Governor Warns of "Huge Hole" in State Budget

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Governor Jennifer Granholm on Thursday warned the state needs to come up with at least $1 billion to balance this year's and next year's budget, telling reporters: "We're looking at another huge deficit going forward."

She said spending cuts will help cover some of the shortfall, but not all. The size of the hole will become evident when the state's top economists meet next month for the revenue estimating conference.

Granholm fended off questions about whether she'll also propose raising taxes to increase revenue, saying only that she will outline her solutions the first week of February in her annual State of the State address and fiscal 2008 budget proposal.

Besides the $1 billion shortfall, the state also needs to come up with a replacement for the Single Business Tax, which brings in about $2 billion annually and will expire at the end of next year.

Asked if she will present the same replacement tax plan that she unsuccessfully asked lawmakers to pass in December, the Democratic governor said that all depends on whether the state needs more revenue.

"If the climate and the conditions change significantly in January," that same offer may not be made, she said. Her earlier plan brought in about the same amount of money as the taxes businesses now pay.