LANSING – While she said the Legislature should have remained in session to continue working on the final resolution of the 2010-11 budget, Gov. Jennifer Granholm told reporters Wednesday completion of the budget may rest on federal action on the Federal Medicaid Assistance Percentages issues.

She also raised doubts that the Legislature would ever act on her proposal to reduce the sales tax rate and extend it to services.

Granholm said legislative leaders seem to want to see if Congress will act to approve an extension of both the FMAP funds and unemployment benefits before moving ahead with final action on next fiscal year’s budget.

If the FMAP extension is rejected, it could mean the state would lose another $560 million in federal money. That would mean, she said to reporters, “a whole another level of pain” to the state’s budget.

Even so, Granholm was critical of lawmakers breaking for some three weeks when they took final action on the 2010-11 K-12 school aid budget a week ago.

When she delivered her State of the State address in February, Granholm said lawmakers applauded her when she called for the 2010-11 budget to be completed by July 1 so schools, universities and local governments would know what to expect by way of state funds when their fiscal years started that day (the state fiscal year doesn’t start until October 1).

While the schools budget has been done, the Legislature should complete the job on the rest of the budget, Granholm said.

Asked if the fact the Legislature is not scheduled to return until July 21 indicated it was more interested in campaigning than in completing the budget, Granholm said she could “understand why people might think that.”

She acknowledged the political realities that existed, but said lawmakers should complete the task before them.

Asked if she saw any chance of the Legislature approving or even acting on her proposal to cut the sales tax to 5.5 percent and extend the tax to most services, Granholm said she saw no chance of that happening before the lame-duck session in November and December.

Whether lawmakers would even attempt it then, Granholm effectively shrugged her shoulders.

Acting on the proposal “requires some political courage,” and she said she doesn’t see that coming.

But Granholm has been in contact with legislative leaders on negotiating agreements on the budget, she said.

Asked if those talks were resulting in any progress, Granholm said the leaders had a desire to see if Congress would pass the extension of the FMAP funding.

Michigan and most states are depending on that funding being passed to help shore up their budgets. Granholm has joined with many of her fellow governors in pressuring Congress to approve the extension, even appearing on national news shows calling for the extension’s approval.

The FMAP extension, along with the funds for extended unemployment benefits, has been held up in Congress in an effort to force attention on deficit spending.

But Granholm said there were some positive developments, at least in terms of the unemployment extension, moving through Congress when it returns next week from its break.

If FMAP is not approved, however, the budget will have be cut by at least another $560 million on top of a projected deficit of some $1 billion.

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