay for essential services during a shutdown. She said, "The constitution is clear: Without a balanced budget in place, state government cannot write a single check."

Lawmakers were notified Thursday by House and Senate officials that a shutdown would also mean no pay for them. Bishop said he's been in contact with Detroit Mayor Kwame Kilpatrick, who said he's concerned the impasse might scuttle two large conventions and mar the opening of the MGM hotel.

The Michigan Gaming Control Board on Thursday said a shutdown would close Detroit's three casinos, costing the city and state about $450,000 each per day.

Speculation in the halls of the Capitol ran wild during the day in which proposals went back and forth between House Democrats and Senate Republicans. The two sides were about $200 million apart on the $1.75 billion deficit, and the remaining outstanding issue was reform of public employee health care.

A steady parade of lawmakers went in and out of Granholm's office but had little to say about any progress.

Lending evidence to the partisan nature of the Lansing standoff was a memo sent Thursday from Michigan Republican Party Chairman Saul Anuzis to top GOP legislative leaders.

"Cutting a deal or 'capitulating' to Granholm's demand -- even a little bit -- would be foolish," Anuzis wrote, citing results from voter polling done earlier by the party that found opposition to the governor's plan to increase the income tax rate from 3.9 to 4.6 percent.

Anuzis also wrote that the polling showed state residents assign equal blame to the Democratic governor and Republican lawmakers for the threatened shutdown, "indicating that we could be badly hurt (politically) unless we move expeditiously to shift the blame to her."

An income tax increase figures prominently into the budget solution, as do budget cuts and government reforms. Granholm and House Democrats favor a boost in the levy from 3.9 percent to 4.6 percent, which would generate $1.1 billion. Senate Republicans are talking about an increase of about 4.3 percent.

A joint House-Senate committee charged with finding an income tax compromise met briefly Thursday morning and had not returned into session by evening.

Meanwhile, a private study group released a report Thursday that concluded a government shutdown would raise serious constitutional questions about the state's ability to continue spending money past Sunday.

"The group agreed that a legal authority does not exist for the state to make expenditures without a budget for the 2007-08 fiscal year and that any shutdown or a failure to properly adopt a budget and operate within the constitution will have serious long-term and negative effects on the state," said the panel headed by Lansing economist Patrick Anderson.

The Associated Press contributed to this report. You can reach Mark Hornbeck at (313) 222-2470 or mhornbeck@detnews.com.