Crisis in Lansing

The drama in Lansing came to a climax Monday morning as state-funded offices were officially required to close their doors. An emergency budget signed into action by Gov. Jennifer Granholm (D) last month officially expired at midnight. Oct. 1, as the House of Representatives and Senate were finalizing their new budget. The shut-down lasted until 4:18 a.m., meaning few of the services were realistically affected. The largest impact on the citizenship was the requirement of the State Police to operate at a reduced capacity.

A battle starting with Granholm’s controversial budget proposal, including the now-passed services tax back in February, the Battle of the Budget lasted far longer than any person could have predicted. For seven months, the senators and representatives in Lansing have battled, Republican vs. Democrat, over issues from broadening the state sales tax to adding the service tax, all in an effort to eliminate part of the $1.75 billion tax deficit the state is facing FY2008. The GOP called for cutting unnecessary state services and offices. The DNC called for raising taxes. In the end, the Republican-backed $600 million cuts couldn’t compete with the Democrat/Granholm supported $1.35 billion in “new revenue,” otherwise known as taxes. The bills passed early Monday morning amidst near-fist fights and Gov. Granholm storming through the House and Senate to strong-arm wary congressmen into votes.

The results break down into a few key pieces. First is House Bill 5198, or the expansion of the state’s 6 percent sales tax. In the new budget, to begin effect Dec. 1, the tax now covers 23 service categories, newly including services like landscapers, car services and janitorial work. The expansion of the sales tax will result in a projected $613 mil increase in revenue according to Saulius Anuzis on behalf of the Michigan GOP.

The other major tax passed came in HB 5194, which raises the state’s income tax 0.45 percent to 4.35. This increase will affect an increase of $121 to $434 per year owed to the state by the average household and making up another major part of the nearly $1.4 bil. expected next year.

Both bills passed with almost no Republican votes, zero for the first and two for the second, prompting many of the state’s citizens to question the long-term effects of the increases.

The most resounding question is this: How long can the state last if it keeps raising taxes and killing off jobs? An already enormous 7.4 percent unemployment rate, one that has risen 0.4 percent in the past year (http://www.milmi.org), a constant since 2003 and the highest since 1993, places a huge burden on the state’s expansive welfare and Medicare/Medicaid system. Add on top of that new broad-sweeping taxes, both on the businesses that need to employ low-income earners and on the earners themselves, and the state opened the potential for an even more damaging year ahead.

What is known is that the new budget will impact everyone in Michigan. Specifically in Houghton, students can look forward to another record tuition increase for 2008-2009 as the budget makes no additions to the higher-ed budget. This means an effective three to five percent funding cut when figured against inflation and requiring our fellow students to foot the deficit. Further impact can be seen in the state-backed loans. Already in 2007 the state had to cut the “credit-ready” loan, one which helped students build credit by not requiring a co-signer and requiring monthly interest payments. This program will in no way be back for the 08-09 year. Watch for further education funds to dry up as the state’s legislature has to scramble next summer for funds when businesses move away from the skyrocketing taxes.

The passing of this budget marks an end to a more-than-ridiculous seven month battle in the state congress. While saving the state from massive closures and further humiliation, the population will have to wait to see the true impact of these broad-sweeping tax increases over the next few years.