Thinking the previously unthinkable

We need to start thinking about the unthinkable.

Michigan is in the grips of an economic catastrophe the likes of which we have never seen. Two of our three major auto companies have just emerged from bankruptcy. We have lost nearly a million manufacturing jobs over the past decade, with no end in sight.

Our unemployment rate is 15.4 percent, tops in the nation. And the tax income our state needs to run is evaporating, fast: June tax revenue was down more than 16 percent compared to last year. Collections are running $120 million per month below estimates that were already revised downward in May.

Best guess is that the state faces a deficit for next year of around $2 billion – that’s around 25 percent of the total General Fund budget! Maybe the federal stimulus money will help plug some of the gap for the fiscal year that begins on October 1. But when it is all gone, when the stimulus money runs out, the state budget is set to go over the cliff.

In response, people in Lansing have been pawing the ground but not getting much done. The House of Representatives has proposed a budget plan, but it’s out of date because it doesn’t take into consideration the sharp deterioration of the state’s revenue.

Republicans in the Senate have passed their own draconian budget – including $100 per pupil cuts for schools and an end to the Michigan Promise Grant scholarship many parents have been counting on.

Gov. Jennifer Granholm has been holding relatively civil meetings with legislative leaders of both parties, but getting to agreement has been … incredibly difficult.

Incredibly, it’s hard to find anybody with a sense of urgency

in Lansing just now, excepting Speaker of the House Andy Dillon (D-Redford Township) who widened eyes last week by proposing to clump together public employee health care plans. Dillon’s plan immediately won praise from business and reformers and vehement opposition from organized labor. To his great credit, Dillon has been thinking about the unthinkable … and talking about it.

There are a few other brave and logical souls out there. Our leaders in Lansing could drive down to see the imploding Detroit Public School system, now largely in the hands of Robert Bobb, appointed Emergency Financial Manager by Governor Granholm.

Bobb has wasted no time. He’s closed schools, fired clumsy and corrupt administrators, cancelled non-performing or corrupt contracts. Now he’s considering putting the entire school system through Chapter 9 of the federal bankruptcy code. This may enable him to renegotiate union contracts, get rid of legacy pension and health care costs and shape the system up in ways not otherwise possible. That’s certainly an example of thinking the unthinkable.

So why not follow suit … and appoint an emergency financial manager for the State of Michigan? If it’s working for DPS and if Lansing can’t summon the will to get our financial house in order, why not try stronger medicine?

Forget it, say the experts. Lou Schimmel, the expert financial manager who fixed Ecorse and Hamtramck, says you’d have get the legislature to pass a bill and persuade the governor to sign it.

Entertaining in theory, he says, but as a practical matter, it would never happen. What about bankruptcy? It seems the rules governing the practice are changing before our eyes, witness GM’s and Chrysler’s rapid exit from bankruptcy. If the legislature and the governor can’t fix our state, why not a bankruptcy judge?

That’s certainly thinking the unthinkable.

To my knowledge, no state has declared bankruptcy in modern times, but there’s always a first time. The overall solution, of course, is to find leaders who have courage and the ability to see the big picture. It isn’t just cutting spending to balance the budget. It’s developing a strategic vision for the state’s future.

That means identifying our distinctive, durable competitive assets and investing in them over the long haul. This includes our universities, our environmental resources and communities that make the quality of life in Michigan so great.

But instead of thinking strategically, Lansing lurches around piecemeal, looking for a few million in cuts here, a few more millions there. And this has resulted in badly using the few resources we do have. We spend more on prisons than on our public universities. We cut spending on the environment through the Department of Natural Resources. We eliminate what’s left of state support for the arts.

When an entire political culture of a major state can’t see the forest for the trees, you know you’re in big trouble.

What is remarkable is that it doesn’t take more than a handful of people who see the big picture and are courageous enough to act on it. Dillon is a perfect example. He’s actually succeeded in getting people to think hard about health benefits for public employees – a subject that has been untouchable for years and years. Lots of people are calling for his head.

I think he deserves a medal.

***

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.

Thinking the previously unthinkable

3 Comments

Bridge Feed

Make A Donation