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REPORT NO. 177, VOLUME 48-- TUESDAY, SEPTEMBER 15 2009 F.Y. '10 MINUS 16: BUDGET TARGETS SEEK $1.2B IN CUTS House and Senate Appropriations members jumped into overdrive Tuesday in parceling out how to cut $1.2 billion from the 2009-10 budget after the chambers' top leaders agreed to that target. The developments Tuesday were a shift from discussions on a different scenario that would have seen the House simply voting to adopt the Senate-passed cuts. But it still means that key members of the House and Senate Appropriations committees will use the overall amount cut by the Senate budgets of $1.2 billion and then negotiate which programs to slice. And the setting of a target figure, while a fragile pact, represents a huge step toward enactment of the budget. Appropriations chair Rep. George Cushingberry Jr. <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=34401&locid=1> (D-Detroit) said of the Senate's $1.2 billion in cuts, "We're going to try to take their numbers and see. We know we have to make some changes and have to make some cuts." Senate Majority Leader Mike Bishop <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=17501&locid=1> (R-Rochester) said he and House Speaker Andy Dillon <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=105001&locid=1> (D-Redford Twp.) have asked subcommittee chairs to use the Senate spending levels, which include the $1.2 billion in cuts, as targets in negotiations about how each department's budget will look. "We have an agreement on process and that is to get these conference committees moving and get some forward momentum on our ultimate goal," Mr. Bishop told reporters, referring to his talks with Mr. Dillon. "What we did agree upon was to get this off dead neutral and move it forward by charging our subcommittee chairs with the responsibility of starting the committee process, talking about the cuts that we have, using those as the target to see if we have an agreement. If we have an agreement, we're going to move these budgets." Mr. Dillon would not confirm for reporters that $1.2 billion is the target, but said lawmakers would be working over the coming days to negotiate cuts. He said Democrats were still fighting to maintain funding for critical areas such as Medicaid, early education, revenue sharing and the Promise Grant. "Number one, we don't want a shutdown," Mr. Dillon said. "It's moving this process forward in a more progressive way. We want to make sure we're funding our priorities." Meanwhile, Governor Jennifer Granholm <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=6701&locid=1> issued layoff notices to about 52,000 state employees, although her spokesperson called the move "a technicality." "A similar technical requirement was met in late August when general notices were sent to the represented groups alerting them of possible temporary layoffs October 1," Ms. Boyd said. "Again, we expect and are working toward a budget resolution in advance of October 1." The letter sent to state employees says "reaching a consensus on the budget has been extremely difficult this year given that the national recession and the upheaval in the financial markets have driven state revenues down to a 40-year low when adjusted for inflation. I assure you the administration is working diligently to have a budget in place to avoid temporary layoffs. These have been trying and uncertain times for you and all of us in state government who take pride in serving the citizens of Michigan. It is our hope that the budget situation will be resolved soon, and we promise to keep you updated on our progress in the days to come." Mr. Dillon said he spoke with Ms. Granholm Tuesday morning and "she knows the strategy." Asked if the governor has said she will veto an all-cuts budget, Mr. Dillon said it's up to the governor to decide on a veto if she thinks the Legislature is going too far. Earlier in the day, Mr. Cushingberry, citing a longtime axiom in Lansing, said, "I hope the governor will respect that she proposes and the Legislature disposes." Ms. Granholm has proposed raising $684 million in revenues through tax increases and the elimination of tax exemptions while also cutting $862 million in spending. Ms. Boyd affirmed the governor was in discussion with lawmakers on the budget all day, but would not comment on specifics related to those negotiations, including $1.2 billion being the target for budget cuts. But Ms. Boyd did say, "We do believe many of the Senate cuts go too far." She said the governor is looking to preserve basic services, such as health care for vulnerable residents, and that the administration is working on a budget that reflects that. Ms. Boyd added the governor still believes in eliminating some tax loopholes. Discussions are ongoing as to what a supplemental could look like if the House proposes revenues to restore cuts later. Mr. Cushingberry said there would have to be a promise from the Senate that it would vote on revenues before the House would act on a supplemental. But Mr. Bishop said he has made no such commitments and that there are currently no votes within his caucus to support a tax increase. To that, Mr. Cushingberry said, "I don't think he's counting his members like we have." Mr. Dillon said Tuesday morning that he would name conference committee members before the day concluded, but he had not yet done so as of press time. Appropriations members are meeting in the less formal workgroup setting. For instance, Rep. John Espinoza <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=83701&locid=1> (D-Croswell), chair of the Department of Agriculture budget, said the Senate budget was higher than his so that leaves him with two options. Mr. Espinoza said he could make changes to spend more general fund dollars in the department and possibly do away with dairy inspection fees that could be difficult for the industry or keep spending where the House set it and share the remaining general fund dollars with other budgets that are farther apart from agreement. Meanwhile, Senate Minority Leader Mike Prusi <http://www.gongwer.com/index.cfm?link=bio.cfm&nameid=28201&locid=1> (D-Ishpeming) ratcheted up his comments about the possibility of the House Democratic caucus supporting a budget that cuts $1.2 billion, instead of cutting less and adding revenue to preserve some programs. Mr. Prusi, in remarks on the Senate floor, said Senate Democrats remain steadfast against the Senate Republican cuts to college scholarships, revenue sharing, Medicaid and early childhood education. "Those priorities still stand with this caucus regardless of any deal that is cut in the back room with the promise of some magical revenue appearing after the budget is put to bed," he said. "We are willing to make difficult cuts, we are willing to make tough decisions, we are willing to work with all sides to get to a resolution of these issues that are so critical to Michigan as we allocate the state's budget; but we will not be left out of the process, and we will not support budgets that do not contain priorities that have been demonstrated and discussed by this caucus throughout the intervening months." Senate Democrats, despite their minority status, will wield influence because the budgets cannot take immediate effect without at least four Democratic votes to get the required 25 for a two-thirds majority. Absent immediate effect, the budget bills would not take effect until sometime in late March, essentially depriving the state of spending authority for the first half of the fiscal year. Mr. Bishop also said he and Mr. Dillon have agreed to pass a continuation budget to avoid a government shutdown if they cannot get a budget passed before October 1. "We've already agreed that if we cannot get the budget going here what we'll do is we'll pass a continuation budget that will give us some more time," he told WWJ-AM. "But I think that we have all the elements in place to get this thing done by this week or next." Of Mr. Bishop's comments about a continuation budget, Mr. Dillon's press secretary said in a statement, "The House, Senate and governor all believe we can resolve the budget crisis without a government shutdown. There are very serious negotiations going on about how we preserve vital services like Promise Scholarships and fire and police protection to keep our families safe. No one benefits from a government shutdown. I believe all parties are committed to resolving the fiscal crisis." Rudy Redmond Manager, KCP Initiative (517) 373-9700