State budget deal avoids cuts in school and medicaid funding

Detroit Free Press - www.freep.com - State budget deal averts cuts in school, Medicaid funding State budget deal averts cuts in school, Medicaid funding May 25, 2007 By CHRIS CHRISTOFF AND DAWSON BELL FREE PRESS STAFF WRITERS LANSING – State lawmakers agreed tonight to erase most of an estimated $800-million deficit for this fiscal year and avert a pending $122-per-pupil cut in funds to public schools. The deal sets the stage for a showdown on a major income tax increase, possibly as early as next week, to address an even larger deficit in 2008 and beyond. Republicans had insisted on no tax increase to balance this fiscal year’s budget, which expires Sept. 30. Democrats have insisted that a tax increase is necessary to prevent cuts now and in the future in education, public safety and health care.The deal is believed to be linked to a vote on an income tax increase for the 2008 fiscal year, which begins Oct. 1. Details of what form that tax might take were not immediately known.Liz Boyd, Gov. Jennifer Granholm’s spokesperson, said the agreement upholds the administration’s commitment to protect education and health care from cuts.“It was a good night for public schools and health care,” Boyd said. “There’s still much work to be done.”House Speaker Andy Dillon echoed Boyd’s sentiments on protecting education and health care. He declined to confirm that a vote on a tax increase was part of the agreement or was imminent.Friday’s agreement followedday-long talks among House Speaker Andy Dillon, Senate Majority Leader Mike Bishop and Lt. Gov. John Cherry, who represented Gov. Jennifer Granholm.House Democrats, in a rare gesture, invited Republicans into their private caucus to discuss the agreement.The deficit reduction deal reached tonight also eliminated the planned 6% reduction in Medicaid payments to physicians, hospitals and nursing homes.Other highlights:• It delays payment of $97 million to universities until after Oct. 1 and $12.9 million to community colleges.• It uses $168 million from restricted funds, including $35 million in a convention facilities fund and $30 million from the 21st Century Jobs Fund.• A $3.6-million cut to the Department of History, Arts and Libraries and $6.5 million from the Legislature’s own budget.About $200 million of the deficit would be left until next week, when the Legislature returns from the holiday weekend.The threat of a Saturday session in the Capitol weighed heavily in both chambers, where members milled around for hours as their leaders met privately to work out details.Al Short, a veteran lobbyist for the Michigan Education Association, the state’s largest teachers union, said: “We’re very much appreciative of the agreement to provide full funding for 2007…since we’re down to less than 40 days” left before schools must close their financial books.But Short said he and others interested in school funding are leery about 2008 because the decision to close out the books for this year without a tax increase will make it more difficult for schools to fully fund education next year.