State shutdown adverted with balanced budget

Published 4:47 am Monday, October 1, 2007

By Staff
LANSING – Using a package of government reforms, departmental cuts and increased revenue, legislators were able to reach an agreement on next year's budget, which begins today, Oct. 1, said Cass County's Sen. Ron Jelinek, R-Three Oaks.
"The Legislature sent a balanced budget to the governor, avoiding a complete state shutdown and implementing some much-needed reforms," said Jelinek, chair of the Senate Appropriations Committee. "We made some tough decisions, but with the budget in place, we can now finalize each state department's appropriation for the year."
Among the governmental reforms is legislation that requires all schools within an intermediate school district to have a common calendar for Christmas vacation and spring break. They also are encouraged to schedule the same professional development days. The bill will save the state and school districts money along with giving students access to better educational experiences. Having one common calendar would allow for sharing of buses, technology, food services and other resources throughout the area served by an ISD.
Another major reform is to provide incentives for healthy behaviors within the Medicaid program. This is designed to improve the health of those on Medicaid and control Medicaid costs.
On the revenue portion of the budget deal, the state income tax will go from 3.9 percent to 4.35 percent. This means that, if after taking all personal exemptions of $3,400 per family member and all other deductions, if a family still has $50,000 in taxable income, they will pay $217 total.
Another piece of the deal involves adding the state's 6 percent sales tax to select services including, among other things, carpet and upholstery cleaning, mini-warehouse/self-storage facilities and document preparation services.
Other reforms include:
Freezing the retirement payments of a retired state employee if the individual is re-employed by the state.
Moving new school employees to a graded health care system and increasing the contribution rate to the pension system for new employees.
Creating two commissions charged with recommending ways to consolidate, streamline and improve state government services and reviewing state mandates imposed on local governments to determine the cost of the mandates and reporting requirements.
Allowing schools and local municipalities to cooperate together to provide health insurance coverage at lower costs.
The Senate started session at noon on Saturday and adjourned at 4:30 a.m. Monday.
Governor Jennifer M. Granholm said action taken by state lawmakers on a comprehensive solution to the state's budget crisis ends a partial shutdown of state government that went into effect today and prevents massive cuts to public education, health care and public safety.
The governor is expected to sign the package of revenues and reforms, along with a 30-day continuation budget to allow the legislature sufficient time to pass individual budgets for Fiscal Year 2008.
"This budget agreement is the right solution for Michigan," said Granholm. "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 jumpstarting our economy and creating new jobs."
The governor acknowledged lawmakers who cast the votes necessary to secure Michigan's future.
"This was a historic vote to put Michigan's fiscal house in order, made possible by those lawmakers who exercised the courage of their convictions," Granholm said.
Granholm inherited a significant budget deficit and has had to deal with an economy that has been challenged like no other by Bush administration trade and outsourcing policies that shipped tens of thousands of manufacturing jobs overseas.
In addition, Michigan's fiscal policies in the 1990s turned a billion dollar surplus into a large deficit. As a result, Granholm has had to resolve more than $4 billion in deficits with more than $3 billion in cuts.
Nearly eight months ago, Granholm presented a comprehensive solution to the state's budget crisis. At that time she called for a combination of budget cuts, government reforms and new revenues that would protect critical services while allowing the state to invest in the things that make us competitive.
The legislative budget agreement includes:
Budget cuts
Legislators are expected to enact nearly $440 million in budget cuts, including changes to state prison's food services, a 1.1 percent rate cut for Medicaid providers, a reduction in day care hours, citizenship requirements for new Medicaid patients, shifting foster children's health care to an HMO and elimination of funding increases for the state's community college and universities.
Government reforms
Legislators have agreed to a series of government reforms including significant changes to teacher health care system, a graded premium requirement for public school employees and an end to public employee double dipping. The legislature has also created a Government Efficiency Committee to identify additional reforms.
New revenues
Legislators voted to increase the state's personal income tax rate to 4.35 percent and to expand the state's sales tax to a number of high-end discretionary services, including interior design, landscaping and personal care services such as massages and manicures.
The combination of taxes is expected to cost the average person approximately $1 per week, less than the cost of a cup of coffee and a donut.
The 35,000 state employees who received temporary layoff notices were asked to report to work on their normal shifts Oct. 1.
Departments that began implementing the partial shutdown on Sunday will take immediate steps to put programs and services back in place including the reopening of state parks and state highway rest areas, sale of lottery tickets and road construction and maintenance.