Cut spending now, Granholm told

LANSING -- House Republican leaders are pressuring Gov. Jennifer Granholm to slash state spending another half-billion dollars immediately because revenue is falling short by $25 million a week.

"Every month we wait will only make the budget problem more difficult," Republican Leader Kevin Elsenheimer of Kewadin said in a memorandum to the governor on Monday.

But the governor said cuts should wait until businesses pay taxes that are due in April, despite a recent projection that revenues are running $200 million behind.

The proposed reduction, carried forward into the 2010 budget, would save nearly $1 billion over two fiscal years, Elsenheimer said.

GOP lawmakers want Granholm to accomplish the cuts with a 5 percent across-the-board reduction for all governmental departments, a 5 percent wage cut for Michigan's 52,000 state workers and a 5 percent increase in the amount state workers must contribute for health care coverage.

They also called for 5 percent cuts in lawmakers' office budgets, pay for nonteaching workers at the 15 public universities and pay for legislative employees.

And they say Granholm should halt scheduled 1 percent and 3 percent pay raises for state employees. Raises are to take effect next year and in 2011, according to Granholm press secretary Liz Boyd.

State employees get no raises this year and must pay more toward their health insurance, making their net income fall, Boyd said.

"We have to pay them what we can afford," said Rep. Chuck Moss of Birmingham, the ranking Republican on the Appropriations Committee.

Moss acknowledged that state workers have made sacrifices but said the state "can't afford to pay them what they're worth."

Republicans also said Granholm, as soon as possible, should convene a revenue estimating conference that would guide budget cuts, which might need to exceed 5 percent.

The next revenue estimating conference is to be in May.

The call for immediate action follows official reports that the state is $200 million behind revenue projections made only two months ago. Granholm recently called that drop "breathtaking."

She said it will result in more budget trimming, but she wants to see April revenues before doing the whacking.

Much hinges on collections from the Michigan Business Tax, which is in its first year.

A big chunk of the revenue from it is due next month.

Boyd said across-the-board budget cuts could jeopardize the billions Michigan is getting in federal stimulus money.

Strings are attached to most of it, forbidding states to scale back the programs it helps to fund.

"We're well aware of the fiscal situation," Boyd added, sharply directing worried House GOP members to "talk to their colleagues in the Senate."

Senate Republicans have passed six measures that would reduce state revenue by more than $2 billion "with no way to pay for that," Boyd said.

You can reach Gary Heinlein at (517) 371-3660 or gheinlein@detnews.com">gheinlein@detnews.com.