LANSING -- A deal to close the gaping hole in this year's state budget collapsed Tuesday over the same issue that has stalled agreement for months: Gov. Jennifer Granholm wants a tax hike to be part of the solution and Senate Majority Leader Mike Bishop won't make that pledge.
A House-Senate conference committee considered a bill to help balance this year's budget with cuts but stopped short of taking a vote late Tuesday because it was evident Democrats would oppose the measure.
A source familiar with the negotiations said Granholm asked Bishop to agree to a $1.8 billion tax increase for the budget year that starts Oct. 1 or she wouldn't sign off on a cuts-only solution to this year's budget. Bishop said no thanks, according to the source.
"We continue to push for a reasonable solution to our budget crisis that includes cuts, government reform, and revenue. We cannot cut our way out of this crisis, and we must make Michigan competitive, we must invest in the things that make Michigan great," Granholm and House Speaker Andy Dillon, D-Redford, said in a prepared statement.
Granholm and Dillon said they have compromised on cuts and budget reforms, but said Bishop, R-Rochester has been "unwilling to finalize an agreement on revenue." Democrats control the House, and Republicans control the Senate. Asked whether the governor attempted to extract a promise from him to agree to a tax increase next year in exchange for a deal on cuts for the current year, Bishop said: "That was part of an internal discussion."
But Bishop said after the conference committee meeting: "I simply refuse to be held hostage to a threat from the governor who has said she can't allow her members to sign this report because she can't get a tax increase."
He called on Granholm to lead and accused the governor and Democrats of "a complete reneging on our agreement at some point in time somebody's going to have to show some real leadership. I call on the governor to provide that leadership."
House Appropriations Chairman George Cushingberry, D-Detroit, who was a member of the conference committee, said: "For him to imply that we agreed to these cuts is not true. We told him repeatedly we wouldn't agree without a complete solution that includes taxes."
Bishop has said he'll consider tax increases to help balance next year's budget but he first wants to implement reforms to streamline government. Granholm administration officials say the state deficit is slightly more than $700 million and the shortfall in next year's budget is closer to $2 billion. She and Dillon said Bishop's cut plan doesn't wipe out the deficit.
Legislative leaders acknowledged that there will likely be another budget hole of as much as $240 million to fill after Friday, when state fiscal analysts huddle to determine how much revenue the state has to pay its bills for the rest of the budget year, which ends Sept. 30.