LANSING ? Gov. Jennifer Granholm, in part two of her year-end interview, said she declined to critize the Michigan Business Tax ? unlike House Speaker Andy Dillon (D-Redford Twp.) and Sen. Majority Leader Mike Bishop (R-Rochester) – reserving her criticism instead for the MBT surcharge.

“I think that the idea of making it more profit-sensitive, making the Single Business Tax essentially much more profit-sensitive, was a good idea,” she said, yet at the same time, keeping a value-added component for revenue stability.

Granholm also denied that Michigan’s economic struggles stem from the old SBT or the current MBT. Snyder has pinned the state’s problems on its business taxation. She pointed to a Senate Fiscal Agency report showing Michigan’s tax burden is down more than any other state in the nation.

“What is it that is causing our economy to go through this structural change?” she asked. “It is not the Michigan Business Tax. It is not the Single Business Tax. It is the fact that we have so many traditional manufacturing jobs that have now moved offshore.”

DEFENDING HER ROLE IN THE BUDGET WARS: Granholm said the partial-government shutdowns in 2007 and 2009 were “not inevitable from my point of view,” but she said it was clear then Senate Republicans wanted the shutdown and noted Bishop’s comments to Gongwer last week when he essentially said the shutdown was inevitable.

“I’ll let his words speak for himself, but that’s the same information that I received, they felt they had to shut the government down in order to demonstrate their objections to any revenues,” she said.

The shutdowns happened not because of a broken process, but because there simply was a philosophical difference between the governor and the Senate, Granholm said.

Snyder has called the target-setting process – where the governor, Senate majority leader and House speaker agree on the final spending numbers for each department and major budget area – a broken model. But Granholm said the problem has not been a lack of input from others.

“I think a lot of stakeholders and external parties were involved in those efforts,” she said. “Everybody who was either protesting or dialing or part of task forces to recommend changes or testifying at hearings. There was a huge amount of input, but ultimately there was a difference of opinion.”

In Granholm’s second term, she made bigger, bolder proposals to address the budget, like the early retirement legislation on teachers and state employees and attempts to apply the sales tax on services.

But in her first term, Granholm advocated a number of one-time measures and short-term fixes on the budget, like raising the cigarette tax. Perhaps most memorably, there was the move in the 2003-04 term to shift the collection of county property taxes from winter to summer as a way to eliminate general fund payment of revenue sharing to counties for about five years, yet still give the counties their money through the pool of revenue generated by the early collection.

At the time, the thinking was that by 2009 and 2010, when counties would again receive revenue sharing from the general fund, state revenues surely would have recovered to afford the payments. Instead, the situation was worse.

Granholm was asked if, knowing what she knows now about the long-term economic struggles for the state, she should have pursued more structure-oriented changes earlier in her tenure.

“It’s just difficult to respond in hindsight. We were doing the best we could with the information we had that the economists were giving us at the time. A lot of the temporary measures were done to prevent people from being cut off of health care, to prevent the safety net from being torn apart,” she said, also noting efforts to keep education funding strong. “We’ve tried to keep these priorities despite the cataclysmic economic and revenue situation that’s unfolded during the decade.”

Granholm was asked if she ever regretted not going for a larger tax increase in 2007, since that was really the last chance she had at passing more revenue for state programs.

But she said she didn’t think she would have gotten one anyway had she proposed more than what she did back then, including her 2-penny plan, which extended the sales tax to services. She also said no one working on the budget at that time anticipated the state’s largest employers, General Motors and Chrysler, would go bankrupt.

Granholm expressed some frustration that various tax credit “loopholes” were not closed by lawmakers to fund critical programs, particularly the Michigan Promise Scholarship, but that, “every loophole has a lobbyist and legislators are going to be very sensitive to the voices of the lobbyists, so it’s going to be a challenge.”

She said what the Business Leaders for Michigan has proposed, as well as the tax loophole issue, should be addressed by the new administration and Legislature.

STRUGGLES WITH THE DETROIT SCHOOLS: Granholm’s position on how the Detroit Public Schools should be governed has evolved over the course of her term. In 2003, Granholm said she supported Detroiters having the chance to restore their right to vote for an elected school board. At the time, the district was run through the state-initiated takeover by a board mostly appointed by the Detroit mayor.

And in 2004, Granholm dismissed talk of appointing an emergency financial manager for the district, saying, “We do not want a takeover of the takeover.”

But as her tenure continued, the financial woes of the district mounted, massive corruption in the district came to light and educational performance remained unsatisfactory. In January 2009, the district, after a protracted period, had not produced a deficit elimination plan satisfying the state, so Robert Bobb was appointed emergency financial manager. Subsequently, Granholm began pushing for putting the city’s mayor in charge of the schools once Bobb’s tenure ended.

But instead of having the Legislature pass a bill that she could sign making the change, Granholm wanted to see city voters approve an advisory ballot initiative approving the change. School governance has long been politically dicey in Detroit.

However, the proposal never made the ballot because the city council blocked it. Now, Granholm said clarifying the emergency financial manager law to give Bobb clear oversight on academics – he lost a round in court on that question – might be the answer.

“The question is what is the best way to achieve the results you want. Is it mayoral control? That’s one avenue potentially,” she said. “Or is it making sure whatever the emergency financial manager is, that their portfolio of duties is clear, including academic control? It might be easier or less controversial if they just reform the … statute.”

Granholm said that did not represent a change in her thinking.

“I have been pushing for mayoral control because that was one avenue, and I thought that the local community could take the situation into their own hands rather than having to have the Legislature make a decision, but obviously the community decided through the city council that they didn’t want to do that, so I think the next step has to be clarification here,” she said.

One of the low-points for the administration was the collapse of a proposal in 2003 to allow 15 new charter high schools in Detroit, funded with $200 million from philanthropist Bob Thompson, after then-Detroit Mayor Kwame Kilpatrick backed out of the deal in the face of union and activist opposition. When asked about that situation, Granholm made a face, as if disgusted by the memory of what happened, but then noted that Thompson still was able to build several new charter schools in the city.

“I strongly believe that quality charters have got to be part of the mix and raising the charter cap or at least having what happened in