Michigan’s fiscal crisis shuts down government temporarily

By Karyn Chenoweth Oct 1, 2007, 12:05 GMT

lots of this in Michigan./Brian Snyder

Michigan’s government resumed operations this morning, four hours after an economically damaging shutdown began.

The legislators worked into the early-morning hours in hopes of preventing a full shutdown. Of the state’s 53,000 employees, 35,000 were temporarily laid off, including most of the state police troopers.

State employees were ordered back to work after lawmakers approved two tax increases and gave themselves an extra month to fix a $1.75 billion budget deficit.

The Michigan shutdown became apparent Sunday. Campers were ordered to leave state parks, freeway rest areas were barricaded, and several drawbridges were left up. Traffic monitoring cameras went dark at midnight.

Branch offices for the secretary of state, Michigan’s equivalent of the department of motor vehicles, posted signs over the weekend saying they were closed. Many offices were filled last week with residents whose driver’s licenses or license plates were to expire soon.

Prisons were to remain staffed, as were other departments viewed critical to residents’ health and safety.

The Michigan House and Senate worked late into the night on bills in the hours before a  midnight deadline, including a state income tax increase, and an expansion of the state’s sales tax with an emergency extension budget that would give lawmakers an extra month to eliminate the deficit.

Jennifer M. Granholm, Michigan’s Democratic governor, told the employees to report to work today after the Republican-led Senate approved the tax increases by separate 20-19 votes.

“This budget agreement is the right solution for Michigan,” Governor Granholm said in a statement. “We prevented massive cuts to public education, health care and public safety while also making extensive government reforms and passing new revenue. With the state back on solid financial footing, we can turn our focus to the critical task of jumpstarting our economy and creating new jobs.”

Governor Granholm had promised not to sign any budget extension unless the lawmakers passed measures increasing the state income tax and expanding the sales tax. The state constitution prohibits spending money unless a balanced budget is in place by Oct. 1, the start of its fiscal year.

The Republican-led Senate approved a bill that is expected to raise $760 million a year by increasing the income tax rate to 4.35 percent, up from 3.9 percent.

The House also approved changes to teachers’ health insurance.

The New York Times reports that Michigan’s unemployment rate is the nation’s highest, at 7.4 percent, compared to the national average of 4.6 percent.

Foreclosures have occurred in the Detroit area at nearly five times the national pace.