Gov. Jennifer Granholm called off a partial shutdown of Michigan's state government early Monday after lawmakers reached a budget deal aimed at plugging a $1.75 billion deficit.

Senate approval of a measure to expand the state's sales tax to services was the final obstacle to ending the shutdown, which lasted a little more than four hours.

Granholm was expected to sign a 30-day extension of Michigan's budget, which expired at midnight. The continuation budget will keep government running.

"This budget agreement is the right solution for Michigan," Granholm said in a statement. "We prevented massive cuts to public education, health care and public safety while also making extensive government reforms and passing new revenue. With the state back on solid financial footing, we can turn our focus to the critical task of jump-starting our economy and creating new jobs."

The Legislature also agreed to raise Michigan's income tax rate from 3.9 percent to 4.35 percent. Structural changes to state government — including the management of teacher and other public employee benefits — also are part of the deal.