(Note: This commentary by Mackinac Center President Lawrence W. Reed originally ran in The Detroit News on Jan. 4, 2007).
If only lawmaking could make a state wealthy, Michigan would be as rich as Babylon. In the 2005-06 session of our full-time Legislature, more than 4,200 bills and 2,900 amendments were introduced. The books were stuffed with 782 new laws, on top of a stream of edicts from the state’s numerous regulatory bodies and edict-issuers. Meanwhile, people and businesses are fleeing Michigan as our single-state recession lingers.
The failure to make the tough and right decisions is painfully evident. Huge savings go unrealized because Lansing won’t exert sufficient spending discipline or tackle special-interest privileges.
The governor says recovery is coming because her 21st Century Jobs Fund will magically subsidize the right businesses (a discredited 16th-century idea). Public schools, universities, municipalities, state departments — all cry endlessly that Michigan will be better off if they get more money and working, taxpaying families keep that much less. No wonder we’re in trouble.
To the last Legislature’s credit, lawmakers finally decided over the governor’s objections to end the state’s burdensome Single Business Tax, making its "replacement" the No. 1 priority for 2007. The new Legislature should take a Hippocratic Oath to do no harm. If it wants to signal that Michigan is a good place to locate or expand a business, it should aim to "replace" business tax revenues with spending reductions and other efficiencies.
We tax because we spend. If we do less of the latter, we can do less of the former. There is no economically friendly way to tax if you’re spending too much or spending unwisely.
For instance, Michigan’s union-sponsored Prevailing Wage Act requires the needless spending of as much as $150 million by public schools every single year, and tens of millions more by other units of government. It should be repealed.
Other states have demonstrated substantial savings by privatizing the management of state prisons — contracting out services to private businesses. Estimates suggest Michigan could do that and cut its corrections costs by about $200 million.
Florida pioneered Medicaid reform by voucherizing the program, dividing up Medicaid spending and giving the per-patient amount directly to beneficiaries. It reduced the state’s expenses and gave recipients more choice and incentives to economize. If Florida can do it, why not Michigan?
Higher education changes could produce tens of millions in savings — for example, moving to a per-pupil "foundation" grant like the one we have now for K-12 education; raising standards and spending less on "remedial" courses; or tying funding less to admissions and more to actual graduation rates.
The universities have come to expect that their spending should grow by far more than inflation or population every year, and that if they don’t get the money from the state they’ll just get it from students. Audits have brought much waste to light. When it comes to preparing teachers for the K-12 classroom, both teachers and the public are being short-changed. How about a little reform?
No less than half a billion dollars total could be saved through the following: shifting state police road patrols to less expensive county sheriff deputies; eliminating the layer of school bureaucracy known as intermediate school districts; curtailing transit funding that pays for nearly empty vehicles; replacing the Michigan Economic Development Corp.’s failed gimmicks with a "fair field and no favors" approach; using alternative sentencing for nonviolent offenders; encouraging schools with declining enrollments to consolidate; and breaking the outrageously expensive grip of the Michigan Education Association union over teacher health insurance costs.
Michigan "taxes" its people and businesses in ways other than simple, direct taxation. Michigan taxes business with its poor labor climate.
We should end project labor agreements whereby municipalities essentially refuse to accept bids from nonunion firms. We should also make Michigan a voluntary union state so no worker can be compelled to join or pay dues to a labor organization as a condition of employment.
The regulation tax in Michigan is heavy, too. Agencies like the Department of Natural Resources and Department of Environmental Quality are key gatekeepers. If you can’t get a permit from them, or if you have to jump through too many hoops to locate here, it may not even matter what the "tax climate" is.
For starters, we should add new protections for property owners against regulatory "takings" and require legislative approval before any agency can issue regulations more stringent than federal requirements.
These recommendations would make a huge down payment on both the current deficit and the state’s long-term health. None of them is new; the courage to do them would be. Michiganians have a right to expect that their well-paid, full-time leaders will muster that courage.
Lawrence W. Reed is president of 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.