A VIEW FROM THE RIGHT - MICHIGAN'S BUDGET UPDATE

"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.

The FY2007 budget deficit, somewhere in the neighborhood of $800 million, has finally been resolved.  Good news and bad news.  Custom dictates we examine the bad news first…

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
www.rightmichigan.com

Comments

[B Post]

Hi Nick. I know I've seen some of your "long list" of things that would require reform in order to generate spending cuts, but I'm only seeing this list (which I consider to be "no-brainers" that should be done) generate perhaps a third of what's necessary to cut. I know even this list will be hard to get past the House too. I suspect that Andy Dillon is signaling willingness to budge on the tax issue because if we can even get some of these important concessions through we'll have to sacrifice something and compromise with the "tax us to death" crowd and give on that issue. If they could roll true state pension reform and retiree health insurance into that equation we might have some real structural reform that could set the state down the right path for the long term. For the short term though, I hear you brother, a tax increase will kill us and scare business out of this state.

Just one last statement of personal ire. I get so tired, probably you as well, of hearing all the people in the Public Pulse and elsewhere quoted as saying that Republicans just don't recognize that we "have" to increase taxes. I think one message that we desperately need to get out is that most of us are NOT advocating service cuts, but rather that we are demanding better value for the tax dollars that we're paying. No one likes to have their wages or benefits cut. But right now particularly the benefits packages of government workers is just way out of whack with the private sector, and that's also the fastest growing expense. The private sector has been working to contain their benefits costs now for about 20 years, and it's about time that we expected the State of Michigan to do the same.

[Sandie]

Nick:

It appears to me that unless the people of this state start making their voice heard (ugh, hum, those left here I mean), then the Republicans are going to cave in come 2008 on those dreaded tax increases. Let's face it, when Republicans gain an edge in one area, someone (the Dems) are going to make them pay a price eventually for that break.

Sure, for the short term, we all got the benefit of no tax increase and saw some budget cuts to tidy up the messy books. But, that give and take is bound to have some serious ramifications eventually. They are just pushing out the inevitable until a later date (to help themselves no doubt and not us).

The ideas that Republicans are tossing about to cut other areas of spending to help the budget without tax increases are worthy ideas, but all those groups effected and their lobbyists are going to put up one heck of a stink if you start messing with the old system. I doubt Dems are going to touch those other areas as it would hurt their voting base (the school system, medical field, unions, etc.).

I agree with B Post that by searching for better service providers, at lower rates with equal or even better quality and so on, we can slim down the budget and still keep service operating at a high. Reductions in cost does not have to mean reduction in quality or delivery.

Side note on illegal immigration bill: It seemed that citizens got involved and put pressure on the Federal lawmakers on the Shamnesty Bill recently voted down in D.C. Had talk radio, conservative style cable shows and a few loud voices in the magazine and newspaper world not spoken up and fired up it's base, that bill just might have passed. Regardless of how loud the general citizens were complaining in their personal lives, they had to do something with that complaining and escalate it. They did; they called, they e-mailed, they wrote and they stopped in to tell their Senators and House Reps what they thought. The masses stated they hated the bill and they made sure their feelings were heard - both Democratic voices and Republican voices.

Perhaps, Michigan residents need to start doing the same thing. We (including me) are just sitting here watching them decide our futures. We feel powerless outside of a sending an e-mail once in a while or making a call now and than to support or denounce this or that. We get to vote every few years and that’s about it. It's very disappointing.

It seems that residents who cared have upped and left the state for greener pastures.

Those left seem to be waiting for the final axe to fall.

Have we been through something like this before - say in the 70's? Sure but, it is frustrating to say, here we go again…

Thanks for the feedback on the state. It's always helpful to see things in a short synopsis like you do here at local area watch.

Sandie
Byron Center, Michigan

[Nick]

B. Post:

You're right, that's a short list, and there are any number of other things we could add to it... don't fill the current judicial vacancies (they aren't needed according to the State Supreme Court), examine the state's mileage reimbursements and all of it's insurance contracts, reform Medicaid to incentivize healthier lifestyles, cancel the 4% raise state employees are scheduled to receive this year while many private employers REDUCE wages in their own businesses.

Another GIANT opportunity is capping welfare for able-bodied adults at 4 years. We're the only state in the Midwest without a cap, allowing people to milk the system forever. Even if we moved to 4 years we'd STILL be the most generous state in the region!

And don't underestimate that pay-cut idea.

Employees under $50K a year take a 1% cut. $50,001 to $99,999 take a 2% cut and employees over $100K a year take a 4% cut.

With 52,000 state employees that adds up quick!

So yeah, the savings are there. But your point (and yours, Sandie) is well taken... none of these are EASY when you're dealing with the taxocrats in Lansing. They sense an opportunity to raise our taxes and they're going to chase that to the ends of the earth.

It really is up to us to make our voices heard. I know the www.RightMichigan.com community is talking about these issues every single day. Check us out if you get a chance and join the discussion. A lot of the leaders in the budget process read the site daily so your voice really will be heard.

And don't underestimate the power of those phone calls and emails. They're a great start! Additional opportunities will come along soon, too.

--Nick
www.RightMichigan.com

[Bann Ho]

Nick,

I think most of the Republican ideas that tie into creative ways to balance next years budget are interesting to say the least.

As a Michigan resident, I would support privatizing prisons, making sure no double dipping of pension and paychecks, and searching for more economical companies to handle the state's medical/pension programs. If these ideas and changes take root, it could mean better service, higher quality and dramatically reduced costs (if it is researched and done properly, no cutting corners to get from point A to point B and securing honest and clean bids for the right firms to handle these area).

On the other hand, I'm not familiar with the Office of The Gentleman? Apparently, I'm off in left field. What is this?

Bann Ho

[MMB]

Nick -

I'm against the concept of making people take pay cuts.

I especially don't like the idea of the more you make, the more you give up. It's a form of income redistribution. Why not have everyone in the food chain take a cut? Why is it those who work for more are always expected to give up more? Making 50K a year is not considered higher end anymore. It's middle to lower class these days. Everyone has expenses and responsibilities, those above 50k and those below 50K. It's all a matter of how you see things.

In the end, how can we ask young adults to pursue 4, 6 and 8 year degrees, work on their careers, put in time and experience only to hear that as you make your way up the work ladder, expect to take pay cuts in times of budget crisis? I believe strongly that if you work hard, put in the time and effort and give it your all, you deserve proper compensation. Both in the private sector and in the public sector.

Instead, continue to analyze each sector of government and eliminate departments that are not needed, phase out those that are duplicates and/or reduce the numbers further as we become more technologically advanced and efficient and simply don't need as many bodies to do reduced work loads. People know full well where they work if they are putting in a full eight to nine hour work day or only five to six hour work day (due to a one hour lunch and periodic 15 minutes bathroom, chat and smoke breaks in between). We need to clean up the system further long before we ask those who are truely working for a dollar to shave off a few more cents each day. We need to continue a tough love program. Your job is a duplicate, you need to go. If we only need 1/2 of a staff as we are more efficient, the other half has to go. You don't pull your weight, you need to go. It's that simple.

Unfortunately, streamlining a bloated system will be personally hard as people are removed, but hopefully they will find work elsewhere. The wages will probably be replaceable in the real world, but the cushy benefits of being a state worker will be hard to duplicate anywhere else. For that, I have alot less compassion :-)

Enjoy your postings here at local area watch and at RM. You are a voice of reason. Keep it up.

Maura

[B Post]

I certainly have no dispute with Maura's idea of streamlining. Ideally that is what should have been done all along, and that should be the first, most fundamental thing to do. But those kinds of structural changes take even longer than assessing pay/benefit cuts and doing that level of structural change. Of course the easiest thing in the world is what the democrats want is to just raise taxes, since that just wipes away having to make any hard choices. But on the pay/benefit cuts I would also still argue that we need to bring those in line with the private sector. The common argument is that we need competitive pay and benefit packages to attract good workers for the state (and I have no disagreement with that), we also don't need to make those packages the ultimate that can be found anywhere. I don't think pay scales are so much out of line, but a lot is being hidden in the benefits packages that are literally a Rolls Royce of benefits.

I had another thought on the way in to work this morning about the present state of affairs in Michigan and the call for tax increases by the governor. I had a huge moment of deja vu. Being a long time Michigan resident, the present business and revenue climate reminds me of the 1980's. Which also corresponds to the last time we had a Democratic governor in office...and also the last time we had our income taxes hiked massively by that governor. The general historical consensus I've seen is that James Blanchard nearly ruined the state when he did that. So much for history repeating itself.

To answer Mr. Ho's question above, the office of the first gentleman is a funded "office" and staff for the spouse of the governor. As I see it, it's welfare money to make the spouse of the governor feel like they are doing something important for the state in their figurehead capacity. Sorry if I sound too cynical. I'm sure they all mean well and do nice things, but it's an easy and symbolic start on the road to cost cutting in the budget.

[Bann Ho]

Thank you for answering the question on The Office of The First Gentleman, Mr. B Post.

Now that I know what it is, it definately can be eliminated. A savings no one will miss less the gentleman who is getting the only benefits from this program.

Bann Ho

[Joonko]

Nick - How do you know that political groups at the state level are reading your site? And maybe influenced? Do you have a tracking device or do you have insiders giving you this feedback?

Either way, that's great to hear. We need the top players to hear what the citizens are REALLY saying not what politicians want to hear or what lobbyists are telling them.

Hats off to you.

[Bridget - The Editor]

Hello Joonko,

I believe Nick has been told that certain politicians are reading his site and are aware of that conservative blogger community. I don't believe there is a tracking device simply word of mouth and increased reader/comment traffic.

Both Nick at RightMichigan.com and Jeff at LiberalMichigan.com do a great service to their respective readers and groups by posting the most up to date information about proposed legislation, new laws, political activity and action alerts for the masses to see. If you care about this state, boths sites are a great reference for daily news.

Glad you enjoy their postings here at The Local Area Watch and at their own sites as well.

Regards,

[Bridget - The Editor]

Correction to above, I should have said Jeff's site was MichiganLiberal.com not LiberalMichigan.com. Sorry for the error in putting one before the other.

Regards,

[Nick]

Bridget's right on... there IS a way to track traffic and that's how you can tell you're getting more clicks and more clicks from Lansing. But as far as knowing that some of our electeds and people in leadership are reading... well... typically they email me when I say something they don't like. :)

--Nick