The last day: Where the budget negotiations stand

As we enter the last day to reach a resolution on a new budget before the state government is forced to shut down, here’s a handy update on the situation that includes the latest actions taken by the legislature and the issues that remain to be resolved.

The big stumbling blocks

Perhaps the biggest hurdle to overcome is still disagreement over how much to cut and whether to raise any taxes to boost revenue and reduce the depth of some of those cuts. Senate Majority Leader Mike Bishop and Speaker of the House Andy Dillon had an agreement to start with the full $1.3 billion in cuts already approved by the Republican-led Senate, but many of the conference committees working on the budgets for individual departments could not reach agreement on such deep cuts and many of those committees lowered the amount of some of those cuts.

On Tuesday, it became clear that there was a shift in strategy by both parties regarding the use of federal stimulus funds. Originally, the agreement was to use about $2.5 billion this year from the stimulus money to help balance the budget and make up the remaining $1.3 billion with cuts or revenue increases. But on Tuesday, several bills came forward and were passed with lower cuts than passed by the Senate, paid for not by revenue increases but by using up the rest of the stimulus money that was intended to be set aside for next year’s budget. Thus, they are kicking the can down the road and making it far more difficult to balance the budget next year.

The issue of revenue increases to reduce the severity of the most damaging cuts remains a key sticking point, one on which there has been enormous inconsistency from Dillon in particular. He originally agreed with Bishop to get the $1.3 billion in cuts, then possibly go back after the budget was passed and raise supplemental appropriations bills to raise some niche taxes and restore some of the cuts. But that was met with much skepticism among House Democrats, who do not think the Republican-led Senate will vote for such tax increases once they’ve got the cuts they’re demanding (and such skepticism is almost certainly correct).

Perhaps bowing to that criticism, Dillon began to move bills with fee increases for various things to the House floor on Saturday, but very little was done to raise revenue. On Tuesday night, he reverted back to his original plan of trying to raise revenue through supplemental bills after the budget was passed. The problem is that he simply may not have the votes in the House to pass the most controversial department budgets.

Budgets yet to be voted on

Here are the department budgets that remain to be voted on in one or both chambers:

1. Department of Transportation. The MDOT budget hasn’t even been voted on by the conference committee yet, where a major sticking point is $8 million in state funding for a publicly-funded second bridge between Detroit and Canada.

2. K-12 schools. The conference committee cut school aid by $218 per student and made steep cuts in aid to school districts as well. Neither the House or Senate has taken up the bill yet and it looks very unlikely that the House will vote for the bill as currently written. And they’re running out of stimulus money with which to plug the holes.

3. Promise scholarships. The conference committee eliminated them entirely. Neither the House or Senate has voted for the bill yet and it is again unclear whether the House will pass it at all in its current form. Even some Republicans have said they will not vote for a bill that cuts this scholarship.

4. Medicaid and mental health funding. These are separate bills, but in both cases the conference committees made steep cuts in funding for important medical services, including $165 million in cuts to payments to doctors and hospitals under Medicaid. Neither the House or Senate has taken a vote on either bill.

What will Granholm do?

Short answer: No one has any idea. She’s played her cards very close to the vest so far. On Tuesday, she did meet with Dillon and the Democratic caucus, but what she was pushing for is unclear. There are several key unanswered questions on her part: Is she okay with a budget that includes all cuts and no revenue increases? Would she veto that kind of budget? Is she willing to use her line-item veto to strike out some of the most controversial cuts? Under what circumstances is she willing to allow the state government to shut down and force the legislature to reach a new budget agreement? Is she willing to accept a continuing resolution to keep the government running until a final budget is reached or would she refuse to sign one as she did in 2007?

She has many tools at her disposal here; how, or even if, she uses them is anyone’s guess at this point.

Strap in, folks. It’s gonna be a long day.