CHICAGO -- The Michigan Legislature on Wednesday night passed the last of the bills for the state's $7.8 billion general fund budget for the fiscal year that begins today.

Gov. John Engler has signed all but a few of the budget bills into law as of yesterday, according to Maureen McNulty, a spokeswoman for the Michigan Department of Management and Budget. She said the governor will need a few days to review the final bills that were passed out of the Legislature this week.

McNulty said the budget passed by lawmakers "was close to" the spending plan that the governor had proposed in March. The all-funds budget for fiscal year 1994 is $22.6 billion.

McNulty said the Engler Administration, which faced a $1.8 billion budget deficit when it took office in 1991, has managed to keep spending at the same levels despite increases in inflation. She added that the remaining $726 million of that deficit was eliminated in fiscal 1993.

A general fund balance of anywhere from $10 million to zero is projected for the end of fiscal 1994. The budget also includes a plan to beef up the budget stabilization fund. Under the plan, money realized from the privatization of the state's workers compensation system and the sale of its assets would be placed in the fund. One state source said the asset sale could bring $100 million.

State revenues are projected to grow 4.7% during the fiscal year.

The fiscal 1994 budget includes an increase of $275 million in matching federal Medicaid funds that will come through a transfer agreement with the University of Michigan Hospitals.

The $3.56 billion budget for primary and secondary education is $33 million higher than last year's. However, the spending plan does not contain any provisions for replacing the $6 billion in property tax revenues the schools will lose in 1994 under a new state law, McNulty said.

The Legislature in July eliminated school property taxes for funding operating expenses as July 1, 1994, in an attempt to bring property tax reform to Michigan. Engler is scheduled to appear before the Legislature Tuesday afternoon to unveil his plan to finance schools.

John Truscott, Engler's spokemans,said the plan will include a two-cent increase in the state's sales tax to raise an estimated $1.8 billion.

Voters would be asked to approve the increase early next year, Truscott said. A number of other revenue sources are being considered, he said, and legislation is being drafted to introduce the governor's plan as soon as possible in the Legislature.

Engler has set a Dec. 31 deadline for having a school funding plan in place.

The elimination of the school property tax forced Engler to scrap a plan to move the state to a two-year budget cycle, an idea he proposed in March.

Michigan's outstanding general obligation debt is rated AA with a negative outlook by Standard & Poor's Corp., AA by Fitch Investors Service, and A1 by Moody's Investors Service.

Rating agency officials could not be reached for comment on the state's new budget.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.