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With Michigan support set, Detroit an issue in governor race

DETROIT June 5 (Reuters) - For Michigan Republican Governor Rick Snyder, the biggest unknown in his reelection bid this year is his backing for Detroit's bankruptcy case.

Snyder as soon as this week is expected to sign legislation offering $195 million in state funds as part of a "grand bargain" to bring in philanthropic money, keep the Detroit Institute Arts collection intact, and ease pension cuts for city retirees.

"This is an opportunity to send a message that ... Detroit, Michigan is on the comeback path," Snyder said on Tuesday after bipartisan passage of the bill by the state legislature.

But there are uncertainties ahead. In a trial scheduled for July, Detroit emergency manager Kevyn Orr must prove his plan for Detroit's bankruptcy exit is realistic. Snyder appointed Orr and greenlighted the bankruptcy filing last July.

Orr has attracted criticism from liberals due to his tough handling of union pensions, while conservatives have criticized state financial support for Detroit, driven to bankruptcy by more than $18 billion in debt.

"A lot depends on the Detroit bankruptcy and a lot could still happen to trip Snyder up," said Bill Ballenger, editor of Inside Michigan Politics. "So far the bankruptcy has been a net positive for Snyder because he has taken the bull by the horns."

Former Democratic Congressman Mark Schauer, Snyder's opponent, is focusing more on other Snyder initiatives: a new right-to-work law, a cut in business taxes, and a new tax on retiree pensions.

Schauer claims Michigan's business tax cut is funded by a tax on retiree pensions, an argument that resonates with workers.

"Snyder ... has been stealing from us," said Ken Little, a steel worker from Detroit suburb Auburn Hills.

Polls have shown Snyder anywhere from 3 points ahead of Schauer - a statistical tie - to 12 points ahead. Analysts anticipate a tighter race than in 2010 when Snyder won by 20 points.

"I assume we're going to have to work hard to get reelected," Snyder told Reuters in late March.

Snyder, a former venture capital firm chief executive, says his right-to-work law and business tax cut both have created jobs.

Michigan's unemployment rate was 7.4 percent in April, down from 11 percent when he took office in early 2011. The state's economy lately has grown at close to the national rate, an improvement from near-double-digit declines at the start of the Great Recession, as General Motors and Chrysler slid into bankruptcy.

Snyder has a funding advantage. The most recent filings show his campaign had raised $6 million by the end of 2013, more than 10 times Schauer's haul.

Snyder may have a hard time getting conservative Republicans to the polls, due to the Detroit bailout, his support for some Obamacare provisions and his embrace of Common Core education standards.

Even so, notes Paul Abramson, a political science professor at Michigan State University, conservatives have "nowhere to go." With the economy healthy, Snyder should win.

"Snyder just needs to avoid making any serious mistakes," he said.

(Reporting By Nick Carey; editing by David Greising and David Gregorio)