LANSING (AP) - Lawmakers are making some progress toward balancing the state budget and avoiding a government shutdown before the Oct. 1 deadline.

But they're still fighting over how much of the $1.75 billion problem should be resolved through higher taxes, and how much should be erased through spending cuts.

Both the House and Senate passed some budget-related bills yesterday, but the showdown over higher taxes isn't resolved. Democrats want tax increases above what Republicans are willing to give. Republicans want spending cuts too deep for Democrats to accept.

And they're running out of time to avoid a possible shutdown of some government services if they can't reach a compromise in less than two weeks.

"We will get back at it again tomorrow," Senate Majority Leader Mike Bishop, a Republican from Rochester, said after the Senate adjourned last night. He said there will be "tough votes" ahead for lawmakers.

Republicans who control the Senate offered to vote on a proposal that would erase more than $1 billion of the deficit through spending cuts, while raising about $660 million by increasing the state's income tax rate from the current 3.9 percent to 4.3 percent. It's unclear how much support the proposal would have among Republican lawmakers, many of whom still would prefer to try and balance the budget without tax increases.

But Senate Democrats and Democratic Gov. Jennifer Granholm weren't happy with the Senate GOP proposal, and a vote was not taken on it Tuesday. Leaders from both parties were continuing negotiations to see if a compromise could be reached.

Senate Minority Leader Mark Schauer, a Democrat from Battle Creek, said the GOP-proposed cuts are too deep and jeopardize education, health care and public safety.

Granholm told reporters yesterday afternoon that she can live with about $300 million in budget cuts, but that the rest of the $1.75 billion shortfall would have to be filled with higher taxes or other measures, such as ending tax exemptions for some businesses.

"Because we have cut for five years, there is not ... $1 billion in cuts without hurting people," she said.

Senate Republicans have passed a plan that would extend the current budget year by 30 days past Oct. 1, an effort to buy more time to resolve the crisis.

Granholm has said she would veto a continuation budget, however, unless it had a revenue increase attached to it.

The governor said House and Senate leaders had been conferring with administration officials throughout the day, and that she was optimistic a solution would be found soon.

The Senate late yesterday passed bills that Republicans said could cut government costs. One bill that was approved unanimously would expand the state's prison labor programs to include more clothing and textile products, giving the state more items to sell to raise revenue. The bill now goes to the House.

Another bill passed unanimously would ban some former state employees from "double dipping" on pensions and health care coverage if they are rehired by the state and already covered by benefit programs. The bill now returns to the House, which already has passed a similar bill.