U.S. News

Michigan governor threatens shutdown amid budget talks

DETROIT (Reuters) - Michigan Governor Jennifer Granholm ordered government offices to shut on Monday if the state’s divided legislature cannot come to terms on a budget that would include higher taxes.

Michigan Governor Jennifer Granholm speaks at a funeral for civil rights activist Rosa Parks in Detroit, Michigan, November 2, 2005. REUTERS/John Gress

Granholm, a Democrat, said she was “hopeful” a compromise could be reached between state Republicans who control the Senate and the Democratic-controlled House that would avoid a costly state government shutdown.

“Productive negotiations are now underway that could head off this government shutdown while there is still time. We have made significant progress in the last 48 hours,” Granholm said Thursday evening in a televised speech from her office.

The government shutdown would deal another blow to a state economy already hurt by deep job losses in the auto sector and a slumping property market.

It would also come within a week of another economic disruption caused by a United Auto Workers union strike against General Motors Corp. that highlighted the uncertainty facing the state.

Granholm said she would not sign a budget that relied on spending cuts alone to close the estimated $1.75 billion budget deficit facing the economically distressed state.

In response, Senate Republicans urged Granholm and the Democratic House to pass a 30-day continuation budget that would allow time for the negotiations to continue into the new fiscal year that begins on Monday.

Granholm indicated she opposed any temporary spending measure that would take the pressure off lawmakers and wanted a full $41 billion budget for the state.

“All a continuation budget does is to continue to spend money we don’t have,” she said.

Granholm’s threatened action could shutter government offices, idle road construction and close Detroit’s downtown casinos. Prisons and state police patrols would remain in operation.

A full list of state offices and projects that would be shut will be announced on Friday, Granholm said.

Michigan’s Republican-controlled Senate has already passed a 30-day continuation budget. Senate Majority Leader Mike Bishop urged the governor to sign off on that measure.

“Partial shutdown or full shutdown should not be considered,” he said in response to Granholm. “Take the threat of government shutdown off the table.”

Granholm and most Democrats have proposed a hike in the state’s income tax to 4.6 percent from the current 3.9 percent. Other proposals have floated the idea of a smaller increase to 4.3 percent.

Granholm and Bishop appeared to agree only in their assessment of the state’s reeling economy. Granholm said Michigan had been hit by an “economic tsunami.”

“It’s true we are looking at one of the most difficult times in our state’s history,” Bishop said.

Michigan’s unemployment rate was 7.4 percent in August, the highest in the nation. Home foreclosures in Detroit, the state’s largest city, are running at five times the national average.