Perhaps we woke up wearing rose-colored glasses on Thursday morning.
But, on first appearances, Governor Jennifer Granholm’s new state budget plan seems to be a product of keen listening to the many business and reform-minded groups who have long demanded change in Lansing.
A year ago, the Center for Michigan published a list of more than $1.5 billion in possible reform choices. Then we were sharply critical when the governor pretty much ignored the list. But this year’s budget looks like she borrowed directly from that year-old, dog-eared spreadsheet of ours.
Prison sentencing reforms and state worker pay and benefits accounted for much of the potential cost savings in the list we published last year. The governor’s budget address adopts both of those strategies to the tune of hundreds of millions of dollars in savings in the next year and, according to the governor’s initial estimates, nearly $8 billion in savings over the next decade.
The governor this week also took big steps toward significant tax reform. The devil is always in the details and there are many details yet to be discovered and debated. But the governor’s plan to lower the sales tax rate and broaden the base of services taxed has considerable potential to modernize the state tax structure. It phases out the much-maligned Michigan Business Tax surcharge and, over the next several years, results in a revenue-neutral tax shift, according to the governor and state Budget Director Bob Emerson.
A coalition of nearly 20 business groups didn’t see it that way Thursday.
“Unfortunately, this plan addresses only one third of the deficit through proposed reform and fills the rest with tax hikes and stimulus money,” the business groups said in a prepared statement. “Once again, we have a short-term solution to a long-term problem that puts off necessary spending reforms for future policy makers to address.”
So, there’s danger of another standoff in the capitol. No surprise there.
To the many political and financial questions floating through the cold, dry air of downtown Lansing, we’ll add three more…
Did the business community really expect something better from the governor? Granholm has crossed over numerous traditional political boundaries to get to some of the reform concepts she has proposed this year. Business groups and other reform-minded organizations have done a tremendous job of relentlessly pushing for big-time transformational changes. Finally, the big-picture issues are on the table in separate but often-complimentary proposals coming out of the governor’s office and leadership of both parties and both chambers of the legislature. Is it now time for a little less saber-rattling and a little more negotiation?
What about the next labor contract? The Granholm Administration has exacted tens of millions of dollars in labor concessions in recent months and her budget takes away a planned 3 percent pay increase for a quarter of the state workforce that is not unionized. But new contracts are under negotiation on the Granholm Administration’s watch. The next round of three-year contracts will have considerable effect on the state budgets for much of the next governor’s first term. Significant pay raises would have one impact. Expanding recent health care co-pay increases to all workers (instead of just future hires) would have another. (NOTE: In last week’s newsletter, the Center stated that state workers had received three years of pay increases during the 2007 budget meltdown. That is incorrect. Contracts for many state workers included pay raises for two of the past three years, but not all three years. The Center regrets the error.)
What’s the backup plan? Granholm’s budget relies on more than a half-billion dollars in new, one-time stimulus money from the federal government. But there’s no guarantee that money is coming and Granholm’s budget doesn’t outline a contingency plan if the federal tap runs dry. Likewise, Granholm’s prison budget includes more than $100 million in savings assuming she’ll push through bills for good-time provisions that would release several thousand prisoners. Corrections officials confirmed to us Thursday that there is no backup plan to passing those bills (which would seem to have a snowball’s chance in the largely law-and-order Senate.)
8 Comments
Keen listening ? You have to be kidding !
Both Andy Dillon and Mike Bishop are laughing at this pathetic attempt to pull the wool over the publics eye once again. Increasing the state budget over 4% with minor, very minor reforms. A chimpanzee could have done better.
Gov. Granholm’s budget is D.O.A., she just hasn’t realized it yet?
Increased taxes on residents (i.e. sales tax on services, taxes on doctors), is no way to retain the few residents who are remaining here in Michigan.
And to add insult to injury:
Michigan’s FY 09-10 Budget – $44.70 billion
Michigan’s FY 10-11 Budget – $47.09 billion
How is spending more money going to help Michigan?
Now we are in another budget season, the eighth one for Governor Granholm. No consideration is given for the possibility of ending the recession and turning the tax revenue around to an increasing rate. Each budget season is an opportunity to make ending the recession priority one. The budget season presents an opportunity to make a dramatic change to business taxes, to make Michigan competitive with other states and the global economy. The opportunity is presented to eliminate tax abatements and Renaissance Zone tax eliminations.
What happens when a tax abatement or Renaissance Zone expires? The business then has to pay its full fair share of business taxes? The business can’t. The business has priced its products and services to compete without the Michigan business taxes. When the abatements expire, the business has the choices of going bankrupt or moving out of state. The state of Michigan can never let the tax abatements or Renaissance Zones expire! That has important implications. The governor and legislature just pass this abatement expiration problem on to the future.
The total budget is up because of a large increase in federal aid. The general fund budget is down 3% following a 10% reduction in the current year. Do you want us to turn down federal aid? That is momey frpm out of state that stimulates the economy. According to a study by MSU, the loss of about $200 million in federal aid would cost Michigan over 6,000 jobs. Most of the federal aid we receive is for transportation and Medicaid and goes to private construction contractors, doctors, hospitals and nursing homes. Michigan still receives less federal aid that we pay to the federal govt. so we need to atract as much federal aid as possible.
Dropping the rate from 6% to 5.5% isn’t going to change anyone’s opposition to this. Further the process of deciding which services are subject to tax and which aren’t is once again a battle of lobbyists and leads to results that just plain stink. If a truly modern tax approach is wanted, that may even help business in this state (read that jobs), how about if we tax almost every transaction at a much lower rate yet? Say at 3%? (Yes definitely includes food medical procedures and medicine). This would eliminate any big advantages to internet, catalog and going out of state to make large purchases. Also would make some room for some additional gas taxes (7 – 9 cents) without giving us the highest total tax on a gallon of gas in the country!
Michigan is NOT uncompetitive to business.
First of all. Forbes and Fortune regularly point out business tax climate and Michigan routinely ranks in the middle.
Secondly, If there was ever a big business tax debacle that caused companies to look elsewhere it was when the REPUBLICANS who Controlled our Congress till 2006, wiped out the MBT with no replacement plan for many months, which put our state in a status of Disaster mode for any new businesses.
I think they did it on purpose, knowing what the ramifications would be. They arent stupid, they just dont care.
Third, Since Granholm came to office, MIchigan has gained numerous technology busineses and industry across the spectrum OTHER THAN the automotive sector, and was gaining jobs until the NATIONAL recession hit a second time and massively worse than the 2001-2003 one.
- The automotive losses were solely due to High Energy prices and Poor economic climate nationwide since Bush and Republicans controlled the Govt together.
There are many businesses in michigan that have come here and many that have expanded in the past 8 yrs that like doing business here.
Telling everyone falsely that Michigan is Not Competitive is blatantly Treasonous to our State and is Literally verbally bashing our state to prospective businesses and purposely steering them away.
You can complain about specific tax situations, but trying to Spew Forth to the world that its some kind of known fact that michigan cannot compete for new business is a crock of Anti-Michigan steaming piles.
Its been Granholm’s plan all along to steer michigan’s business center away from the automotive sector and move it into global and national tech industries to keep this disaster from ever happening to our state again.
Its the right move, its the right plan, and its called Learning from the past.
The GOP has no plan but to systematically Politically take apart our state and carve it up to the highest bidders and wipe out its ability to serve like a government is designed to do.
All for the profits of those that donate to their campaigns- the wealthy elite, and morons that believe their rhetoric and who are literally getting pounded by their policies and dont realize it.
“Michigan still receives less federal aid that we pay to the federal govt. so we need to atract as much federal aid as possible.”
Taxing Michigan Residents during a recession is not the proper way to accomplish this.
You are effectively having people pay twice for the same thing.
Fixing Michigan’s “donor state” status should be the responsibility of our representation in Washington.
If they cannot (will not) do that, then they should not be in Washington to begin with.
I agree with the; “No Tax” people now. I do not support police officers, schools, people who ensure the restaurants you eat in are safe, the roads you drive on, the parks you visit, the guards who keep the bad guys away from us, the fire departments who put out your house fire, the university systems that ensure the brightest minds are created and nurtured here, etc. With the current GOP party of; “NO” you are assured that there will be haves and have nots in this State of ours. Most of us will be the have nots but, we sure cannot depend on taxes to pay for this stuff. It’s supposed to be paid by; “Big Business” I guess who has become masters of sending jobs overseas where they can engage in slave labor and limited pollution laws to increase profits so select shareholders can get rich. Our health care system is the biggest delusion that you have been convinced to enjoy. We are the only; “Profit Motivated Health Care System” in the world. What do you think of a system that you pay in to, but, when they have to file a claim, they call it; “Medical Losses.” Something wrong here but it was too easy to convince marginal people that there was going to be death panels and the government was going to kill your granny. We deserve whatever they shovel at us because most people have not ever engaged in critical thinking. Much easier to believe an e-mail that a friend of a friend sent you. Naturally my message is sarcastic because I am sick of the people that think that all taxation is bad. Taxes pay for many things we all enjoy and that keep us safe.
Balanced cuts and reforms are what is needed to turn our fine state around. Hopefully people will start listening to the brightest minds about this instead of the people they put in office for six years who do everything but listen to the people who are supposed to advise them on proper courses of action. Our term limit system has ensured us of the best group of buffoons that money could buy for six years. Michigan has suffered drastically because of it.