Thursday, May 29, 2008

More debt in Michigan. Look out for more taxes.

Some bad news that is not shocker with the Matt Millen of governors running the show here.

From the Grand Rapids Press

The report illustrates that Michigan can't march blithely into the future thinking its budget problems have been solved. Even when the state's economy turns around, Michigan's government will continue to operate at increasing deficits -- what the report calls a "structural deficit" because it's built into the very structure of government and isn't caused by cyclical economic woes. Among the study's key findings:

If current spending and tax policies continue, Michigan will face a cumulative deficit of nearly $10 billion by 2017 -- $6 billion from the general fund and $3.6 billion from funding for K-12 education.

Michigan's roads would see a $417 million deficit by 2017. This is true despite a state transportation plan that includes $8.7 billion in new construction and highway repair needs.

Prisons and health care are major causes of the budget gap in the general fund. Both categories of spending will grow at five times the rate of money coming into state coffers, the report estimates.

The report recommends several solutions, all worthy of consideration. Shifting some of the state's tax burdens to the growing service sector would allow Michigan's revenues to follow its economy. Michigan ranks low among states in the number of services taxed. Any service tax would have to be fair, unlike the capricious levy briefly enacted, then quickly revoked, last year. Another alternative is to create a graduated income tax here, as we have on the federal level, where rates rise with income.

However, toying with the state's tax structure and rates should come only after lawmakers have reined in insupportable spending. One simple solution: State employees and teachers must share more of their health costs. Another big opportunity for reform is in prison spending. Michigan incarcerates 47 percent more prisoners on average than the seven surrounding Great Lakes states, largely because of longer sentences. Lawmakers need to take a long-overdue look at sentencing and parole procedures, as well as alternatives to imprisonment for non-violent offenders.

None of this is easy work, especially in a political year. But lawmakers who claim to care about the future of our state -- and that should be all of them -- won't neglect it.

Now this report is from a group with a strong establishment board of trustees, the Citizens Research Council. One of the names on there is Phil Power, whom I almost always disagree with. Power had his own editorial today in the Argus which he once owned.

From the Argus

The nonpartisan and highly respected Citizens Research Council of Michigan (CRC) is predicting — once again — long-term, big-time state budget trouble. Even though the legislature thrashed and fought most of last year, barely avoiding a state shutdown before finally enacting a new tax package and balancing the budget ... it turns out that was only a temporary plug for the collapsing dam.

In fact, little last year has done anything to relieve the "chronic structural budget deficit." That means the cost increases of state programs will continue to outrun revenues.

Rapidly rising health-care costs and our prison system (estimated at 7.3 percent per year) will swamp state finances. The CRC experts estimate budget gaps starting next year which would balloon to a $6 billion hole in the General Fund by 2017 if nothing is done.

All of which makes it disgraceful that last year's report of the governor's Emergency Financial Advisory Panel was so roundly ignored. The panel, headed by former governors Jim Blanchard and Bill Milliken and consisting of some of Michigan's most distinguished leaders, came up with a remarkably tough-minded, far-reaching set of structural reforms designed to cut costs and assure adequate revenues to sustain necessary state programs.

Some examples:

Cutting corrections expenses, which now at $2.2 billion a year is more than the state spends on our colleges and universities.

Reducing fringe benefits for state employees, which now exceed by a mile those paid to workers in the private sector.

Working out better ways for school districts and local government units to collaborate by sharing services and cutting costs.

The devastating new CRC projections should come as no surprise to those familiar with the emergency panel's brief report, which ought to have been mailed to every family in the state.

Now any report with Single Business Tax creator Bill Millken and Jim "I raised taxes 38%" Blanchard has my guard up immediately. They recommended more tax increases, especially the "services tax" in their infamous report. It's what I expect from a couple of political hacks.

Regardless of any committee talk, it is no secret that there is going to be a major deficit. I would not be surprised if there are more taxes this year, especially in the "lame duck" session as a "parting gift" like Rick Johnson gave us in 2004 from some termed out legislators. I'm quite concerned about a gas tax increase, as well as the return of the services tax. Those two are being pushed hard by the elite.

While the presidential race will get most of the hype, we need to watch Lansing like a hawk.


Bachbone said...

Time to draft a few more recall petetions, I guess.

Communications guru said...

Yea, you had so much success last time. Good luck.

Unknown said...

When corporations run into financial trouble they close facilities, lay off employees, cut benefits, etc . . . When the state runs into financial trouble it raises taxes.

Michigan needs to get with the times. Everyone else is tightening their belt to survive and the state should too.