Brief Michigan shutdown ends, interim budget OK'd

[October 01, 2009]  LANSING, Mich. (AP) -- One of the nation's most economically battered states is heading into more fiscal fights after surviving a short-lived government shutdown that ended with an interim budget and lingering uncertainty about more permanent spending cuts.

The interim budget avoided state worker layoffs and office closures. It also delayed some tough financial decisions in a state facing a $3 billion shortfall while struggling with the nation's highest unemployment rate, a shrinking auto industry, a high home foreclosure rate and an economy that soured long before the national recession.

With the stopgap signed by Democratic Gov. Jennifer Granholm, lawmakers have 30 days to put a permanent budget in place.

The interim budget was adopted less than two hours into Michigan's second partial government shutdown in three fiscal years -- implemented after lawmakers failed to agree on a permanent budget before midnight Wednesday. Michigan's 2007 shutdown lasted four hours.

"Regardless of whether we're technically open or closed for business, this is a black eye on our state," said Republican Rep. Kevin Elsenheimer of Kewadin.

The interim budget became necessary after a deal to fill the shortfall with federal recovery dollars and more than $1 billion in cuts fell through. Many lawmakers discovered they couldn't stomach deep cuts to schools and local services in the stricken state.

But critics quickly faulted lawmakers for leaving groups relying on state money up in the air.

"School districts have had their own budgets in place since June 1, and have waited all summer for a financial commitment from the Legislature," Michigan Education Association President Iris Salters said.

Pennsylvania is the only other state without a budget enacted. Leaders there reached a tentative deal nearly two weeks ago, but have been unable to put all the pieces in place. Only Michigan and Alabama have fiscal years that start Oct. 1, and Alabama has passed its budget.

Michigan has had a tough time finding money for everything from prisons to universities and in-school health clinics for adolescents. State revenues have grown just 1.3 percent annually during the past decade when federal funds are left out, according to the nonpartisan House Fiscal Agency.

The interim budget originally was Senate Republicans' idea. But as House Democrats on Wednesday tried to restore programs such as scholarships and library money, GOP lawmakers realized the measure would give Democrats more time to build support for possible tax increases.

"If they want to talk tax increases, they can go ahead and do it," Republican Senate Majority Mike Bishop of Rochester said after the shutdown ended. "But we passed a budget ... without a tax increase" in the GOP-controlled Senate.

Democratic House Speaker Andy Dillon of Wayne County's Redford Township apologized for taking so long to get a deal done.

"These are very difficult budgets and a lot of people made some very tough cuts today that the public recognizes we need to do," he said.

The budget so far does not include tax increases. But Dillon said House Democrats could soon begin to look at that or other revenue sources to replace some cuts. One proposal would be to lessen cuts to K-12 schools by using stimulus money lawmakers had hoped to save for the next budget year.

Granholm signaled in a statement that she, too, would be looking for ways to raise more money to restore college scholarships and some local government money.

"Our future demands a budget that helps diversify our economy and create jobs, a budget that keeps police and fire officers on the streets of our communities, a budget that helps our kids afford to go to college," she said.

[Associated Press; By KATHY BARKS HOFFMAN]

Associated Press writers David Eggert and Tim Martin contributed to this report.

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