Governor Granholm Says Comprehensive Budget Solution Resolves State's Fiscal Crisis

Contact: Liz Boyd 517-335-6397

October 1, 2007

Ends Government Shutdown, Prevents Massive Cuts to Health Care, Education, Safety

LANSING - Governor Jennifer M. Granholm today said action taken by state lawmakers on a comprehensive solution to the state's budget crisis ends a partial shutdown of state government that went into effect today and prevents massive cuts to public education, health care, and public safety.  The governor is expected to sign the package of revenues and reforms, along with a 30-day continuation budget to allow the Legislature sufficient time to pass individual budgets for fiscal year 2008.

"This budget agreement is the right solution for Michigan," said Granholm. "We prevented massive cuts to public education, health care, and public safety while also making extensive government reforms and passing new revenue.  With the state back on solid financial footing, we can turn our focus to the critical task of jumpstarting our economy and creating new jobs."

The governor acknowledged lawmakers who cast the votes necessary to secure Michigan's future.

"This was a historic vote to put Michigan's fiscal house in order, made possible by those lawmakers who exercised the courage of their convictions," Granholm said.

Granholm inherited a significant budget deficit and has had to deal with an economy that has been challenged like no other by Bush Administration trade and outsourcing policies that have shipped tens of thousands of manufacturing jobs overseas.  In addition, Michigan's fiscal policies in the 1990s turned a billion dollar surplus into a large deficit.  As a result, Granholm has had to resolve more than $4 billion in deficits with more than $3 billion in cuts.

Nearly eight months ago, Granholm presented a comprehensive solution to the state's budget crisis.  At that time, she called for a combination of budget cuts, government reforms, and new revenues that would protect critical services while allowing the state to invest in the things that make us competitive.  The legislative budget agreement includes:

Budget Cuts

Legislators are expected to enact nearly $440 million in budget cuts, including changes to state prisons' food services, a 1.1 percent rate cut for Medicaid providers, a reduction in day care hours, citizenship requirements for new Medicaid patients, shifting foster children's health care to an HMO, and elimination of funding increases for the state's community colleges and universities.

Government Reforms

Legislators have agreed to a series of government reforms, including significant changes to the teacher health care system, a graded premium requirement for public school employees, and an end to public employee double-dipping.  The Legislature has also created a Government Efficiency Committee to identify additional reforms.

New Revenues

Legislators voted to increase the state's personal income tax rate to 4.35 percent and to expand the state's sales tax to a number of high-end discretionary services, including interior design, landscaping, and personal care services such as massages and manicures.  The combination of taxes is expected to cost the average person approximately $1 per week, less than the cost of a cup of coffee and a donut.

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