Even though Michigan has 200,000 fewer jobs than it did before the pandemic and its economic recovery is the 9th-worst among the states, our state government is awash in cash. Federal money has been pouring in. But state revenue has continued to grow, too, so it’s important that the Legislature and the governor practice some restraint. That’s why we’ve recommended an idea we call the Sustainable Michigan Budget. Our proposal would limit growth in state spending to the percentage growth of the state population and inflation.
State governments are not like the federal government and most, Michigan included, are required by their constitution to balance their budget each year. Even so, there’s always pressure to spend more, especially when revenue soars.
The danger facing Michigan is that large fund balances today will be used in ways that ratchet up the long-term costs of government without providing commensurate improvements in services. Seeing this possibility, we thought it was time to give lawmakers a target to shoot for, which would provide some restraint.
Adopting the Sustainable Michigan Budget would reduce state spending increases, and lawmakers could use the savings to lower taxes, making Michigan more competitive and improving its economic recovery. Lawmakers could pay down old debts and save taxpayers billions in interest costs. And the proposal encourages them to find ways to give residents better — and not simply more — government.
Can we get elected officials to agree with us? It doesn’t seem that the governor will. Her executive budget recommends spending $2.7 billion more than our Sustainable Michigan Budget. But if legislators adopted it instead of the governor’s proposal, they would save so much money they could lower the income tax rate from 4.25% to 3.37%.
The governor only suggests spending. It’s up to legislators to approve budgets, and Republicans in the Legislature seem more likely to agree with us. Senate Majority Leader Mike Shirkey recently commented to the Gongwer News Service,“Even though we have lots of idle cash sitting on the balance sheet right now, I advocate that we discipline ourselves to be very prudent and not grow the budget any more than our inflation and population.” Other legislative leaders have also publicly expressed an interest in having more restraint in next year’s budget.
That’s great to hear. And we look forward to further encouraging lawmakers to save money by passing a Sustainable Michigan Budget.