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Michigan lawmakers reach budget deal that includes tax increases; partial gov't shutdown ends
LANSING - The state Legislature agreed early Monday to raise the income tax and expand the sales tax to services in a deal with the governor that quickly ended a partial state government shutdown. For a little more than four hours, fewer state police patrolled Michigan highways, campgrounds were closed and road construction projects and lottery sales were stopped. More service interruptions were planned for later in the day until the final pieces of the deal were sent to Democratic Gov. Jennifer Granholm. Applause broke out in Granholm's office when the final vote was announced at 4:18 a.m. ``This budget agreement is the right solution for Michigan,'' Granholm said in a statement. ``We prevented massive cuts to public education, health care and public safety while also making extensive government reforms and passing new revenue. With the state back on solid financial footing, we can turn our focus to the critical task of jump-starting our economy and creating new jobs.'' Granholm signed a 30-day extension of Michigan's budget, which expired at midnight. The continuation budget keeps government running. The Legislature agreed to raise Michigan's income tax rate from 3.9 percent to 4.35 percent and expand the 6 percent sales tax to some services. Granholm signed both measures. Structural changes to state government _ including the management of teacher and other public employee benefits _ also are part of the package. The tax increases should erase most of a projected $1.75 billion deficit in Michigan's next budget. The final budget for the new fiscal year will include $440 million in spending cuts, including no inflationary funding increase for public universities and community colleges, Granholm said. The deal came after a marathon legislative session that covered parts of three days. Like most Michigan legislators, Rep. Darwin Booher, R-Evart, is feeling the effects of fatigue. “I only had 45 minutes of sleep in the last two days,” Booher said over the phone during a brief recess Sunday night. “There is a room off the House floor where I tried to close my eyes for a bit. Sleeping on the floor isn't easy. When we adjourn (in the morning), there are going to be 110 people heading for bed.” Despite the efforts of legislatures, Michigan's state government partially shut down early Monday with no budget deal in place for the new fiscal year. Gov. Jennifer Granholm was still awaiting key votes in the Republican-controlled Senate after 12:01 a.m., the deadline for approving a state budget. The state has no authority to spend money without a budget in place. Parts but not all of a temporary budget fix that would have avoided a shutdown were approved Sunday, but the Legislature was still working when the clock struck midnight on tax increases to help fill a $1.75 billion deficit. Granholm was waiting to sign a 30-day continuation budget but not until the Legislature sent her the tax increases. The Democrat-led House on Sunday passed a bill that would raise the state's income tax from the current 3.9 percent to 4.35 percent, sending the measure to the Republican-led Senate, where it faced a much tougher fight. The House earlier passed a bill placing the state's 6 percent sales tax on a wide range of services, but the Senate had not voted on the measure. The House passed the income tax measure 57-52. Democrats hold a 58-52 edge in the House, but three Democrats - Martin Griffin and Michael Simpson of the Jackson area and Lisa Wojno of Warren - voted against it. Two Republicans, Chris Ward of Brighton and Ed Gaffney of Grosse Pointe Farms, voted in favor of the proposal. No Republicans voted for the bill placing the sales tax on services. All Democrats did, except for Reps. Marc Corriveau of Northville and Kate Ebli of Monroe, who voted no. “The service tax, which could raise $600 million, was passed,” Booher said. “It passed with just 56 votes - that was how many was needed. I didn't support that.” There were no votes against the two bills implementing the budget extension. The House cleared the board without tallying the vote on a measure that would change the way some teacher and state worker health benefits are determined. It also failed twice to pass a measure tying teachers' health care coverage for retirement to how many years they've worked. It would have affected those entering the teaching ranks after June 30, 2008. House Speaker Andy Dillon, D-Redford Township, castigated House Republicans for refusing to put up any votes on the sales tax bill and for not supplying enough votes to pass the changes to teacher benefits Republicans had said were crucial to any deal. But Minority Leader Craig DeRoche, R-Novi, said the House Republicans had said all along they didn't like raising more revenue to fill the shortfall, and had supplied the votes they'd promised on the teacher benefits bills. Because all parts of the budget deal weren't in place by 12:01 a.m., 35,000 of the state's roughly 53,000 workers are barred from going to work this morning and all state services except those needed to protect health and safety would halt. State workers were told their paychecks would be reduced to reflect any hours missed because of a shutdown. They were given a phone number to call and a Web site to check to see if they should come to work today. The state last withheld some employee paychecks in 1959, when a cash-starved state budget resulted in what became known as the Payless Payday crisis. Raising the state's income tax to 4.35 percent would raise an additional $765 million for the state. Extending the sales tax to some services starting Dec. 1 would bring in an estimated $614 million for the 10 months remaining in the fiscal year at that point, or about $750 million annually, state Treasurer Robert Kleine said. Your Local Connection Which services would be taxed? TAXED € Astrology € Bail bonding € Balloon-o-grams € Coin-operated blood pressure testing machine services € Coin-operated personal service machines € Concierge services € Consumer-buying services € Credit card notification services € Dating services € Discount buying services € Genealogical investigation services € House-sitting services € Coin-operated rental locker services € Palm-reading services € Party-planning services € Pay telephones € Personal fitness trainers € Psychic services € Rest-room operation services € Shoeshines € Singing telegrams € Wedding chapel services € Wedding planners € Tanning € Massage € Investment advising € Janitorial € Skiing € Travel agents NOT TAXED € Cable television € Sports tickets € Golf € Movies € Legal fees € Accounting € Haircuts
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