Granholm Challenges Republican Lawmakers Over Budget Plans

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The philosophical fight over whether the state should handle its budget crisis with more spending cuts or with a combination of cuts and tax hikes grew more heated Thursday.

Democratic Gov. Jennifer Granholm accused Republicans of running away from the crisis, a charge Senate Majority Leader Mike Bishop denied.

During a news conference, Granholm challenged the Republicans who control the Senate to put out their own plan for balancing the budget. On Wednesday, the Senate Appropriations Committee voted along party lines to reject the governor's proposed executive order cutting about $100 million from this year's budget.

"I can't negotiate with vapor, when they've put out no plan on the other side," Granholm said. "I call on Republican lawmakers to have the backbone and the courage to put their plan on the table."

Bishop, R-Rochester, said Thursday that a bipartisan panel Granholm set up last month to examine how the state could get out of its chronic budget problems recommended "wide, deep reforms in government."

"She adopted their ideas for tax increases but didn't adopt their ideas for cuts and reforms, which is troubling to a lot of us who want to see significant solutions for the future," Bishop said.

Granholm said she has spent four years trying to cut business taxes and resist general tax increases, relying instead on $3 billion in spending cuts to resolve the state's chronic budget problems. But she said the approach hasn't worked.

"I plead guilty to having bought into the hope that cutting taxes would spur economic development," she said. "It hasn't done it. So now we have to pursue an investment strategy."

Granholm wants to offset this year's nearly $900 million deficit through a mix of spending reductions to day care, foster care and other programs; a new 2 percent tax on services such as haircuts and movie tickets starting June 1; the postponement of $69.4 million earmarked for universities to the next budget year; and changed accounting practices.

Republican lawmakers object to the tax increase and say they want more spending cuts in the budget year that started Oct. 1. They acknowledge that could mean midyear reductions to K-12 school budgets across Michigan. School districts stand to lose up to $220 per pupil, the entire spending increase they were allotted for this school year.

"I'd like to see how many votes they have to cut (aid to) schools in the middle of the school year," Granholm said Thursday, adding that she opposes such cuts. "School districts will be thrown into bankruptcy."

Bishop said education is a top priority and Republicans will do everything possible to lessen any potential hit to schools, but he added: "It's extremely irresponsible to suggest that something's off the table right now. We cannot begin this discussion by saying there's a whole area of our budget that's off the table in terms of negotiations."

Republicans aren't specifying what further cuts to make, but Bishop said the GOP will pitch its own plan based on spending cuts in the coming weeks.

Groups on both sides of the debate are preparing to weigh in on the governor's proposed 2 percent tax on services, which would cost businesses about $1 billion a year and individuals just less than $500 million.

Granholm says the "two-penny tax" is a worthwhile investment to make in education, health care and public services that otherwise would have to be cut.

But Amy Hagerstrom, head of the Michigan chapter of Americans for Prosperity, a national group that supports limiting taxes and government regulations, says she thinks more needs to be done to cut spending before tax increases are considered. On Friday, the group will kick off a 14-city swing to talk to citizens about such choices.

"It's not just the state budget in crisis right now. We have taxpayers in crisis," said Hagerstrom, who owns a Lansing consulting business. "I look at my friends and neighbors and I think, `But how much more can they bear?"'

Supporters of Mid-Michigan Democracy for America, however, are planning a letter-writing campaign to support the governor's plan.

"This is vital to Michigan's future and a very small price to pay, about $65 per year for an average family," leaders said in a letter to supporters.

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