Utility tax part of House speaker's budget plan Tim Martin / Associated Press
LANSING -- House Speaker Andy Dillon's plan to help the state's budget crisis includes a tax on utilities, which could add roughly $500 million a year in revenue. Dillon, a Redford Democrat in his first year running the state House, discussed the budget situation with reporters Thursday at the state Capitol. His plan, which is still developing, will be added to the mix of other proposals already pitched by Democratic Gov. Jennifer Granholm and Republican lawmakers. Dillon said more details of the House plan would be available next week. He said a 2008 ballot proposal for a graduated income tax is among the possible budget solutions, although that may not address this year's or next year's problems. The state faces an overall deficit of $940 million this fiscal year and an even bigger hole in the budget year that starts in Oct. 1. At least part of this year's budget problem was addressed Thursday. The House Appropriations Committee approved an executive order put forth by Granholm to eliminate $344 million of this year's deficit through a mix of cuts and accounting changes. The Senate Appropriations Committee approved the plan last week. A key part of Dillon's plan would be a tax on utilities. While reports have suggested that could raise up to $1 billion a year, House Democrats said a more likely revenue scenario is half that much. In return for agreeing to the tax, Consumers Energy Co. and DTE Energy Inc. could see the state eliminate the energy-choice law passed in 2000 that opened the state's electricity markets to competition. Some consumer groups that favor choice likely would oppose ending deregulation. Dillon said he thought it would be possible to raise the utility tax without a complete passing on of the costs to consumers through higher tax rates or fees. "There are ways to subsidize that so it would not require a complete pass-through to consumers," Dillon said Thursday. Republicans are wary of the tax resulting in higher utility bills. "We need to see all the details, but we would feel this in the pocketbook, any way you cut it," said Matt Marsden, a spokesman for Republican Senate Majority Leader Mike Bishop of Rochester. Jeff Holyfield, a spokesman for Jackson-based Consumers, said the utility is willing to work with Dillon and other legislative leaders. But he said it was unclear how the Dillon plan would deal with rate increases as a result of the higher tax. "One of our priorities is to keep our rates competitive," Holyfield said. While some businesses have chosen alternative electric suppliers, options besides the big utilities have not been readily available in the residential market. Overall, the state had 27 licensed alternative electric suppliers at the end of 2006. Competition in the electrical market has declined the past two years, according to state regulators. Dillon presented his plan two days after Gov. Jennifer Granholm asked state department heads to tell her by next week what programs might be affected and what steps should be taken if the state runs out of money in May and has to shut down. The Democratic governor has suggested a plan to help resolve some of the shortfall in this year's budget through $344 million in cuts and accounting changes. The Senate has approved that plan, and the House Appropriations Committee is expected to follow suit Thursday. Granholm also wants to put a new 2 percent tax on services in place by June 1 to raise more money. The so-called "two-penny tax" has not received much of a positive response from House Democrats, who hold a majority in that chamber. Senate Republicans already have rejected the tax on services. They also have passed a plan that includes $600 million in cuts and accounting changes, including a $34 per pupil cut in funding for K-12 schools. The Senate plan, which spending decreases for local governments, community corrections, health care and other programs, is unacceptable to the governor and unlikely to get through the Democratic-controlled House.
