Warning that Michigan could end up with the poorest credit rating in the nation, Gov. William G. Milliken outlined plans to cut the state's $4.3 billion budget by $326 million unless the legislature temporarily raises the state income tax.
The bill to boost the tax from 4.6 percent to 5.6 percent for six months ending Sept. 30 was approved by a House-Senate conference committee in a 5-to-1 vote, sending the measure to the state Senate.
If the tax increase is not passed, Milliken said, Moody's Investors Service Inc. will lower the state's credit rating. He said that would jeopardize plans to borrow $500 million this fall to pay bills and meet aid obligations to school districts and local governments.
But legislative leaders expressed doubts the tax bill would pass. Milliken's aides said the budget-cutting order would mean the layoff of 1,300 state workers. It would cut $74.4 million from four-year colleges, $13 million from community colleges and $58.1 million from local government revenue sharing.
The rest of the cuts would come from state departments, including a one-third reduction in the second of two September benefit payments to people on welfare.