Nearly 300 Michigan citizens and a panel of seven experts discussed some of the most contentious issues in our state’s politics this Tuesday morning. The tone was civil; the disagreements, while plain spoken, were respectful; the questions from the audience were probing.
In my view, it was the best possible example of citizen engagement and clear headed interest group participation, taken at a time when many have despaired of such a thing ever happening.
Billed as an Action Group meeting on budgeting and tax reform in Michigan, the session was cast as an experiment to see if a group of engaged citizens and diverse experts could find ways to exchange views in a constructive way and begin the task of exploring the issues that will characterize Michigan’s policy debates from now until Election Day 2010 and the swearing in of a new governor and legislature in 2011.
Experts included:
Economics professor Charles Ballard, Michigan State University
Rob Fowler, President and CEO of Small Business of Michigan
Dan Gilmartin, Executive Director and CEO of the Michigan Municipal League
Sharon Parks, President and CEO of the Michigan League for Human Services
Doug Rothwell, President and CEO of Business Leaders for Michigan
Doug Pratt, Director of Communications, Michigan Education Association
Richard Studley, President and CEO of the Michigan State Chamber of Commerce
As the issues guide distributed to participants made clear, the facts of Michigan’s present situation are dire. There is a structural gap between what the state takes in and what it spends that has persisted for years at levels between $1-2 billion. Left unaddressed, this gap is projected to reach $10 billion by 2017.
This means that the choices for future governors and legislators are limited but clear: 1) raise taxes; 2) cut spending; 3) implement a strategic combination of tax increases, spending cuts and structural reforms in the organization and cost of Michigan government at state, local and educational levels.
While there were substantial disagreements between the various interest groups represented – business, labor, education and local government – it appeared to me there exist elements of a “grand bargain” that could drive Michigan policy in a new and much more constructive direction than the paralysis of recent years. Components might include expanding the sales tax to services, cutting business taxes and implementing reforms in the structure, workings and cost of Michigan government at all levels.
State revenues have deteriorated enormously within the past two years, the consequence of the prolonged recession. Amounting to more than $9 billion in 2006, the General Fund is now projected to be less than $7 billion for FY 2010-11. Many agreed such a radical shortfall in revenue will require the state no longer conduct business as usual.
Audience members used “clickers” to express their preferences on a number of issues.
Should the state budget be bigger, smaller or about the same as it is now? If the state were to increase spending, most said K-12 schools, followed by economic development. If the state were to cut spending, the big favorite was public safety (including the Department of Corrections).
In other votes a majority preferred to extend the sales tax to services, if taxes were to be increased, while nearly the same number chose to cut business taxes.
Opening comments by panel members confirmed their perspectives:
Ballard: “Our policy of systematic disinvestment in education is just crazy.”
Fowler: “Michigan is like a struggling company. We can just raise prices (that is raise taxes) or we can become more competitive by strategically cutting expenses.”
Gilmartin: “If your revenue stream looks like the ones faced by our local government units, you’d close the door and go out of business.”
Parks: “We have millions of people with much greater needs, but less ability to provide help for them than at any time I can remember.”
Pratt: “Investing in public education has a far greater payoff for the Michigan economy than any other investment.”
Rothwell: “There is no silver bullet, no magic solution. The state lacks a comprehensive strategy to manager our financial affairs or foster its growth.”
Studley: “The biggest problem with our tax policy is that we’re rapidly running out of tax payers. A strong and growing economy is essential to any tax reform plan.”
Julie, a young entrepreneur, asked the panel to justify to her just why she should stay in Michigan. Fowler pointed out that Michigan, rather than chasing big manufacturing companies -”smokestacks” – should develop an entrepreneur-friendly culture, “gardening rather than hunting and gathering.” Gilmartin agreed that the tax climate is not the key issue for young people: “The young people who are moving to Chicago are doing because they like Chicago as a place, not because of the tax climate.”
John Austin, Vice Chair of the State Board of Education asked which component of the
state’s education structure was the more important, K-12 or higher education? Rothwell answered that it was higher education, including community colleges, while Ballard suggested very early childhood education programs had proven to have enormously high payoff rates.
Fred Dillingham, a former State Representative and now head of economic development for
Livingston County argued that “Michigan is no longer a wealthy state,” and any policy we select has to take that into consideration. Pointing out that when considering tax policy, the rate of tax was less important than the base on which the tax is levied, he argued that extending the sales tax to services while perhaps cutting the rate from the present 6 percent might be a good compromise.
And I pointed out that many observers have essentially given up on the idea
that Michigan leaders can get anything serious done before the next election.
“Doing that would be just admitting that our politics is broken. Instead,” I urged, “let’s find a way forward right now. Let’s find some specific things we can agree on and get them done.”
8 Comments
RE: education, my three kids will be leaving Michigan for college. Go ahead and “Google” the top entrepreneurial business schools in the country… NONE are in Michigan. Economic development doesn’t mean squat without the talent and tax environment to start businesses. And, I would submit to anyone that it won’t cost any additional dollars to teach entrepreneurial skills than it is to teach the skills to go to work for someone else… It’s just a change of focus and skills.
Thanks to the center for a very constructive meeting. I know the people of Michigan have the ability to solve our economic problems if we can get the bullheaded politicans out of the way. If we can communicate the messages that come from those attending to the general public, I’m confident that the bullheaded politicans in Lansing will change or be gone.
As we have seen in the past, tax increases without Reform are spending good money after bad. Yes people will have no option but to pay more taxes but without real (Reform) it will be a repeat of the 2007 tax increase which was stated to be used for the stuctural inbalance built into our system. It seems that was incorrect. People are sick of these tactics. You can’t tax and spend yourself into prosperity. Something ( Reform ) has got to be in the mix… K-12 spending 85-90% of thier budget on salaries will have to be addressed and the rising fully funded insurance premiums of all state employees.
How do we get rid of the bullheaded politicians who seem to be running Michigan into the ground? I am sure other states don’t have these many politians on a full time basis.
The problem is that the base for taxes is disappearing rapidly. Michigan has been hit the worst, but other states are now falling down too. The problem is that we can not afford the society that has been constructed around entitlements. There are proofs of this fact. Argentina, who actually fashioned it’s economy and gov’t after the USA, failed when the bills came due on their social programs. They actually raised taxes to 100% and confiscated all savings and pension accounts in banks. This same thing is happening here now. The debt we are drowning in is directly related to government programs that we can no longer pay for. The only answer is to discontinue the pouring money down the hole that has been constructed artificially and start all over again. The government in Michigan has to be dramatically reduced in size, scope and power. In order to become competitive again, Michigan government must get out of the way. Reduce gov’t, reduce taxation and regulation.
I always hear many people talk about getting rid of the entitlements. Usually these are people that have done quite well and are not dependent upon Social Security, Medicaire, or any other program that is run by the government. It would be sad to think that people will have to work till death because we are not willing to raise the limit upon which social security is collected. The ones who also talk about reducing government, taxation, regulation are the ones that destroy the environment, take care of shareholders vs. the masses, send jobs overseas and companies so that EPA laws and labor costs can be avoided, engage in massive fraud that can be missed because of a lack of oversight. One has only to look at this recession and how it started with the banking industry and sub-prime mortgages which dragged this country to it’s knees. Our taxes pay for roads, schools, public safety, entitlements, parks and recreation, etc. We need to decide what we are going to invest in. Advocating for companies that have no conscience is not what I want to see our country move towards. You have only to look at the company under indictment that fed our troops overseas to see what the lack of oversight creates. You have only to look at HMO’s and our current health insurances to see what lack of oversight creates. Spreading the wealth to a smaller and smaller section of our country is what the past regimes policies created. They will be the first ones to be screaming for public safety when their homes are being robbed. You get what you pay for or, in this case, what you refused to pay for.
Considering that many in the private sector have taken large pay cuts, isn’t it time that this issue be considered for the public sector?
It seems if educators took a 7% pay & benefit cut, just like the rest of us did, we might not have to cut so many programs.
Why not allow advertising on school buses and in school lunchrooms as a way to help lower any deficits ? Imagine if businesses were able to buy naming rights to current or new schools as that would bring much needed cash in. It wouldn’t hurt to ask Dell , HP , Tropicana, Papermate… or any other of thousands of businesses if they’d like a school with their brand name on it. Reduce the amount of funds school boards eat up by reducing the size of schoolboards or eliminate schoolboard and hand the duties over to a city council to lower funds spent.