LANSING – The party lines were set Monday on the issue of a continuation Michigan budget for 2007-08, with the Senate passing two bills creating a one-month continuation budget and Gov. Jennifer Granholm saying she will veto such a budget unless a tax increase is passed as part of the proposal.

The state has been struggling for seven months to reach an agreement on the budget and allowing for a continuation budget simply “is kicking the can” down the road for a while longer, Granholm told reporters.

But her comments were more gracious than Senate Democrats, who trashed the attempts in SB 772 and SB 773 as giving up on any effort to reach a final agreement on the budget.

Both bills passed the Senate on 20-17 straight party line votes. Only Sen. Valde Garcia (R-Howell) was absent.

Senate Republicans said it was obvious that a continuation budget had to be passed to prevent the state from defaulting on its bond obligations. Even if an agreement were reached on Monday on the budget all provisions could not be in place in time for the October 1 start of the fiscal year.

Senate Majority Leader Mike Bishop (R-Rochester) said acting on the budget was the only responsible action.

“You can sit on your hands and do nothing and complain, which you have been very good at, or you can do something. This is not a partisan issue, this is about getting your job done,” he said.

But Granholm was insistent that without a tax increase the continuation budget was a dead issue.

Sen. Michael Switalski (D-Roseville) conceded that a continuation budget was likely needed, but he said only if the Legislature reached agreement on a revenue proposal. If there was such an agreement, the bills would pass unanimously, he said.

Under the bills, the state would operate for 30 days under continuation spending. SB 772 provides for gross revenues of $2.8 billion, of which $977.4 million are general fund. In effect, the bill allocations one-twelfth of the state’s current expenditures to the budget.

The bill also creates a special joint legislative committee to advise the state budget director during the month.

SB 773 allows for payments of one-eleventh of state’s school aid funds to public schools during the month.

Speaking to reporters after the Senate acted, Bishop said the chamber did what it had to do, and that he was tired of what Granholm said she would not do. It was time for her to say what she would do.

But in her press conference, Granholm called on all legislators to be willing to compromise, “to come to the middle” and agree to a solution that includes a tax increase. Simply cutting the state’s budget will hurt its chances to build and invest, she said.

Asked if there was anyway the state could avoid default without some kind of budget structure in place, Granholm said, “We’re not there yet” referring to the potential of default.

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