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From Gongwer for Thursday, August 27th Update on the Budget Talks <http://www.gongwer.com> MICHIGAN REPORT The Capitol Record Since 1906 REPORT NO. 165, VOLUME 48-- THURSDAY, AUGUST 27 2009 2 YEARS AFTER SHUTDOWN, '10 BUDGET HEADED TO BRINK Hope that legislative leaders and the governor would reconcile their differences and get a 2009-10 budget passed this summer is dropping as fast as morning temperatures in Michigan with just weeks before a new fiscal year and no deal in sight. 2007 vs. 2009 Acrimony Less public bickering between the three key players. Remember "the letter" and all parties publicly accusing the other of breaking a deal? Taxes Unlike 2007, no official has publicly proposed a major general tax increase. Summer Bummer Like 2007, leaders have been unable to strike a deal before Labor Day, although this time most of the budget bills are in conference committees. Recall Rage 2007 recall leader Leon Drolet and his pig, Mr. Perks, have yet to make an appearance on the Capitol lawn. No Longer Rookies The three key leaders all have had time to get to know each other and settle into their roles unlike 2007 when Mr. Bishop and Mr. Dillon were new. Feds to the Rescue $2.4 billion in economic stimulus money this year is a huge help. With the Senate adjourning Thursday until after the Labor Day weekend, it is now assured the 2009-10 budget will not be completed until at least 22 days before the deadline, mirroring the same chaos-induced month many went through two years ago. Although the situation legislators and the administration of Governor Jennifer Granholm <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=6701&locid=1> face now is very different than it was in 2007, from the economy being worse off to arguments between the parties erupting in public, many parallels between then and now can be drawn and that is leaving some in the Capitol questioning whether another government shutdown is brewing. Ms. Granholm said this week that while she believes a budget will be finished before the new fiscal year begins October 1, she wants to see the pace of talks pick up. And earlier this week, sources said more meetings between key lawmakers, staff and the administration were scheduled than in previous weeks, although budget targets still have not been set. But legislators involved in the negotiations are starting to express doubt, or at least hear it from others, that there is enough time to complete all that needs to get done with the budget before the deadline. "The Legislature tends to get things done when they must get things done," said House Minority Leader Kevin Elsenheimer <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=87101&locid=1> (R-Kewadin). "I don't see how it's going to be any different this time. It has to be done by September 30 and it will likely get done by September 30." Sen. Ron Jelinek <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=21201&locid=1> (R-Three Oaks), the Senate Appropriations Committee chair, said several aspects of negotiations are better this year. Negotiators have more than $2 billion in federal stimulus money to patch holes, there's more agreement about making cuts and the overall tone of talks is more positive. "Nobody's trying to upstage each other at this point," Mr. Jelinek said of the target meetings. But Mr. Jelinek said he worries there will not be enough time for conference committees to act after a deal is struck to meet the October 1 deadline. That could force the need for a continuation budget, he said. "Everybody has agreed we don't want to go to shutdown," he said. "Right now, our problem is that the targets are dragging out." And the sides have yet to agree on how much new revenue to raise, Mr. Jelinek said. "That's probably going to be our biggest obstacle," he said. Sen. Michael Switalski <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=16901&locid=1> of Roseville, the top Democrat on the Senate Appropriations Committee, said he's flummoxed that the sides have yet to reach a deal. The two sides are close and it should have happened by now, he said. "I can't explain why we haven't gotten it done yet," he said. "It makes no sense to me because it's night and day (compared to 2007)." This time, no one is proposing a general tax increase, and Senate Republicans have passed their proposed cuts for all to see instead of keeping their plan secret like 2007, Mr. Switalski said. Indeed, two Republicans who voted for one of 2007's general tax increases, Sen. Wayne Kuipers <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=24601&locid=1> (R-Holland) and Sen. Patricia Birkholz <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=22001&locid=1> (R-Saugatuck Twp.) are now saying they will oppose a tax increase. Mr. Jelinek, who voted for a tax increase in 2007, said he started out this year's process adamantly opposed to a tax increase, and that has not changed, but said he is trying to be reasonable in the negotiations. But the sides can't agree on what tax exemptions to eliminate and how much overall revenue to raise, he said. Mr. Switalski said he's open to more cuts and tax proposals like raising the cigarette tax, but not a general tax increase. "I beat my head on the table," he said. "I think we're very close. It's just a question of making the deal. I keep thinking it's imminent." Still there are people like Rep. Richard Hammel <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=172301&locid=1> (D-Flushing), majority vice chair of House Appropriations, who say they're comfortable with how talks are progressing. Mr. Hammel said once targets are set, most of the budgets should be quickly wrapped up. Looking the "beast in the face" again - i.e. another government shutdown - is not something people are throwing around as an option, said the ranking Republican member of House Appropriations, Rep. Chuck Moss <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=156901&locid=1> (R-Birmingham). THEN AND NOW: Still, no budget is in place for 2009-10, and that's the same situation the Legislature and governor faced two years ago. Economically, conditions have severely worsened for Michigan and for the country. Last fall, the collapse of the financial market led the federal government to infuse hundreds of billions of dollars into that sector, only to follow up with aid to the struggling domestic auto industry. By late winter, Congress passed $787 billion in stimulus funding, a large portion of which went to other layers of government. Since then, however, Michigan endured the bankruptcies of two of its largest employers, General Motors Corporation and Chrysler LLC. Two years ago, the foundering of the state's iconic companies was unfathomable. And while there is the usual debate between whether to raise taxes or cut programs, or both, the stimulus has hugely helped ease arguments on how to close a $2.8 billion combined deficit in the general fund and School Aid Fund. The good news is all but one budget (Department of State Police) is prepped for conference committee should the targets be set by leadership and the governor. Two years ago, both chambers were just getting around to moving some budgets and they didn't completely jive about revenues. And while the Legislature and governor had to balance a budget deficit in the current fiscal year in the month of May like two years ago, this time a mixture of cuts with a strong measure of stimulus spending was used. This year, officials are also not dealing with a replacement to the business tax, which took up a large chunk of time two years ago. In fact, nearly all of June in 2007 was dedicated to getting a replacement in place during the usual time to get second-house budgets passed. And at this point in 2007, the blow-ups between Ms. Granholm and Senate Majority Leader Mike Bishop <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=17501&locid=1> (R-Rochester) were public. In an Oakland Press article that ran weeks after Mr. Bishop had been interviewed, he had said working with Democrats was like dealing with "a dysfunctional family at Thanksgiving dinner." Ms. Granholm responded, although some counseled against it, with a letter to Mr. Bishop outlining the agreement both parties had made to raise $1.2 billion in revenues. By the time the letter was dropped off by the governor's legislative liaison, it had been leaked to the press and the next day both sides were arguing back and forth on who leaked it and whether or not there had been a deal in the first place. Compared to a recent back and forth argument in the press about Mr. Bishop insisting the governor make public her back-room tax increase proposals, the public feuding between the two seems minor. Only recently has Mr. Bishop criticized Ms. Granholm for employing the same tactics she used in 2007 to win approval of a tax increase while Mr. Dillon and Mr. Bishop have tweaked each other on whether the House should vote on any of Ms. Granholm's reported tax proposals. That might be because all three have been working together for those two years whereas in 2007 the legislative leaders had just been plopped into their prospective posts. "Those two faced one of the toughest issues any two legislators have faced within months of being in their jobs," Mr. Elsenheimer said. While the budget hole may be larger than the $1.7 billion lawmakers faced in 2007, the level of leadership is better now, Mr. Elsenheimer said. But politically, key officials are in very different places than they were in 2007. Mr. Bishop is running for attorney general while Mr. Dillon is mentioned as a possible candidate for governor. Ms. Granholm has a little more than a year left on her final term and is hoping her second-in-command, Lt. Governor John Cherry Jr. <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=110101&locid=1> , succeeds her. Dozens of other legislators also having an eye toward higher office wonder what all these votes could mean for their political futures. And Mr. Perks, the infamous pink plaster pig provocateur Leon Drolet wheeled around in 2007 before he launched recalls against lawmakers voting for the tax hike, hasn't made an appearance at the Capitol. WORRY GROWS AMONG GROUPS: The talks are occurring, like they did in 2007, behind closed doors where only a few select people know details. When these discussions drag for weeks, the town gets nervous. "Not to hear anything or know where the conversation is going should be a concern to everyone in Michigan," said Judy Putnam, spokesperson for the Michigan League for Human Services. With cuts likely needed to cover the ever-growing budget hole, people will be affected, but no one knows how severely. Senate Republicans have proposed $1.2 billion in cuts while House Republicans have called for $1.4 billion in reductions. Groups responsible for dealing with a government shutdown, from the bus inspectors to schools handing out Promise Grants, have a heightened level of concern the state is headed down a familiar road, said Progress Michigan Executive Director David Holtz. "There is a real desire to send a strong message to the Legislature that shutting down the government is not an option," he said. Said Bill Anderson, legislative liaison for the Michigan Townships Association: "I can't say we're in panic mode. ... When you talk with people about the state budget you don't know whether to laugh or cry." Not having a budget in place impacts communities and schools that already have started their fiscal years without knowing their state appropriations, he said. And while it was about this time of year when the Legislature decided to delve into when to run a 2008 presidential primary in Michigan, all policy decisions seem to be getting put on the backburner until appropriation decisions are made, Mr. Anderson said. Those who watch and rely on the process are expressing "frustration more than anything," he said. Richard Studley, president and CEO of the Michigan Chamber of Commerce, said two improvements from 2007 are that Mr. Dillon has proposed a major government reform with his plan to pool all government employees into one health insurance plan while Senate Republicans have passed significant spending reductions. But Mr. Studley said Ms. Granholm appears to be using the same playbook as 2007 to win tax increases with her veiled opposition to Mr. Dillon's plan and public opposition to the Senate GOP cuts. If left alone, Mr. Dillon and Mr. Bishop could probably resolve the budget on their own, he said. "If we were talking two or three weeks ago, I would have been more optimistic that the budget would be resolved on time," he said. "We're still hopeful, we're still optimistic, but that concern is growing. I think it's increasingly apparent every day that the governor wants to replay 2007. ... More and more, it looks like the executive office wants to put both the speaker and senate majority leader in a position where there's not time to enact reforms and there's not time to reduce spending." Still, the governor herself said this week the lack of a deal was "ridiculous." "The budget should have been done long ago," she said. Pamela Ann Martell Higher Education Consultant King-Chavez-Parks (KCP) Initiative Michigan Department of Energy, Labor & Economic Growth 201 N. Washington Square Victor Office Center, 3rd Floor Lansing, MI 48913 Direct Line: (517) 335-3009 Main Line: (517) 373-9700 Fax: (517) 373-2759 Email: [log in to unmask]