I've been at the Detroit Chamber of Commerce Mackinac Policy Conference over the last couple of days.

What is fascinating is the universality of contempt -- to put it mildly -- for the legislature's so-called "balanced budget" agreement for the state's fiscal year the ends at the end of September.

A sampling of comments:

David Newman, a former radio personality and now head of Zovea Consulting in Southfield: "The most recent farce."

Former Congressman and former State Senator Joe Schwarz: "Purportedly, this produced a balanced budget for 2007, without a tax increase but with cuts and deferrals that some feel are appalling. In net, this makes a tax increase for 2008 inevitable, when the state could be facing a budget hole of around $1.8 billion.

Guardian Industries executive Peter Walters: "This makes no sense at all. If anybody in business tried to run their company like the legislature is budgeting for the state, we'd all be out of business."

After talking with nearly 100 people here, my own take is at the very best the legislature basically kicked the can down the road, didn't really resolve the budget deficit for this year and made the financial situation next year much worse.

What is sad about the whole situation is that there is a lengthy report circulating (it was on The Center's newsletter last week) setting out a whole raft of structural reforms in the organization, management and funding of state, local and school governments. The legislature knows about these ideas, yet it chose to ignore them in its rush to "balance" our budget.

I can only hope conversations about next year's budget, which must start soon, will pay close attention to serious, far reaching reform.

Below is the original text of my column, written just after the budget agreement was announced:

The great German Chancellor Otto von Bismarck once wisely said there were two things you didn't want to see being made -- sausage and legislation. They're both messy. Often you have no idea what's in the end product. And what goes into the process is, well, not for the faint-hearted.

There were initial sighs of relief across the state last weekend, after our Michigan legislators ground together enough ingredients to assert they had overcome an $800 million deficit for the fiscal year ending Sept. 30th.

Yet the way it was done is dismaying, and provides clear evidence that our political leaders are still scared to tackle the real problems that -- every year -- turn up a chronic billion dollar-plus structural state budget deficit.

Everyone now knows Michigan in deep economic crisis. That meant our state's leaders had a wonderful chance to step up and accomplish the "Grand Bargain." That would involve making serious changes in the workings and costs of state and local government in return for dragging the tax system into the 21st century. But they opted for a bunch of accounting hocus-pocus, one- time gimmicks, and borrowing from the future.

What they gave us was the image of a balanced budget without the financial substance. Although the legislators claim they accomplished $785 million in savings, there were very few tough budget cuts and no tax increases in the deal they cobbled together late last week.

The one place they did cut was the place our future could least afford -- higher education. Virtually everybody realizes that Michigan's economic future depends in large part on increasing the proportion of the workforce with a college degree. But state support for universities, already suffering from repeated cutbacks over the years, was cut by another $26 million.

Additionally, state payments worth $165 million to universities and community colleges were delayed until October, safely after the start of the new fiscal year. But that $165 million will have to be added to next year's deficit.

The legislature's other "solutions" are at least as bad. Attracting and retaining the highly talented and educated "creative class" Michigan needs requires a frothy mix of stimulating communities and a vibrant arts and cultural scene. Yet our lawmakers cut $3.6 million from arts and cultural programs.

Three funds meant to be restricted - refined petroleum, state campaign and convention facilities - were raided for $215 million. Pension and retirement accounting rules were changed, producing a "savings" of $364 million.

Even before this deal was done, the highly respected, non-partisan Citizens Research Council of Michigan said the state has grabbed cash out of restricted funds and resorted to various accounting gimmicks worth $4.2 billion.

Now, that figure is even higher. Want to know how bad our state's standing has slipped? Michigan earned $137 million in interest payments in 2000. This year, we'll have to pay $66 million interest on short-term loans.

The budget deal does avoid some of the rough possibilities. There will be no lost payments to public schools; Gov. Jennifer Granholm had threatened a $116 cut per pupil. There will be no shutdown of state government; the layoffs the governor had warned state employees to expect aren't happening, at least not yet. And there will be no further cuts in revenue sharing for local government; legislators had been talking about cutting them by $40 million.

House Speaker Andy Dillon (D-Redford), reflecting on what had to be done to balance the budget, was quoted as saying, "I'm not proud of these cuts. But they get us to our end goal." Certainly, the consequences of no budget agreement could have been a disaster. Michigan scarcely needs the national embarrassment of payless paydays, wholesale layoffs of state employees and God knows what else. Dillon and Senate Majority Leader Mike Bishop (R- Rochester) are smart and have established a good working relationship.

Trouble is -- if they can't put together a realistic, long-term budget agreement this time around, who can believe they're gonna do it next year?

For next year the problems will be much, much worse. The projected budget deficit for the fiscal year that begins with October was $1.6 billion -- even before all the stuff that got shoveled from this year into next.

The rumor actively circulating in Lansing is that in exchange for no tax increase this year, lawmakers (including some crucial Republicans) will vote an increase in the state income tax from 3.9 percent to 4.4 percent. Republicans are denying any such deal, and Democrats are laying low, hoping that emerging bipartisan support for a tax increase will immunize both political parties.

Sooner or later, however, Michigan's political leaders are going to have to face that a far-reaching, common-ground reform agenda must be put into place.

We simply cannot survive as a state - let alone prosper - as long as we cannot put our financial house solidly in order. This year's budget agreement does not do it. Instead, it's yet another example of political expediency overcoming a great opportunity to move toward sensible financial management.

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Phil Power is a longtime observer of politics, economics and education issues in Michigan. He would be pleased to hear from readers at ppower@hcnnet.com. Phil Power is president of the Center for Michigan. However, these opinions and others expressed in Phil Power's columns are individual opinions and do not in any way represent official policy positions of the Center for Michigan.