Last night, as the hours counted down to the start of a new fiscal year with no new budget in place, breathless reporters camped out in front of the Capitol dutifully fretted about the "threat of a government shutdown" spurring "hard choices between service cuts and tax increases."

Baloney.

The real choice is whether the perks, privileges and numbers of Michigan's school and government employees will finally yield to the reality of a fiscal tsunami. For most members of the political establishment the decision was made long ago: No way.

That choice made, all that's left is wrangling over which other components of our society will go under the bus: Medicaid doctors, college students, business owners, investors, families, taxpayers and even welfare recipients. The sacred trust that the political class will never, never break is protecting the privileged class of "public servants" and their unions from having to share the sacrifice.

To be fair, almost all the men and women working in schools and government really are public servants in the best sense. The problem is a web of obsolete laws and even constitutional provisions that make their unions into political power centers with excessive influence over public policy decision-making, including the budget. The Legislature failed last night to conquer an overspending crisis of nearly $3 billion it created and has known about for months. An interim budget avoids a government shutdown and gives legislators 30 more days to pass a fiscal 2010 budget.

Therefore, it's not just that outsized public employee benefit packages add as much as $5.7 billion annually to the overall cost of government in Michigan, although that certainly hurts. It’s not just the fact that Michigan pays $5,407 more per prisoner than other Midwest states, or that teacher salaries here exceed the national average by $12,000, adding $243 million and $1.34 billion to the cost of our government, respectively.

No, the more fundamental problem is that the excessive political influence of their unions makes it impossible for our political class to solve these and countless other problems.

Incidentally, the extra teacher salaries amount to $798 per pupil, or four-times the proposed $218 per pupil school aid cut upon which the "all cuts/no tax hike" budget deal foundered last night when the MEA school employee union flexed its lobbying muscles; they demanded more of the "stimulus" money legislative leaders were trying to reserve for next year when the real fiscal reckoning comes. They demanded - and they got.

And so, the political class offers Michigan the false choice of "service cuts vs. tax hikes."

Might we instead save hundreds of millions of dollars annually by privatizing a few prisons, causing the others to "sharpen their pencils" and get their costs down? Don't even think about it.

Save hundreds of dollars per student with competitive bidding for non-instructional school services like janitors, food service and transportation? If you're a school board member who votes for it be prepared to endure a union-instigated recall campaign, as has happened in a dozen districts in the past couple years.

Save money and generate better outcomes for children by lifting the charter school cap, or outsourcing foster care and juvenile justice services to private social services agencies? In your dreams.

Let local governments economize by reforming the law that makes it impossible to realize savings from consolidating services, or repealing the one that mandates binding arbitration for public safety employees? An attempt last year to do the first was gutted by the unions’ agents in the legislature, and the second can’t even get a hearing despite universal recognition of the havoc it wreaks on municipal budgets.

Overhaul the Public Employee Relations Act that hamstrings local government leaders when they try to rein in other excessive costs? Recognize that collective bargaining for government employees is a privilege, not a right, and when a privilege has been habitually abused it should be revoked?

When pigs fly.

Here is the sad reality:  At the root of Michigan's budget debacle and almost all its other major problems one will find a union, which helped the problem grow and now is stopping it from being fixed. It’s not just Michigan, either. The thing that is killing other declining states like California, New York, Rhode Island, Pennsylvania  - the thing they have in common - is not their tax systems (that's a symptom), their institutional structures (term limits or no, part time of full), or any of the other usual suspects.

Instead, it's the excessive political power of unions. Fix that, and the transformational reforms Michigan needs become possible. Don't fix it, and we lurch from budget crisis to budget crisis, with politicians offering the false choice of "cuts vs. tax hikes."

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Jack McHugh is senior legislative analyst at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.