BUDGET BATTLE BEGINS WITH HOUSE G.O.P. UNVEILING PLAN
A chasm opened Tuesday between the Republican-controlled House and Democratic Governor Jennifer Granholm over what programs to fund and how much to fund them in the 2005-06 budget as the House GOP finally revealed its spending plan.
With the Republican-controlled Senate also moving on several spending cuts and proposals opposed by Ms. Granholm, the stage is set for budget negotiations between the Legislature and governor as difficult as any in memory - potentially more so.
The House GOP proposed an array of cuts throughout state government that the Granholm administration said it would oppose - cutting 43,000 residents off of Medicaid, closing two Upper Peninsula prisons, slashing funding to the state's primary economic development agency, booting 15,000 people from welfare and requiring co-pays for some Medicaid recipients.
"It's not necessarily a selection of good vs. bad," said Rep. Scott Hummel (R-DeWitt), chair of the House Appropriations Committee as he opened a 12-hour hearing of the committee on the bill. "It's mostly come down to better vs. good."
No vote was taken on the massive omnibus budget bill (HB 4831) that at 683 pages contains spending for everything in state government except capital outlay projects and funding for specific school programs. Surprisingly, Republicans revealed that they had placed funding for basic K-12 operations into the omnibus bill in conflict with previous statements that all K-12 funding would be handled in separate legislation.
The committee could vote as soon as Wednesday. Upon concluding its Tuesday meeting just before 9 p.m., the panel had plowed through every sector of state government except the Department of Human Services, capital outlay, public universities and the funding for basic school operations.
Anticipating negative reaction to the budget for cutting some programs, Mr. Hummel said critics should note that the House GOP plan increases spending overall from the 2004-05 current year to 2005-06.
The bill sparked sharp criticism from Ms. Granholm, House Democrats and groups representing those who would take the brunt of the cuts.
"It infuriates me that they would balance the budget on the backs of the people who are least able to afford it to support tax benefits for the people who can most afford it," she told reporters in criticizing Republicans in both the House and Senate, but particularly the House. "I've attempted to be bipartisan. I'm a fiscally moderate person, and this has been a fiscally moderate administration, but the budget that's been proposed by the Republicans is unprecedented in the state of Michigan. It's unprecedented in its cruelty."
Ms. Granholm said she would seek compromise with the Legislature, but that the budget process unfolding in the House indicated an unwillingness to allow discussion on any of the particulars of the budget.
The governor said Republicans "don't have the courage" to allow thorough review of their cuts or to eliminate "tax expenditures." Ms. Granholm proposed eliminating millions of tax exemptions, such as the one that does not apply the sales tax to food bought from vending machines.
Ms. Granholm and Democrats also accused the Republicans of breaking their pledge not to raise taxes or fees to balance the budget because of their proposal to establish new co-pays for some Medicaid recipients and increase them on others.
"For some reason, if you apply it to the poor, it's not an increase. But if you apply it to the rich, it's an increase," Ms. Granholm said. "They're proposing to tax the poorest because they could not bring themselves to tax the doctors."
Ms. Granholm proposed a new tax on physicians to trigger matching federal funds for Medicaid, but Republicans in the House and Senate have said they would not support the idea.
Rep. Gretchen Whitmer of East Lansing, the top Democrat on the House Appropriations Committee, said the decision to place only the $175 per pupil increase in K-12 funding, and not the entire school aid budget, into the omnibus bill smacks of politics. Republicans clearly plan to hammer Democrats, who are expected to oppose the omnibus spending bill for its many cuts to other programs, for voting against the school funding increase, Ms. Whitmer said.
"That makes it clear to me that this budget's driven more by politics than policy," she said.
But House Speaker Craig DeRoche (R-Novi) denied any political motive for putting only the per pupil increase in the budget. Mr. DeRoche said it only makes sense to place funding for K-12 operations in the omnibus bill because it is the top priority for the House GOP.
Moving the funding there allows discussion on whether to shift funding to or from schools from other parts of the budget, he said.
"Everyone serving in the House of Representatives was elected to make the difficult decisions as well as the easy ones," he said.
Responding to Ms. Granholm's criticism, Senate Majority Leader Ken Sikkema (R-Wyoming) shot back that the governor overstated her willingness to cut. He said spending in the state has increased $125 million since Ms. Granholm took office, not been cut by $3 billion as she has professed.
"The people of Michigan expect state government to live within its means because it is living on their money," he said. "To suggest we can't cut spending from a nearly $40 billion budget is nonsense. We can cut and we will do so as long as people want us to cut rather than raise taxes to balance the budget."
And he said the cuts in the legislative proposals were not reached lightly. "Many senators have stepped up to the plate and made some tough decisions," he said. "It's never easy to cut budgets. This year was made even more difficult by our decision not to raise taxes, but I'm convinced it was the right decision."
Greg Bird, State Budget Office spokesperson, said the $3 billion was not the cut in real spending, but the cut in programs needed to keep them in line with revenues. "When those increases occur, you have to either come up with the revenue to pay for those increases or you have to correspond with cuts," he said of rising costs such as increasing Medicaid caseloads. "There's obviously no question that we have made some very tough cuts in the budget."
Ms. Granholm said her budget proposal had not been kind to the poorest of the poor. "We are holding the line," she said. "We don't have the funds to do an increase. At some point out of fairness we must do that."
Ms. Granholm said General Motors Corporation's announcement Tuesday that it would be cutting some 25,000 jobs further highlighted both the concerns with the House budget and the need to act on her proposed Single Business Tax changes. "They are going to choose places that make them competitive," she said.
The current tax climate for manufacturers, combined with the proposals in the budget to cut programs at the Michigan Economic Development Corporation, make it more difficult for GM and other manufacturers to be competitive in Michigan, she said.
INDIAN TUITION WAIVER ENDED, PRIVATE SCHOLARSHIP CUT
American Indians would no longer have their tuition at a public university paid for by the state under the House Republican budget bill for higher education.
The higher education budget's spending for the state's 15 public universities was outlined earlier by House Republicans (See Gongwer Michigan Report, May 25, 2005). But the GOP did not at the time indicate their plans for other spending in the higher education budget.
The bill (HB 4831) also would eliminate funding for the King-Chavez-Parks program that seeks to increase the participation of minorities in post-secondary education. And it would cut the Tuition Grant program for private college students by 2 percent, saving $1.2 million. Ms. Granholm recommended restructuring the King-Chavez-Parks program and eliminating the Tuition Grant program.
And the legislation would replace $9.75 million in general fund money for the State Competitive Scholarship Program with money from the Michigan Higher Education Assistance Authority operating fund. It also would replace $10.25 million in Merit Award Trust Fund money with equivalent funds from the authority for the Tuition Incentive Program.
Those moves come after the Granholm administration sought to use the authority's operating funds to help pay for prepaid college tuition plans for winners of Governor Jennifer Granholm's private nonprofit scholarship program.
The budget concurs with Ms. Granholm's recommendation not to pay Merit Award scholarships to those students who won the award by scoring well enough on the Michigan Educational Assessment Program but decided to attend a university outside of Michigan.
Overall, the budget contains $1.71 billion ($1.54 billion general fund). That's a 0.1 percent increase from the current year (4.9 percent reduction general fund). Ms. Granholm proposed spending $1.64 billion ($1.49 billion general fund).
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