POTENTIAL BUDGET FIXES WILL BE PAINFUL, SENATE APPROPS TOLD
Senate Appropriations Committee members will start to see how difficult
the problem of fixing the current budget is on Thursday when the Senate
Fiscal Agency is to issue a memo outlining potential spending cuts,
revenue increases and one-time fixes that could be used to correct the
deficit in the 2006-07 budget. That memo will project what a 10
percent general fund across the board cut in each department would mean
beginning on April 1, including the number of state workers who would
have to be laid off.
Committee Chair Sen. Ron Jelinek (R-Three Oaks) and Sen. Michael
Switalski (D-Roseville), the Democratic vice chair, will receive the
memo.
In testimony before the full committee, Senate Fiscal Agency Director
Gary Olson said he had directed the agency to develop a series of
potential general fund cuts in each department that could total more
than $900 million.
The SFA is projecting a general fund deficit of $441.9 million for the
current year, but Mr. Olson told committee members the projected cuts
could be enough to help cover the $377.4 million deficit in the School
Aid Fund.
The memo will also include how much potential tax increases could net
the state.
If, for example, the income tax was raised from its current 3.9 percent
rate to 4 percent, that would raise an estimated $124.4 million through
the remainder of the current fiscal year.
If the current sales tax were raised from 6 percent to 7 percent, which
would require a vote of the people, it would raise $690.3 million for
the rest of the year.
If a 6 percent sales tax on services was created and placed on most
services such a tax would have the potential of raising $4.4 billion
during the rest of the fiscal year. But Mr. Olson said many policy
decisions would need to be made on such a tax and what it would apply
to.
If, for example, health care services were exempted the tax would raise
$1.3 billion less.
And most discussion about a sales tax on services has centered around
applying a reduced sales tax rate.
Other taxes would raise far less, although if the state education
property tax were raised by 1 mill that could raise $349 million for the
remainder of the fiscal year, and a boost in the cigarette tax from the
current $2 a pack to $3 a pack were enacted that would raise $220
million.
Suggestions that the beer tax be raised for the first time in more than
40 years has drawn some howls from the public, but if the tax were
raised from the current $6.30 a barrel to $7.30 a barrel it would only
raise an additional $3.5 million.
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