Top 10 Budget Recommendations

Two statistical realities stand out when examining Michigan governance:

  • Pension, health care and other employee fringe benefits provided by all units of government in the state exceed the average of private-sector benefits by $5.7 billion annually. (Approximately $708 million is in state government, $2.45 billion in public schools, $844 million in colleges and universities and $1.73 million in local governments.)
  • Charter schools spend $2,200 less per student per year than conventional schools. If all Michigan public schools operated at this lower per-pupil cost, total savings would be $3.5 billion.

Converting these statistics into actual budget savings involves a combination of straightforward “eat your vegetables” cuts, and process innovations like privatization that generate savings through “second-order” incentive changes throughout the system.

Here are our Top 10 budget reform ideas:


Place new school employees into a defined-contribution, 401(k)-type pension plan, rather than a defined-benefit system.


Require school employees to pay the same amount to their health insurance benefits as federal employees in this state (27 percent). This could save around $500 million annually.


Require school districts to make a good faith effort to contract out transportation, food and custodial services. Conservative estimates place annual savings at $300 million.


End annual appropriations to the 21st Century Jobs Fund ($75 million was appropriated in current-year budget).


Eliminate state film production subsidies. (The Department of Treasury estimates these will cost $155 million this year.)


Privatize one or more state prisons. In addition to direct savings, “second-order” incentive changes throughout the system could generate more than $150 million annually, based on the other states’ experience.


Eliminate the restrictions on the number of charter schools that can be authorized by state universities.


Fund public universities primarily through a standard per-student grant or voucher, with a university’s research financed in a separate line item.


Devolve State Police road patrols to county sheriff departments. This nominally saves $65 million, but the resulting major MSP downsizing would save much more.


Repeal the state’s “prevailing wage” law, which prohibits awarding government construction contracts to the lowest bidder unless it pays above-market continued on other side wages.