"We are facing a budget shortfall this current fiscal year in excess of $500 million and next year's is in excess of $3 billion. Bottom line: We have a lot of work to do...
"We did this in anticipation of the looming budget crisis and the need for us to roll up our sleeves and get to work immediately."
Speaker Dillon, Journal of the House, Jan. 10, 2007, pgs. 22-23
That was the word from Democrat House Speaker Andy Dillon five months before his chamber decided to take a five-day weekend on Mackinac Island, with the state’s future tax structure and a $2 billion budget whole for FY2008 sitting on the books.
As folks return to work in Lansing this Tuesday, rested and refreshed, no doubt, they still need to roll up their sleeves to get to work. So let’s start by examining exactly where we stand.
Only a small portion, somewhere around 25%, give or take, of the “savings” represents actual cuts to government spending. The balance was achieved through selling off tobacco settlement dollars and delaying payments to universities. Basically they cooked the books. The “fix” wasn’t a solution so much as a stop-gap. And what it took to achieve what they did… the GOP in the Senate has agreed to allow a vote on a tax increase in 2008, a sign many conservatives have taken as a sign of wobbly knees.
The good news? When you only have a couple months before the end of a fiscal year you’re not going to be able to make a lot of cuts, period. The money is almost all gone at that point. So the fact the Senate GOP was able to make any cuts at all is a good thing. Even better, while the governor ran around the state claiming she was going to be forced to kill people through Medicaid cuts (her words) and close our kids’ schools (her state superintendent’s words) through draconian school aid cuts if the GOP didn’t kneel at the alter of Baal-Granholm, dark-goddess of the tax increase, renounce their faith in fiscal restraint and embrace a $1.8 billion tax increase, they thumbed their noses at the dollar-bill-green idol and prevented a single pennies worth of said cuts with nary a sign of a tax increase.
What next? To paraphrase my favorite Tolkein hero, the battle of 07 is finished but the battle for Michigan is about to begin.
First on the docket is a replacement for the dreaded and finally dead Single Business Tax. The Senate has their BEST plan which small and medium sized businesses like and the House has their MBT which major manufacturers like the Big 3 think is pretty groovy. Word out of Lansing is that they’re down to one issue, one sticking point in negotiations. In other words, they’re close. The Senate GOP has even gone along to get along on this one and backed off their initial insistence that the replacement represent a $300 million net tax cut for Michigan businesses. Instead, pursuant to the wants and dreams and hopes of every tax-and-spender in the state any SBT replacement will be 100% revenue neutral.
Good for the bargaining process, bad for Michigan’s economic recovery.
But the real danger on the horizon rests in the FY2008 budget deficit. It’s shaping up to be in the neighborhood of $2 billion. For those of you who have a hard time wrapping your mind around big numbers, that’s enough money to buy 200,000,000,000 penny tootsie rolls at the drug store counter. Wait, that’s another big number. And do they still sell penny tootsie rolls? But I digress.
How are they looking at fixing this new mess? The Governor and the House are openly advocating for a $2 billion increase in the state’s income tax, a move that’s sure to send investors, job makers, entrepreneurs and families with options scurrying even faster towards the border. And the House has the votes to pass any sort of destructive tax hike scheme the governor can cook up (though they never did grant her a vote on that ridiculous, campaign pledge violating “two-penny” service tax plan).
The Senate GOP majority appears, for their part, to be looking at a series of serious reforms. You can expect the Dems to try to co-opt a few of these so they can paint themselves as serious reformers. And you can expect their friends in the press to play right along and give them credit for trying to reign in government spending. Ideas being bandied about in Republican circles include:
*Privatizing the housing / care of 5% of the state’s prison population, a move that could save the state nearly $200 million a year, according to a study by the Rio Grande Foundation.
*Eliminating the MEA’s monopoly on teacher health insurance, a move that could save the state as much as $400 million.
*Preventing state employees from drawing a paycheck and a pension at the same time.
*Eliminating the Office of the First Gentleman, saving a quarter of a million dollars annually.
*Asking state employees making over $100,000 a year to take a 4% pay cut, again, saving millions.
And that’s the short list.
The real worry is that for every item on that list the Democrats grant lip service they’ll try to exact a toll from House and Senate Republicans to the tune of YES votes for tax increases. GOP members in both chambers are likely never to face a period of greater pressure. They’re going to be tested. How will they hold up? That remains to be seen. But you’d better believe we’ll be providing as much positive… uh… hmm… encouragement (yeah, that’s the word) as we possibly can to potential turn coats like Ron Jelenik and Valde Garcia and Dick Ball and Mike Nofs and Ed Gaffney.
It’s one thing to have your Democrats taking shots at Michigan’s future. It’s another thing entirely when “our own” elected officials stab us in the back.
However you slice it, it’s going to be an interesting summer in Lansing.
Lets just hope it’s exciting, not disastrous.
Submitted By Guest Writer:
Nick De Leeuw