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Michigan Lawmakers Reach Deal to Dodge Tax Bullet

Sat October 06, 2007 - Midwest Edition
David Eggert and Tim Martin - ASSOCIATED PRESS

LANSING, Mich. (AP) Lawmakers worked through the night to avoid a partial government shutdown and appeared to be close to a deal Sept. 30 that would increase taxes aimed at plugging a $1.75 billion budget deficit.

The Legislature needs a spending plan finished in time for the fiscal year to start on Oct. 1 or most government operations will cease, including food safety and gas pump inspections, liquor deliveries, lottery ticket sales, the issuance of driver’s licenses, and road construction.

But the three Detroit casinos, which reportedly contribute $1 million a day to state public schools and Detroit public safety, can stay open even if the state can’t oversee them during a shutdown.

Democratic Gov. Jennifer Granholm has told about 35,000 of the state’s more than 53,000 workers not to report to work on Oct. 1 if a shutdown occurs. The remaining workers, mostly related to public health and safety, would stay on the job.

Republicans have pushed Granholm to accept a temporary budget that would extend the one currently in place, giving legislators more time to craft a long-term deal.

Granholm has said she won’t sign a temporary budget unless she has assurances higher taxes to pay for education, public health and other programs are part of the deal.

Some cost-cutting moves and government restructuring proposals had started to advance through the Legislature during the overnight session.

A conference committee passed a bill that would extend the state’s 6 percent sales tax to a wide range of services, including ski tickets, administrative services, consultants and janitorial services. Even if the measure passes the full Legislature, it still leaves a hole of more than $1 billion.

A proposal approved 21-17 by the Republican-led Senate would aim to save money by changing how health insurance benefits for teachers and government workers are managed.

The measure, now headed to the Democrat-led House, is key to the overall budget deal because it could be a trade-off to get Republicans to vote for tax increases.

The House passed bills to create incentives for Medicaid recipients to lead healthy lifestyles, among other reforms, which now are headed to the Senate.

“Today the Michigan Senate voted to expand the state’s 6 percent sales tax to various services previously not taxed, in an attempt to erase the state’s deficit and balance the budget,” said Kevin N. Koehler, president of Construction Association of Michigan.

“This historic agreement stopped an impending massive interruption of state services. Core construction is not included among those services that will be affected, however some segments of our industry will be.”

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