The major findings of this study appear in the "Executive Summary." They suggest several conclusions.
First, the SOS proposal would have had its most significant impact on Michigan through its state spending cap. As noted in this study, the proposal’s local tax issues would have been resolved over time through the courts and would have represented a change in the degree, not the nature of, the local taxpayer provisions under the Headlee amendment. And while ending publicly funded pensions for new Michigan lawmakers would indeed have affected the state budget, that budget impact is small in comparison to the impact of the state spending cap over the long term.
The evidence suggests that the SOS proposal would have significantly restrained state government spending growth while allowing annual spending increases: State spending from state resources would have been reduced by an estimated $9.6 billion in total between fiscal 1995 and fiscal 2007. This extra money would have generated a fiscal 2005 state budget stabilization fund estimated at $2.5 billion, compared to the effectively empty stabilization fund that actually existed in 2005. This $2.5 billion would have been available to insulate the state budget from future revenue declines resulting from a depressed state economy.
Currently, the Headlee amendment to the state constitution implicitly caps Michigan government spending. In fiscal 2000, state spending exceeded the Headlee limit by $159.7 million. At least since 1995, however, Michigan government spending has been restrained in practical terms only by the relative strength of the Michigan economy.
During years when a strong economy has produced increased tax revenue, Michigan lawmakers and governors have spent much of the additional revenue, often by creating new government programs. Lawmakers themselves later classified some of this additional spending as "non-essential." Only in periods of recession has state spending abated, largely due to the decline in available tax revenue.
The SOS spending limit would have produced annual state spending in fiscal 2007 that is almost identical to the current state budget. This similarity suggests that Michigan government could have financed programs within the boundaries of the SOS spending cap.
An estimated $8 billion would have been rebated to Michigan taxpayers between 1995 and 2007 under the SOS proposal. It is possible that this de facto tax cut could have improved Michigan’s economic performance. The largest tax rebates would have occurred on the threshold of the current recession.
These rebates would have resulted in less state government spending, but Colorado’s experience with a state spending cap based on population and inflation suggests that lower levels of government spending do not necessarily lead to a decline in quality of life.