Yesterday afternoon leaders in the state legislature made key agreements regarding the state budget for the 2010 fiscal year, advancing hopes that a deal will be worked out before the legislature’s October deadline.

In a closed-door meeting, Senate Majority Leader Mike Bishop (R–Rochester) and House Speaker Andy Dillon (D–Redford Twp.) set newly established budget targets, including a $1.2 billion cut in spending without increasing taxes, according to The Associated Press.

“This afternoon we have come to a bi-partisan, bicameral agreement which establishes guidelines for reaching a budget resolution,” Bishop wrote in a press release distributed after the meeting. “This signed agreement between legislative leaders allows the budget chairmen to move forward with making specific budget reductions to bring our fiscal house in order.”

The agreement represents a major breakthrough in the legislative stalemate over the 2010 budget, according to Rep. Joan Bauer (D–Lansing), who heads up the House’s Higher Education Appropriations Committee.

If lawmakers don’t reach a decision by the Oct. 1 deadline, there will be a partial government shutdown akin to the one policymakers faced in 2007, which lasted four hours.

Over the next two weeks, legislators are hoping to strike enough compromises between the House and Senate to avoid a similar episode.

According to The Associated Press, Gov. Jennifer Granholm doesn’t support the agreements in cuts Bishop and Dillon reached. Granholm proposed raising $685 million in revenue through raising some taxes and reducing business tax credits to cut spending by $862 million.

“The governor has made it clear that she will draw the line at dangerous cuts that would hurt citizens or harm our ability to grow the economy and create jobs,” said Liz Boyd, Granholm’s press secretary.

Rep. Pam Byrnes (D–Lyndon Twp.) said the House’s Democratic caucus proposed allocating funds for four key areas including the Michigan Promise Scholarship, early childhood education, police and fire safety, and Medicaid coverage.

Byrnes said although Democrats in the state want to increase revenue through higher taxes, that option is complicated by the Michigan’s current economic state. The Republican-controlled Senate is also unwilling to raise taxes as a means of creating more revenue.

“The only other alternative is to generate more revenue of which would mean more taxes to people,” Byrnes said. “And now we have the highest unemployment rate in the nation, and doing the general tax increase would not be very well received by the citizens of Michigan at this time.”

Sen. Liz Brater (D–Ann Arbor) agrees with the solution of raising taxes to help fund the state’s various commitments.

“There’s a number of ways we could solve the problem, but basically the kind of cuts they’re talking about are very draconian and they’re not going to be able to provide needed essential state services unless we provide some additional revenue,” she said.

“The problem is that there’s serious philosophical disagreement between the leadership of the Senate and the House about what is the role of state government,” she continued, “that makes it difficult to come to these necessary compromises.”

According to Bauer, there is a $232 million difference between the House and Senate’s higher education budgets, which is due in part to the House’s full funding of the Michigan Promise Grants at $140 million.

Byrnes said the state has federal stimulus money from the American Recovery and Reinvestment Act that can provide a cut of the funding for state universities, but that the Promise Scholarship was not included in these funds.

“We’re able to use those federal funds to do this, so there should be no cuts actually to the operating expenses of the universities,” Byrnes said. “And that’s why the proposal of the Senate was to cut the promise grant because that was not tied into the operating expenses.”

The University planned their budget for the 2009-2010 academic year according to estimations based on state appropriations of $316 million, according to Cynthia Wilbanks, the University’s vice president for government relations.

“That is the requirement under the federal stimulus program that the state must maintain funding at the 2006 fiscal year level,” she said.

According to Wilbanks, the University’s funding from the state, which is at about 22 to 23 percent of the general fund, has steadily declined since 2002, when state funding for the University was at its peak at $363 million.

“It’s certainly a reflection today of the downturn in the economy in the state of Michigan and I think all of us who rely in some way on state support know that the current expenditures of the state are not sustainable based on the current revenues that the state is receiving, so something’s got to give,” Wilbanks said.

Bauer said the conference committees, appointed by the House Speaker and the Senate Majority Leader during their meeting yesterday, will work to forge compromises and solve the differences between the two bodies.

Those conference committee reports will then be presented as a revised budget to the full House and Senate.

According to Bauer, after these reports are created, the House and Senate cannot further amend the budget and can only vote it up or down.

Brater said while the legislature is trying to prevent a government shutdown through these recent negotiations between legislative leaders, she has heard word of a possible continuation budget, which would involve a resolution that extends the current year’s budget for a short period.

“It’s possible we could have a continuation budget. I’ve heard talk of that to reenact a single budget temporarily until we solve the problems,” Brater said. “But that would be somewhat only a short-term fix because there’s not enough money in this current fiscal year’s budget. I mean there’s more money being spent in the fiscal year’s budget than we currently have to spend.”

Brater said the only sector in which she supports cuts is the Department of Corrections.

“That of course is very controversial but we need to be shifting what we’re spending in corrections to preventative programs and to prevent criminalization later in life,” Brater said. “I think we know what we need to do to stabilize this economy and certainly invest in higher education is key for the 21st century workforce.”

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