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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.