LANSING - Gov. Jennifer Granholm told Michigan Building and Construction Trades Council delegates that Michigan's job and budgetary woes are rooted in a state that has 630 percent more manufacturing jobs than any other.

And those manufacturing jobs are leaving Michigan in record numbers, pushed out by global competition and lower wages abroad, which is in turn causing a ripple effect in job losses in the service economy and other areas.

"We have to have the courage to invest in our state, in building the next Michigan," Granholm said in comments directed at the building trades. "We can't make an investment in roads, bridges and universities in our state without new revenue."

By "investment," Granholm meant raise taxes. It isn't a popular idea with anyone, which the governor acknowledged. But she said the proposal she has on the table, a 2 percent tax increase on various services, was found to be the lesser of other evils with Michigan voters by internal polling.

That service tax increase idea doesn't appear to be going anywhere in the Republican-led Michigan Senate, or even the Democratic-led Michigan House. But whether its greater "investment," or unprecedented cuts in state services, the state's lawmakers will have to come up with a plan in a manner of weeks, since the state's Constitution requires a balanced budget.

Granholm's told building trades delegates:

• The state government is already working with 30 percent less revenue than when Gov. Engler left office in 2002. She said the tax cuts initiated by Engler and the Republican-dominated legislature "were supposed to lead to more investment in our state. In reality these tax cuts have led to less and less investment in our state. "The state's workforce has been cut so that it's at the same size as it was in 1974, and we've leveraged technology as much as possible to make up for it," Granholm said. "But when state government gets leaner every year we're cutting our ability to be competitive." She said if there is an advantage to lower taxes in making the state more attractive to investors, it would be offset by poor roads and under-funded public education.
• She echoed what other speakers said at the conference - the only significant places left to cut the state budget are in prisons, public education and public health care funding. "We don't want to release prisoners who may be a danger, but we have one of the highest incarceration rates in the nation," Granholm said, indicating that's a place to explore state cuts. In addition, cuts in K-12 and university funding would push cost burdens on to local school districts and individual students. And, cutting public health care affects the people least able to afford health care, and would push them toward costly emergency room visits, anyway.
• The governor's service tax plan would put a 2 cent tax on everything from haircuts to movie tickets, costing the average resident $1.33 a month. "No other plan has caught fire, and we have to do something," Granholm said. "The tax on services was tested as having the lowest impact on citizens." The governor said as Michigan climbs out of its economic hole, our state needs to look at opportunities to diversify. One of the major areas she suggested was build on the state's burgeoning alternative energy industry - ethanol plants are growing like corn in the state, and Michigan has two plants that are solar panel employers. "We need to re-brand as a post-industrial state with opportunities in alternative energy," she said.

GOV. JENNIFER GRANHOLM talks to Michigan Building and Construction Trades Council delegates. Seated (l-r) are council President Patrick "Shorty" Gleason, CEO Patrick Devlin, and State Rep. Doug Bennett.