REPORT NO. 184, VOLUME 48-- THURSDAY, SEPTEMBER 24 2009

F.Y. '10 MINUS 7: PROGRESS STALLS ON BUDGET

Plans to close the $2.8 billion budget deficit with $1.279 billion in cuts, federal stimulus money and no tax increases ran into trouble Thursday as little to no progress was made on the most controversial issues.

Talks to reach an agreement on revenue sharing, which would be cut by $163.4 million under the spending targets signed by Senate Majority Leader Mike Bishop (R-Rochester) and House Speaker Andy Dillon (D-Redford Twp.), have hit a wall, key House and Senate negotiators said.

Meanwhile, the conference committee on the Department of Community Health budget (HB 4436), which contains deep cuts in Medicaid reimbursement rates and community mental health, has yet to meet.

Conference committees on other budgets with controversial cuts, such as the Department of Corrections (HB 4437) and Department of Human Services (SB 248), scheduled meetings for the day, but took no action.

The House, after expectations of an all-night session, decided to adjourn about 5:30 p.m., declining to act on controversial cuts to the K-12 public schools (HB 4447) and higher education budgets (HB 4441).

Instead, the House scheduled sessions for Friday, Saturday and Sunday. The Senate has scheduled a session for Friday, but not the weekend. It appears there will be no legislative session on Monday, which is the Jewish holiday of Yom Kippur.

Senate Republicans, after saying they would not act on any budget bills until the House approved its budget legislation, quickly changed their minds so that at least some budgets could show some forward progress. They passed budgets for the judiciary (SB 249, 24-13), Department of Military and Veterans Affairs (SB 250, 24-13) and Department of Energy, Labor and Economic Growth (SB 243, 21-16).

"What we wanted to do was to empty out what we had in the queue and make sure that we show forward progress," Mr. Bishop said. "We want to make sure that everybody knows the deal is still on."

Still, the disagreements in those budgets paled in comparison to most of the others.

Adding to the confusion was the House Appropriations Committee's approval of a supplemental budget bill (HB 5403) that would restore $120 million to the Promise Grant program, which under the higher education budget bill pending before the House would be eliminated.

Mr. Bishop said the lack of movement on the major budget bills did not concern him.

"We still have those sticking points," he said. "It's going to be difficult to get to that level where we have full agreement on all of them. ... I'm still just optimistic that the speaker will be able to fulfill the terms of the targets we agreed to."

Speaking to reporters just before session broke for the day, Mr. Dillon said it was uncertain whether the chamber would hold session over the weekend, adding negotiations change "minute by minute."

But Mr. Dillon shot down what he called rumors that he and Mr. Bishop had taken control of negotiations on the Department of Community Health because the subcommittee chairs managing talks on its budget had reached an impasse.

However, Mr. Dillon said the same five budgets that had been problematic earlier in the day remained the ones that were unresolved: general government, human services, community health, corrections and higher education.

Talk continues to swirl of reducing some of the cuts in the Community Health budget by passing a tax on physicians. Mr. Bishop did not rule out the idea, but also didn't embrace it.

"It's not our proposal," he said. "I presume it's being baked up over there in the House. I don't know what they want to do with it."

Earlier in the day, Mr. Dillon said that it was "probable" the House would send a revenue package over to the Senate, but that legislators were still trying to reach the $1.279 billion in cuts to which he and Mr. Bishop agreed.

"I think people are recognizing some of these cuts are too deep," he said.

He said he didn't know what bills would be in the revenue package.

Asked later in the day what was going on with any revenue proposal, Mr. Dillon said, "We're working on it all."

He said session was adjourning for the day because it was clear the House would not vote on any budgets in the evening and it made no sense to keep people in the chamber. He did say Appropriations members would continue to work on the budget into the night.

In the afternoon, Governor Jennifer Granholm talked with Democratic lawmakers on the House floor.

She told reporters afterward that "big cuts" unavoidably will be part of the 2009-10 budget, but she can't support such drastic measures as reductions to college scholarships and K-12 schools.

"No one wants a shutdown," she said. "You know the ball is obviously in the Legislature's court at this point and they are working very hard to get it across the line before the budget deadline. I'm trying to do everything I can to help them."

Of the possibility of holding session during the weekend, Mr. Bishop said he would see how Friday's session goes and that the Senate is prepared to meet into the weekend if necessary.

House Minority Floor Leader Dave Hildenbrand (R-Lowell) had given notice on Wednesday he would move to discharge the continuation budget on Thursday. After he made that motion during session, House Majority Floor Leader Kathy Angerer (D-Dundee) postponed that item for the day, meaning the issue remains on the calendar and could come up Friday.

F.Y. '10 MINUS 7: PROMISE GRANT 'RESTORED,' BUT NO FUNDING

A day after a conference committee approved a higher education budget without funding for the $4,000 Promise Grant college scholarship, the House Appropriations Committee acted to restore that program under a supplemental bill.

But while HB 5403 restored the $120 million expected to be needed to fund the college scholarship, there was no funding source tied to it.

Rep. George Cushingberry Jr. (D-Detroit) said he expected the House Tax Policy Committee would act on a revenue bill either Thursday or Friday (it didn't happen Thursday).

He said acting on a supplemental came after legislators started voting on steep cuts, including the Promise Grant, on Wednesday and several wanted to restore those.

But members of both sides of the aisle were skeptical.

Rep. John Proos (R-St. Joseph) said restoring the Promise Grant wasn't part of the deal struck between House Speaker Andy Dillon (D-Redford Twp.) and Senate Majority Leader Mike Bishop (R-Rochester).

"We can all in concept say the Promise is something we like. This has been the number one topic I have received from constituents in southwest Michigan," Mr. Proos said. "But in front of us we don't have a funding mechanism."

House Minority Floor Leader Dave Hildenbrand (R-Lowell) said voting to restore the cuts was an "11^th hour curveball." He said taxes can be pursued by any legislator who wants to propose them, but not until after the start of the fiscal year on October 1. He said right now lawmakers should be focused on balancing the budget before that deadline.

On the Democratic side, Rep. Fred Miller (D-Mount Clemens) said if the Promise Grant is such a priority it should have been included in the higher education budget and he praised the two Democrats who opposed that measure as it came out of conference.

Rep. Gary McDowell (D-Rudyard) expressed continued concern that the original intent of the tobacco settlement money was to remedy the health care affects of smoking within the Medicaid population, but it has long been diverted to college scholarships.

Rep. Alma Wheeler Smith (D-Salem Twp.) said since the tobacco settlement money is the source of revenue for the Merit Award and there is a balance in that fund, then lawmakers don't need to look for new revenue to replace the Promise Grant.

But Mr. Cushingberry worried that since some of the tobacco settlement money was securitized to fund the 21^st Century Jobs Fund, tapping into it for the Promise Grant could harm the state's bonds for the jobs fund.

House Fiscal Agency Director Mitch Bean advised lawmakers that the state's fiscal problems are compounding for 2011 when the federal stimulus will run its course and that part of the budget agreement already relies on transferring $37.5 million from the jobs fund to the general fund.

In the end, Republicans opposed the supplemental, except Rep. Darwin Booher (R-Evart) and Rep. Bill Caul (R-Mount Pleasant), who abstained.

The only Democrats to oppose the move were Ms. Smith and Mr. Miller.

Mr. Bishop criticized the House Appropriations Committee for the move.

"That's what they do," he said. "They spend money they don't have. At least they're consistent."