Michigan slides toward partial government shutdown

Michigan slides toward partial government shutdown

Battered Michigan slides toward partial gov't shutdown after lawmakers fail to agree on budget

On Thursday October 1, 2009, 12:27 am EDT

LANSING, Mich. (AP) -- Michigan's state government stumbled toward a partial shutdown Thursday as one of the nation's most economically battered states remained without a budget.

State lawmakers failed Wednesday to agree on deep spending cuts proposed to balance the budget by a midnight deadline.

They also failed to finalize a temporary budget that could have averted Michigan's second shutdown since 2007.

Secretary of State offices could close and state parks could begin asking visitors to leave if the impasse isn't resolved before state workers are to report for work Thursday.

Essential services such as state police and prisons will continue running.

Lawmakers could not agree to steep cuts in tax payments to local governments and shallower cuts to K-12 education.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

LANSING, Mich. (AP) -- One of the nation's most economically battered states remained one of the last without a budget in place as Michigan lawmakers worked to avoid a government shutdown ahead of a midnight Wednesday deadline for pulling together a plan.

A deal to fill a nearly $3 billion shortfall with federal recovery dollars and more than $1 billion in cuts fell through, as many lawmakers discovered they couldn't stomach deep cuts to schools and local services such as police and fire protection in the stricken state.

Michigan already is struggling with the nation's highest unemployment rate, a shrinking auto industry, a high rate of home foreclosures and an economy that soured long before the national recession hit. The number of people receiving food stamps and unemployment checks keeps going up, and it's the only state where the Census Bureau found poverty rates rose two years in a row.

Pennsylvania is the only other state without a budget deal enacted. Leaders there reached a tentative deal nearly two weeks ago, but have been unable to get the votes 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 is having a tough time finding money for everything from prisons to universities and in-school health clinics for adolescents. It's not a new trend. 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.

University funding has dropped 22 percent during the past seven years when adjusted for inflation, forcing up tuition rates. Yet the higher education compromise lawmakers passed Wednesday eliminated the popular Promise Grant scholarship, which gave college students up to $4,000, and cut other student financial aid to the bone.

The lack of a budget deal left 51,000 state workers unsure as they headed to bed Wednesday night whether they'd have to show up for work Thursday. The administration had issued temporary layoff notices earlier in the day and told state contractors they might not get paid.

Democratic Gov. Jennifer Granholm was angling to get an interim budget sent to her by the midnight deadline. She didn't like the cuts it contained, but it would mean 30 more days for lawmakers to put a more palatable deal in place and she probably wouldn't have to cut much spending during that period.

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 feared Democrats only wanted the stopgap to win more time for tax increases.

"The continuation budget was there as a safety valve in case we didn't finish," said Republican Senate Majority Leader Mike Bishop of Rochester. Having one in place would only give Granholm "30 more days to pressure the Legislature to adopt something she wants."

Granholm spokeswoman Liz Boyd disagreed, saying Bishop and Democratic House Speaker Andy Dillon of Wayne County's Redford Township failed to get the votes to pass a budget deal that included deep cuts and no new revenue.

"They're unable to get approval on budgets based on agreements they agreed to -- not us," Boyd said. "The prudent thing to do, the responsible thing to do, would be to put that continuation budget on the governor's desk so that we can operate government."

As legislative leaders attempted to find common ground, school and local government leaders grew increasingly nervous contemplating just how much in cuts they'd have to absorb.

Revenue for cities, villages and townships has dropped by nearly a quarter in the past eight years, and mayors statewide said absorbing a proposed 11 percent cut in the new budget would force them to lay off police, close parks and shut off some city services.

Michigan is even in danger of losing millions of federal dollars for Medicaid and similar programs if it can't come up with its share of matching funds.

House Appropriations Chairman George Cushingberry warned lawmakers they had to make a choice between hurting education, health care services and public safety or finding more money.

"You can't have it both ways," the Detroit Democrat told House members.

But Republican Sen. John Pappageorge of the Detroit suburb of Troy criticized Democrats for talking about raising more revenue.

"What you're saying is we're going to take money from our citizens," he said. "Guess what? They don't care for that."

Associated Press Writer David Eggert contributed to this report.