House-Senate conference committee reach deal on school aid cuts

Mark Hornbeck and Karen Bouffard / Detroit News Lansing Bureau

Lansing -- School aid will be reduced by $165 per pupil, rather than $218 under a deal struck late Thursday by legislative leaders.

A House-Senate conference committee unanimously approved the deal after 10 p.m.

The $105 million reduction in the school aid cut will have to be made up with additional revenue. Lawmakers were expected to vote on revenue later Thursday or early Friday.

Sources said the revenue package includes a freeze in a tax credit for low-income families, reductions in business tax credits, including the break for the film industry, and a tax amnesty program.

Included in the deal is a three-year phase-out of the 22 percent surcharge on the Michigan Business Tax beginning this fiscal year.

The school aid budget includes $450 million in stimulus funds, leaving $181 million to be used next school year. The committee restored half of a 40-percent cut to county intermediate school districts, which provide special education, vocational training and other services for local districts.

The budget bill also spends $88 million for public preschool programs and $7.6 million for private preschool programs as well as $13 million for early childhood programs.

"We're far from out of the woods on this," said committee chairman Rep. Terry Brown, D-Pigeon.

Asked what happens if lawmakers don't approve the revenue increases, he said: "We're not going there."

Meanwhile Thursday, a House spending panel decided charging bars and liquor stores that want to offer late-night and Sunday sales is one way to raise money for the sagging state budget. But anti-alcohol groups slammed the move.

The House Appropriations Committee voted to sell $1,500 permits that would allow sales from 2-4 a.m. and beginning at 7 a.m. Sundays. The bill must be passed by the House and Senate before it can take effect.

The permits, expected to raise nearly $14 million a year, would be subject to approval by the Liquor Control Commission and local governments.

Gov. Jennifer Granholm, who proposed the idea in her budget plan in February, said extending drinking hours is not an ideal solution to the state's nagging budget woes, but noted bars and communities won't be compelled to do it.

"It's an option," she said, for generating cash to keep police and firefighters on the streets, and to fund college scholarships.

But Richard Rondeau, executive director of MADD of Southeast Michigan called on the House to look for other sources of revenue. He said the change would increase chances of barhopping and driving under the influence of alcohol.

"We feel that the chances are very likely -- and too dangerous -- for someone who may already be impaired to drive to another bar open until 4 a.m.," he said. "This idea comes at too big a price."

The committee vote came in the wake of more bad news for the state budget. Tax collections for May to September were down $130 million -- $65 million in the general fund and $65 million in the school aid pot -- compared with last May's dismal revenue projections, the House Fiscal Agency reported.

House Fiscal Agency Director Mitch Bean said the shortfall means the state likely will eat into its carryover cash from the 2009 fiscal year that ended last week, and that the budget hole for the fiscal year that started Oct. 1 is greater than the $2.8 billion that was anticipated.

"We may have more of a problem for 2010 than we thought we had," Bean said.

The flagging economy continues to be the culprit. The state lost 43,000 jobs in August after a July increase of 22,700 jobs. Manufacturing, construction, professional and business services, and retail trade posted large declines, the fiscal agency reported.

Meanwhile, Gov. Jennifer Granholm signed three spending bills Thursday -- for community colleges, the courts and Military and Veterans Affairs -- marking the first final action on the budget. Those bills were noncontroversial and among the first passed by the Legislature. Granholm must sign off on budget bills sent to her by the Legislature before the state's budget is in place. After failing to come to agreement before the fiscal year ended Sept. 30, lawmakers passed a 30-day continuation budget to give them time to finalize the spending plans, which call for a total of $1.3 billion in cuts.

kbouffard@detnews.com (517) 371-3660