First, the cheery news. Michigan government remains open for business.
The state’s continued operation was anything but certain a few days ago as the Legislature stared another Oct. 1 budget deadline square in the face without an agreement. Twice in the last three years government briefly shut down because of such standoffs. This time, lawmakers got it done without bringing things to a screeching halt, balancing the budget as the state constitution requires. Credit them for that.
That said, the budget defers to another day the weighty reforms that would keep Michigan lean and healthy for the future. No surprise that an election year finds leaders in both parties shying from hard choices.
It’s tough to tell voters just a few weeks before an election they’ll see more cuts in government, be asked to pay more taxes, or face some combination of the two.
Still, it bears repeating that the hard choices remain. And they’re about to get tougher.
This fiscal year’s budget, which took effect Friday, was built on the illusory foundation of more than $1 billion in one-time federal cash — money for roads, health care for the poor and schools, among other give-aways. The funds won’t be available next time lawmakers come to the bargaining table.
As a result, the fiscal year 2012 general fund budget — which this year totals $8.3 billion — will have an estimated $1.6 billion shortfall. That’s a big hole, and it can’t be filled with just cuts or tax increases. The governor and lawmakers must forthrightly confront the spending and tax structures that no longer work.
Cutting costs by getting a handle on public employee compensation will be crucial.
Just as important will be addressing the revenue side and insisting on a tax system that won’t consistently shrink the state’s available resources, even after the economy begins to rebound. Gov. Jennifer Granholm and a group called Business Leaders for Michigan have both proposed lowering the sales tax and extending it to a broad array of services. That is the right direction to go.
One encouraging initiative in this year’s budget agreement was a retirement incentive package for state employees. The retirement program sweetens the “multiplier” by which pension checks are calculated as an incentive to move workers off the payroll. Remaining employees will contribute an additional 3 percent toward health care benefits for three years — a truncated time period that doesn’t go far enough in reforming the costly system. The savings are estimated at $80 million the first year.
A similar carrot-and-stick approach was put toward a teacher retirement plan earlier this year. Teachers challenged it in court. State workers may do the same. Those challenges should not obscure the need to control burdensome state costs, retirement and health care for public workers among them.
The agreement included, too, a new $160 liquor license that will allow retailers to sell alcohol on Sunday mornings. State law had previously forbidden sale of alcoholic beverages between 2 a.m. and noon on Sundays. The bill expands hours of liquor sales on Christmas, and provides liquor licenses for nursing homes and other places.
Lawmakers found a state match for imperiled federal road funding. But it’s a short-term fix: Funds came from borrowing and shifting money. Still needed is a longer-term solution to our crumbling roads, beginning with a gas tax increase. Funding is needed, too, for the now-defunded Pure Michigan ad campaign, a proven money-maker that deserved better than the budgetary backhand it received.
Schools will receive an additional $154 per pupil, a sum they saw cut this year. The increase is built on the federal “edujobs” bill, a one-time boost from Washington. As with other areas of the budget, schools will likely see more threatened cuts again next year.
Federal money kept Michigan from facing even more dire reductions to state services the last two years. However, the money also kept Michigan from facing reality. The new governor and Legislature won’t have that luxury. The bill is coming due.
With Washington’s contribution spent, there will be no other choice but to find more sustainable ways to pay it.
http://www.mlive.com/opinion/grand-rapids/index.ssf/2010/10/editorial_michigan_budget_done.html