Remember a year ago, when after much squealing and great flailing, Michigan’s legislature finally adopted a “balanced budget?”
Sure you do, even if you’d rather forget. After several false (and baffling) starts, some taxes were raised. Some spending cuts were made.
And very modest changes in public employee fringe benefits were achieved. But a great opportunity was lost to make far-reaching reforms in the structure, workings and cost of state government.
Indeed, to nobody’s great surprise, the Citizens’ Research Council reported at the end of the year that there is still a looming structural deficit in Michigan’s state budget. Best estimates are that the deficit will grow to $9.6 billion (that’s “billion,” with a “B”) by fiscal 2017 if current spending and taxing policies are not changed.
Folks, that’s less than 10 years from now.
Fortunately, somebody is finally trying to do something serious about all this. Within the past two weeks, the leaders of Detroit Renaissance – the top-level business group headed by Board Chair David Brandon (Domino’s Pizza) and CEO Doug Rothwell – have met with legislative leaders to warn things must be done … right now.
They presented legislative leaders, both Republicans and Democrats, with a thoughtful report: “Budget Action Plan: Restructuring Options to the State Legislature for Transforming Michigan’s Budget.”
There was some pretty serious talk behind the budget proposals. The Detroit Renaissance team told the lawmakers bluntly that this is no time to keep kicking the can down the road. They pointed out that we can no longer tolerate a political system that is either unable, unwilling, or both to deal decisively with continued intolerable fiscal irresponsibility.
And they noted that a good time to take the first steps in the right direction is right now, during the lame duck legislative session taking place between the November election and the end of the year.
Detroit Renaissance’s budget plan sets out a road map to achieve annual savings of $800 million over 10 years. That’s $800 million that each year can either be saved for the taxpayers or reallocated to more important priorities.
Take the prison system, aka the Department of Corrections. This is one of Michigan’s fastest-growing budget items. At $2.2 billion per year, now costs more than we spend on our public universities. Michigan throws lots more criminals in the slam that our neighboring states. We keep them in prison longer – and at a much higher cost – than our neighbors do. But our crime rate is just about the same. Something, therefore, is radically wrong. The Detroit Renaissance report suggests we could save $445 million per year by changing our policies to reduce the number of prisoners and reduce their average length of stay.
Among the changes they suggest: Changing statutory guidelines for felony offenses and reducing the number of prisoners kept in jail past their earliest parole date. We also jail a lot of non-violent offenders – 23 percent of our total prison population in 2007 – at a cost of around $340 million annually.
We could also save lots of money by changing the way our prisons are run. For example, the average daily cost of feeding a Michigan prisoner is $4.68, according to the Auditor General, who reports that Kansas ($4.14) and Florida ($2.65) are much lower. Why is this? Maybe because both other states use private contractors to feed prisoners. The Auditor General estimates the range of annual cost savings by privatizing just this one area could be between $10 million and $38 million annually.
Here’s another area for scrutiny: Michigan state employees are paid well, but not out of line when compared with other states. But their fringe benefits rank in the top five states. Teacher retirement, first of all, is expensive, and costs are growing rapidly. For example, fully 42 percent of the increase in school aid appropriations over the past five years went to pay the increased costs of public school retirees and beneficiaries. And Michigan state employees enjoy health care packages that are more expensive than the national average. Reducing benefits and increasing co-pays would save millions. The Detroit Renaissance report estimates that more than $350 million per year could be saved by changing policy in the area of state employee fringes.
The report ends on a thoughtful, non-accusatory note: By acting now, we can save lots of money and avoid being slammed by a crisis. “As a state, we can choose to have meaningful discussions now, or we can be forced into limited policy choices,” it says.
Elsewhere around the state, calls for far-reaching reform in the structure, workings, costs and priorities of our state government are rising. Last week, I attended the West Michigan Policy Conference in Grand Rapids.
I came away with a strong impression of how West Michigan businesses are losing patience with a state “spinning its wheels.” By offering legislative leaders a range of options, avoiding finger-pointing and pointing out how serious a situation we face, the Detroit Renaissance report takes an important step in a state badly in need of far-reaching reform. I hope lawmakers come back to the next meeting with concrete, far-reaching proposals. Otherwise, frustration will mount, time will be wasted, and we’ll all be closer to a day of reckoning that none of us wants — or needs — to have.
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Editor’s Note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics, and a former chairman of the Michigan chapter of the Nature Conservancy. He is also the founder and president of The Center for Michigan, a centrist think-and-do tank which publishes the Michigan Scorecard. The opinions expressed here are Power’s own and do not represent the official views of The Center. He welcomes your comments at ppower@thecenterformichigan.net.
3 Comments
The purpose of government is the health, safety and general welfare of the public.
To comply with that mandate governments build infrastructure (roads, sewers), provide public safety services, collect the taxes to pay for it all and secure the identification of private property.
Doing anything beyond that mandate, is beyond the scope of government work.
For “public safety” we put a lot of our fellow citizens in jail for actions we have defined as crimes.
In order to reduce costs maybe we could take a hard look at why we put people away to insure that the reason for incarceration is based on factual data and is really in the interest of public safety. Don’t assume that the value systems justifiying our actions are based in civilized human principles; or that the rationale for incarceration is a factual one.
I agree with Chuck Fellows on his point about Government -it is a service entity put in place to serve the Public in a few major categories that have various details below them. It should not be run like a business because a business has different purpose for the Top officials, the Ownership, the customers and workers.
However, there is no reason to ever exploit government for abundant personal gain when the population is suffering financially.
State and local employees should Not be being paid salaries/benefits at a high level when the entire private sector has dropped wages and merit increases and any inflationary increases to zero because of statewide economic, employment, and financial problems.
As for cost savings. Is it a Stretch to ask if the Local ->County/City/Township/Village services and goods that are routinely purchased in small quantities from different vendors/sources and varied brands that can instead be purchased by the State to utilize economies of scale for statewide cost savings from volume purchasing of products, consistent quality, centrally delivered, distributed, and directed.
Anything that can be done to organize our Michigan communities requirements that wont harm our state’s security or other needs, could be a big cost savings for the state and local communities. either easing budgets or possibly reducing property taxes.
Thanks for this, Phil. I scanned the main points of the report and recall your earlier posts about how much our Dept. of Corrections cost. So I took a look at the map of DOC facilities and noticed that there is only one prison in Wayne County. Here’s the link to the map:
http://www.michigan.gov/corrections/0,1607,7-119-1381_1387—,00.html
My question is this: if a significant proportion of prisoners are from, say, Detroit; wouldn’t it be more cost effective to have the prisons closer to where the “scene of the crime” is, so to say? I am just guessing, though; when I suggest the Detroit is where most of the crime occurs. I’m sure there is plenty elsewhere, but allow me to make that linkage, even if it is only a mere hunch.
Neither can I claim to have any knowledge of how all those other prisons were located where they are now, either. Again, working from a hunch, I’d suspect the state wanted to spread the benefits of its social programs around the state; and did not want to make Detroit look any more than a penal colony than it already is.
I’m just sending up a trial balloon for reducing prison costs by gradually re-configuring the system geographically to reduce costs. Who knows, maybe having prisoners serve their time “close to home” will reduce recidivism, and would also result in a 5-10 percent reduction in costs.
I sure hope someone better informed than I has thought about this already. Hope this post illicits heat and light.