LANSING – A surprising move on a cigarette tax increase compromise that led to passage in the Senate was praised by Gov. Jennifer Granholm as a step in the right direction. A provision that would have earmarked $35 million for the Life Sciences Corridor, however, was defeated.

The Senate’s move to pass the new version of HB 5632 with the minimum needed votes (20-15) truly caught all sides off-guard, with the administration quickly sending Granholm chief of staff Rick Wiener and Budget Director Mary Lannoye to meet with Senate Democrats over the amendment from Sen. Michael Switalski (D-Roseville) that was approved.

Under the amendment, 100 percent of the revenue from the tax on cigarettes, which would be raised by 75 cents a pack to $2, would be allocated to the Medicaid Benefits Trust Fund for the remainder of the current fiscal year and for the 2004-05 fiscal year.

Beginning with the 2005-06 fiscal year, 75 percent of the tax revenues would be allocated to Medicaid with 25 percent allocated to the state’s general fund. Republicans had hoped to require $35 million of the funding to go to Life Sciences Corridor funding, but that provision was not included.

Unlike the House version of the bill, the Senate version includes tax increases on other tobacco products, such as cigars and pipe tobacco, and does not allow retailers to capture the first few weeks of the inventory tax. Senate Majority Leader Ken Sikkema (R-Wyoming) said he could be willing to accept the inventory provision if the House insisted it be part of the mix.

The House version also allocated the bulk of the 2003-04 revenues to the general fund, and beginning with the 2004-05 fiscal year revenues would be largely split between the School Aid Fund and the Medicaid Trust Fund, with some revenues also going to the general fund, the Healthy Michigan Fund and some to Wayne County for indigent health care.

The House took no action Tuesday, but is likely to vote on the bill on Wednesday though what action it will take has not yet been decided.

Sikkema told reporters after the Senate acted that he applauded Switalski. “I think this is a fair way to go,” he said.

In a press conference, Granholm said she still needed to study details, but that right now the measure looked good.

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