Gov. Jennifer Granholm unveiled her proposed budget for FY 2011, which begins on October 1, on Thursday. The proposal includes nearly $600 million in cuts spread throughout the state’s government agencies and changes in the state tax code to bring in more than $500 million in new revenue.
The key change is to the state sales tax, which under this proposal would be reduced from 6 percent to 5.5 percent, but would apply to services as well as products. Along with that, the Michigan Business Tax surcharge would be phased out over two years. Those combined changes, the governor says, “provide $554 million in additional funding to the School Aid Fund in fiscal year 2011, but are revenue neutral by the end of the 2013 fiscal year.”
“Spending cuts alone cannot create the economic growth and jobs that Michigan needs,” said Granholm. “We must continue to invest in things most critical to attracting business investment, and my budget makes those important investments.”
The proposed budget would leave revenue sharing for local governments, state aid for education and the number of state police even with 2010 levels, but it would restore the Michigan Promise scholarship to give $4,000 to eligible students to pay for college tuition.
There are other reform measures to save money without making budget cuts, including changes to the state employee retirement system to encourage early retirement, changes in criminal sentencing to reduce the number of people in prison and changes to the health care system for state employees.