Granholm also proposed reducing higher education spending by $39 million with the elimination of the Tuition Grant program for private colleges and reforms to the Tuition Incentive Program.

Granholm’s budget proposal totals $47.1 billion and includes $7.9 billion for general fund spending. General fund spending includes higher education allocations.

The state has a projected deficit between $1.2 and $1.7 billion for the next fiscal year, which begins Oct. 1, 2010. As proposed, the governor’s budget eliminates $1.5 billion of the deficit.

The governor’s budget also restructures the tax system by lowering the sales from 6 percent to 5.5 percent, expanding the sales tax to services and eliminating the Michigan Business Tax surcharge in the next two years, creating a savings of about $2.6 billion for businesses in the next four years.