Granholm wants mix of tax cuts, hikes, reforms

2/6/2007

LANSING, Mich. Gov. Jennifer Granholm today castigated those who say the state s financial problems can be fixed solely with tax cuts and vowed to present a mix of spending cuts, structural reforms and tax increases Thursday to balance the budget.

I will not cut the things that will make Michigan competitive. Nor will I devastate our most vulnerable citizens, the Democratic governor said in her fifth annual State of the State address. Our new proposed tax system will be geared to job creation in the new economy, not the old one. It will end our debilitating fiscal crisis, and allow us to invest in our people.

Granholm said she won t slash school funding this school year despite a $368 million deficit in the school aid fund, and that she plans to increase spending for schools next year. Schools faced cuts of more than $200 per student if a way wasn t found to fill the gap. The governor didn t say how the shortfall would be made up, although a tax increase could be used.

Republican leaders and some business groups even before the speech had been wary of any mention of a possible tax increase. But Granholm dismissed her critics as naysayers.

The naysayers haven t seen my budget yet, but they already know they are against it, she said. The naysayers will claim that changes in our tax system will send business packing, even when the facts show that taxes aren t the reason we re losing jobs. They ll say there s no limit to how much we can cut spending, even when they can t tell you who they d cut or who will feel that pain.

Senate Majority Leader Mike Bishop, a Republican from Rochester, said before the speech that asking taxpayers in a bad economy to pay more was unfair unless cuts were made first.

We need to stand up for smaller, more efficient government, Bishop said, noting that taxpayers are at the end of their rope ... suffering right now more than they have in the history of my tenure here in the Legislature.

Granholm said she has cut taxes and cut spending in the past and will continue to do so. But she added the state needs to have enough money to invest in its citizens if it is to prosper.

No business wants to drive its trucks over potholed streets and crumbling bridges. High-tech companies like Google will not invest in a state that is slashing funding for universities and colleges where they get their talent, she said.

Having made her case, Granholm kept the details of her replacement for the Single Business Tax and for any tax increases under wraps in her speech. They ll be presented Thursday, when state budget director Bob Emerson lays out her plan for handling a shortfall of more than $800 million in the current budget and her spending plan for the fiscal year beginning Oct. 1.

Instead, she said the state will continue to build on its efforts to sell the state through marketing ads, pursuing more international investment and making more money available to small businesses and startup companies.

She also said the state will begin a three-year effort to attract more alternative energy companies to the state by investing in research and pilot programs of alternative energy companies, a loan fund for entrepreneurs and the installation of about 1,000 biodiesel and ethanol pumps statewide by the end of next year.

The governor also proposed a change to revenue sharing payments to local governments, giving more money to cities and townships that are sharing services or consolidating with other local governments to save money.

School districts also will be asked to consolidate their business services, with those that do in the next school year getting extra money. The governor said a year from now she d submit a budget that penalized school districts that haven t consolidated at least some services.

Consolidation of services makes sense, and it saves money, she said. And whether it s by using a carrot or a stick, we are going to make it happen.

Granholm also said her administration would step up background checks for any adult with a foster child in their home and add more child protective services workers.

To reduce prison costs, the state will use less costly ways to deal with nonviolent offenders that will get them out of prisons.

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