Michigan budget showdown

Another state shutdown looms

Clock's ticking as legislators continue to wrangle over $440M in program cuts before Oct. 31.

Mark Hornbeck and Gary Heinlein / Detroit News Lansing Bureau

LANSING -- Lawmakers have made no visible progress on hammering out $440 million in budget-balancing cuts as the state is closing in on another shutdown deadline -- this one on Halloween.

Gov. Jennifer Granholm and the Legislature worked past the witching hour on Oct. 1 to strike a deal on erasing a $1.75 billion deficit, causing a partial closure of state services for about four hours while most Michiganians slept.

Aside from increases in the state income tax and what has turned out to be a controversy-charged expansion of the sales tax to a bizarre array of services, that agreement also included a 30-day continuation budget to allow time to work out the cuts.

The deadline on the emergency budget is now less than two weeks away.

Panic hasn't yet set in and all sides indicate progress is being made.

If that sounds familiar, these were the same messages leaders were sending out about a budget agreement in mid-September.

But not everyone is comfortable with the pace.

"We're still hopeful, but after what happened last month, we're not encouraged," said Richard Studley, executive president of the Michigan Chamber of Commerce.

"Business owners and everyday people are starting to understand ... (that) over three-fourths of the budget solution was a $1.4-billion tax on consumers and job providers while the cuts were just something written on a piece of paper."

Phil Power, president of the nonprofit Center for Michigan, said there's growing concern that lawmakers are headed toward another crisis.

"You betcha I'm worried," said ex-newspaperman Power, whose Ann Arbor-based think tank seeks "comprehensive, long-range and, in some cases, radical policy solutions to transform Michigan's business, economic, political and cultural climate."

"In order to get a sensible resolution," he said, "things need to be very different in the Legislature than they were during the first round."

Leslee Fritz, spokeswoman for state budget director Bob Emerson, said Wednesday that the principals are "working under the assumption the Legislature will get it done. The process is continuing."

Right after lawmakers struck a deal Oct. 1 that included tax increases, Senate Majority Leader Mike Bishop, R-Rochester, and House Speaker Andy Dillon, D-Redford Township, said the two sides were close to agreement on the remaining $440 million in cuts that must be made.

But almost three weeks later, the cuts remain under discussion. No action is expected on budget bills until next week.

The parties have generally agreed on what areas will be cut. The largest reduction, some would argue, isn't a cut at all.

A planned 2.5 percent increase in aid to public schools will be rolled back to 1 percent, saving $173 million.

The same goes for community colleges and universities, saving another $26 million.

But the toughest negotiations involve reductions in Human Services ($80 million) and Community Health ($52 million) programs.

Should the state cut public assistance checks, which haven't been increased in more than a decade? Should day-care programs be trimmed, as the governor has proposed, making it more difficult for single moms to go to work?

Greg Bird, press spokesman for Democratic House Speaker Dillon, confirmed that those unresolved issues have slowed the talks.

"Those are budgets that provide critical services to vulnerable residents we need to protect," Bird said.

Replied Matt Marsden, spokesman for Senate Majority Leader Bishop: "Democrats wanted revenue and they delivered massive tax hikes. Now we need to implement real cuts. There is an urgency for the Democrats to make good on cuts we all agreed to, or we'll be back soon to that miserable place we were a few weekends ago" -- on the brink of a state shutdown, he said.

Some Republicans are seeking cuts in the Medicaid health care program for the poor that may affect client eligibility for certain groups, including young adults and relatives who take care of young single mothers.

Another possibility is ratcheting up Medicaid client co-pays.

Democrats say the reductions should be taken out of reimbursement to doctors and hospitals, which human services advocates say impacts poor people's access to health care services.

"These are awful, untenable choices. That's why they're having so much trouble with them," said Sharon Parks, an analyst with the Michigan League for Human Services.

About $56 million in prison spending cuts also are part of the agreement. Republicans are wary of efforts to parole more inmates and closing prisons.

Prison closings are opposed in the communities that depend on them for jobs, and among police and prosecutors.

Earlier this year, angry law officers and residents packed a meeting held by Senate Republicans on one prison closing in Jackson

"There have been town hall meetings and community support not to close those," said Corrections Department spokesman Russ Marlan.

Marlan said the main cuts are the closing of the 1,400-inmate Southern Michigan Correctional Facility in Jackson, at a $35 million savings, and shuttering of a 264-bed prison camp in Manistique, which saves $4 million.

Those prisoners are being transferred elsewhere in the system. Marlan said the number of state prisoners has dropped about 1,500 this year because more are being paroled and fewer are being sent back behind bars for parole violations.

The department also plans to save $3 million by closing the 1,300-bed Riverside Correctional Facility in Ionia and reopening the nearby Michigan Reformatory.

A $9 million program that lets local communities use inmate labor on public projects is being eliminated.

Fritz of the state budget office said there's a possibility most of the state spending plan will be passed by Oct. 31, but temporary budgets might have to be approved again for a couple of departments, such as Human Services and Community Health.

"That's the most likely scenario," should the Legislature find itself with no final accord in all areas by the end of the month, Fritz said.

If budget negotiations drag on into November, payments due Nov. 1 would be in immediate jeopardy.

Those include Treasury and Transportation bond payments, state employee paychecks and public assistance checks, Fritz added.

You can reach Mark Hornbeck at (313) 222-2470 or mhornbeck@detnews.com.