Evaluating a state’s chief executive is always easiest after he or she has left
office. It’s only then that one is able to examine the full sweep of decisions
and policies, and to assess how a governor handled situations and to determine
whether or not he or she "grew" while in the job. But decisions made in the
first year impact the state’s citizenry no less than those made in the third or
fourth, and citizens have a right to expect their investment in a governor to
yield positive returns from start to finish.
Michiganians, on balance, have reason to regard Gov. Jennifer Granholm’s
administration with respect, though this first year has been checkered with both
achievement and disappointment. For reasons that will be apparent in the
balance of this essay, we believe the governor has earned the letter grade of
"B-minus" for her first year — above average as governors go, but with plenty of
room for improvement.
The soft economy and resulting
lower-than-expected revenues dominated politics in Lansing this year as
officials struggled to make the tough decisions needed to balance income and
expenses. As the Mackinac Center pointed out in February, how the governor and
Legislature responded would be determined by whether they saw our situation as a
crisis to be survived by putting state government ahead of the people who pay
for it and live under it, or as an opportunity to reinvent and downsize the
Lansing establishment to make it less intrusive and more efficient and
Twenty years ago, a Democratic
governor used a budget deficit as an excuse to dramatically boost taxes — a move
which damaged Michigan’s image and competitiveness and led to Republican control
of the Senate that remains in place to this day. Gov. Granholm, fortunately,
pursued the different and more positive course of putting much of the
budget-balancing emphasis on cutting excessive spending and avoiding dramatic,
broad-based increases in the most economically destructive taxes.
Nonetheless, more can and should be done. As never before, state programs
should be under the microscope, scrutinized in detail for waste, duplication,
and their penchant for competing with or crowding out private initiative or
currying favor with special interests. Priorities should be continually
re-examined, and many more programs need to be eliminated. The state workforce
can and should shrink further.
Granholm stated early in the year that she wanted to use the yawning budget
deficit as an opportunity to "reinvent" government. That hasn’t really happened
yet, as spending for most programs has been simply shaved or held steady (ready
to grow again when revenues rise), and few have been actually eliminated. If
Gov. Granholm is serious about reinventing government, then the rest of her term
will have to focus on limiting Lansing’s reach and strengthening the capacity of
the private sector to fill the void.
been refreshing that while many other states have responded to their budget
deficits this year with general tax increases, Michigan has not done so. Both
Gov. Granholm and certain members of the Republican-controlled Legislature
deserve credit for that. They have read the political tea leaves and have
sensed rightly that Michiganians do not believe they are undergoverned.
Perhaps the governor and Legislature also recognize that state government is not
the only entity in Michigan that’s having a difficult time. Hundreds of
thousands of Michigan families, charities, and businesses are, too. Indeed,
it’s precisely because those families and businesses are in trouble that
the state is in trouble. We should never forget that the state has nothing to
spend on anybody except what it first takes from somebody. The state’s first
priority ought to be the fiscal health of the hard-working people who, as
taxpayers, have to pay the state’s bills before they pay their own. When they
are not unduly burdened by taxes, they have less need for assistance themselves
and more ability to help those who do need assistance. (For 77 policy ideas for strengthening Michigan, see www.mackinac.org/4198.)
across Michigan, citizens are coping with the lingering challenges of an ailing
economy only now showing signs of an upswing. And they are coping by
re-examining their spending. They are re-prioritizing, and doing without some
things they’d love to have. They are spending less, and taking fewer and
shorter vacations closer to home. They are stretching further the dollars they
have, and generally exerting the discipline necessary to weather the storm. Why
should state government not do the same? In fact, why wouldn’t we welcome this
as an opportunity for officials to demonstrate the discipline and prudence we
expect from them? Better than most of the country’s governors, Gov. Granholm
has understood this and made decisions accordingly and appropriately, with a few
Michigan vs. Ohio and
the Granholm administration’s restraint on taxes and spending stands in stark
contrast to what some others are doing elsewhere. In neighboring Ohio,
Republican Gov. Bob Taft, after ballooning state spending in his first term, is
busy jacking up taxes in his second. At the federal level, President George
Bush has vetoed nothing and pushed for massive hikes in domestic, non-defense
spending at more than double the rate the Clinton administration delivered.
Gov. Granholm refused funding in her 2004 budget for a ridiculous program that
gives away fruit and vegetables to visitors at the state’s roadside welcome
centers in southwest Michigan, the Legislature tried to keep the program alive.
The governor had to line-item veto it. She also wisely counseled against a
costly program to provide laptop computers to sixth graders, an ill-conceived
boondoggle originating in the House.
While we applaud many aspects of
Gov. Granholm’s handling of the state budget deficit this year, we know that a
new and important test on that front may be coming soon. What will the governor
do when the nascent economic turnaround begins to yield higher revenues for
Lansing? Will all the talk about reinventing government give way to pleasing
traditional constituencies, throwing money at one perceived problem or another,
expanding state programs that the citizenry would do better without? Will she
set state government once again on the course of more spending, thereby making
it all the more difficult for Michigan to weather the next downturn,
whenever it comes? This remains to be seen.
Meanwhile, Michigan families and businesses are shouldering a tax burden that
remains above the average among the 50 states. What we get in exchange is a
mixed bag. We get decent roads and good schools in some areas. But more often
than not we get excessive construction costs, inefficient bureaucracies, and
schools that parents and children are desperate to escape.
large measure to rising property tax rates and assessments, state and local
taxes actually have risen since 1993, the year before Proposal A passed, from
10.7 percent of total personal income in Michigan to 10.8 percent in 2000, the
most recent year for which numbers are available. The state’s Single Business
Tax exacts a "take" that may represent a larger portion of business income than
that of any corporate income tax in the other 49 states. Even a May 2002 report
from the Michigan Economic Development Corporation showed that Michigan ranks
16th among 17 peer states in business costs (meaning that 15 of the 17 states
with whom we compete have lower costs). Michigan simply must make more
progress in reducing the financial burdens it imposes on its workers, families
and businesses. Because we live in a competitive and highly mobile world, we
cannot afford to do otherwise.
Strengthening Civil Society
Granholm should indeed make good on her pledge to reinvent state government.
She should use her next three years to make a huge difference in what state
government does — to regroup, stick to the basics and do them well, and trust
the people. This is a time to strengthen civil society — that network of
private institutions, community associations, schools and religious
organizations, families and friends and coworkers, and all their voluntary,
from-the-heart interactions. There is room for politics in our lives, but most
of what enriches and defines us as a progressive and compassionate people
emanates from other, deeper sources such as family, community, enterprise,
church, and charity.
government grows, civil society shrinks. When government moves beyond its core
functions, it does not create things out of thin air so much as it displaces
what a free people would otherwise choose to do. And it ends up performing too
many tasks too poorly, including the ones we absolutely must rely upon for the
sake of safety and basic, essential services. If this is a radical notion, then
America was founded on radical notions.
we restore and strengthen the attitudes and institutions that formed the
foundation of American civil society? Certainly, we can never do so by blindly
embracing government programs that crowd out private initiative or by impugning
the motives of those who raise legitimate questions about those government
programs. We cannot restore civil society if we have no confidence in ourselves
and believe that politicians and bureaucrats have a monopoly on compassion.
We’ll never get there if we tax away large portions of people’s earnings and
then, like children who never learned their arithmetic, complain that people
can’t afford to meet some of their needs.
advance civil society only when people get serious about replacing government
programs with private initiative, when discussion gets beyond such infantile
reasoning as, "If you want to cut government spending for schools, you must be
opposed to education." Civil society blossoms when we understand that "hiring"
the expensive middleman of government is not the best way to "do good"; that it
often breaks the connection between people in need and caring people who want to
help. We make progress when the "government is the answer" cure is recognized
for what it is: false charity, a cop-out, a simplistic non-answer that doesn’t
get the job done well, even though it allows advocates to believe they’ve done
the right thing.
The Good and the Not So Good
While the state budget deficit
subsumed all other issues in importance in 2003, it was not the only
issue. Nor is it the only factor in our overall evaluation of Gov. Granholm’s
first year. There are two sides to that ledger and below we summarize the
pluses and minuses of the governor and her administration’s policies:
On the Plus
On a personal level, Gov. Granholm projects a
positive, energetic image for Michigan. She has kept her ear to the ground and
been accessible and receptive to most segments of the public.
The governor has generally chosen competent people to
head departments, eschewing some of the more radical corners of her party. To
date, from all appearances, they have run a clean and open administration.
As explained above, the governor has opted to balance
the state budget without a large, broad-based tax hike, though the budget deal
she struck with the Legislature providing for a six-month "pause" in a scheduled
income tax rate cut is problematic. Some of the fee increases her
administration advocated were reasonable and responsible because the fees had
fallen behind inflation or were not covering the costs of providing services;
others were actually disguised tax hikes and should not be counted in the "plus"
Gov. Granholm has questioned the sacred cow of public
education funding by proposing modest reductions for both K-12 and higher
education. Real, after-inflation spending on education has soared in Michigan
since passage of Proposal A nearly a decade ago: Operating expenses were up by
13 percent between 1994 and 2002 while capital spending has more than
doubled in the same time period. With the corrosive and self-serving influence
of the Michigan Education Association union strong within the Democratic Party,
a Democratic governor might have been expected to make education immune to
spending reductions. That has not happened. If the result is that schools
learn to live within the means of the taxpayers who fund them, it will be
positive for Michigan.
The governor set an early and personal example when
she announced more than $4 million in executive branch budget cuts within her
first month in office. She did so with this declaration: "Michigan government
has been spending beyond its means for too long. The account is overdrawn;
we’ve got to quit writing checks whenever we can." She reduced the state’s
motor fleet, cut employees’ cell phone usage, eliminated color copying, powered
down state buildings, ordered a hiring freeze for most unfilled positions in
state government, paused management bonuses and travel payments, and refused a
pay increase for herself.
The governor tackled state employee unions and
successfully secured more than $200 million in wage and benefit concessions, an
entirely appropriate and necessary move in light of already generous state
compensation and a recession economy.
Gov. Granholm moved authority over the Michigan
Educational Assessment Program (MEAP) from the Department of Treasury to the
Department of Education, and indicated she would positively consider scrapping
MEAP altogether, in favor of one or more of the several "off-the-shelf"
commercial tests already on the market. That would save Michigan millions
of dollars, reduce the influence of bureaucracy and politics in the testing of our
state’s students, and provide an opportunity to reduce the size and payroll at
the Department of Education. See www.mackinac.org/4382.
The governor showed courage in cutting adult
education, a program with a history of scandal that should have been eliminated
back when Gov. Engler reduced its funding from $200 million to $80 million.
On the Minus
Gov. Granholm’s spending reductions have not done much
to reinvent government because for the most part, she has pared some programs
back but has not eliminated or redesigned very many. For starters, she should
muster the courage to whack away at corporate welfare at the Michigan Economic
Development Corporation, sell the state fairgrounds, and get rid of special
interest legislation that unions have promoted and which cost state and local
governments and schools hundreds of millions of dollars unnecessarily. (Last
February, the Mackinac Center for Public Policy released a comprehensive
analysis of the budget and recommended far more in spending reductions than
needed to balance the budget. See www.mackinac.org/5046.)
Michigan’s Prevailing Wage Act, for example, annually
forces schools to spend upwards of $150 million more than is necessary for
construction and renovation. It makes little sense to bemoan cuts in school
spending and ignore this mammoth waste. See www.mackinac.org/2380.
The governor wanted to close tax "loopholes" but some
of her proposals upon closer inspection would actually have constituted new
taxes on business. One would have enabled the state to impose taxes on
out-of-state business with local affiliates; another would have increased the
real estate transfer tax; yet another would have foisted the onerous Single
Business Tax on the oil and gas industry, which already pays a special Severance
Tax in lieu of other taxes. The Legislature wisely blocked these ill-advised
Gov. Granholm struck a deal with the legislature to
pause the scheduled one-tenth of one percent reduction in the state income tax
(from 4 percent to 3.9 percent). The cut is to be delayed by six months.
Honest people can debate whether pausing a scheduled cut constitutes a tax hike
or not. But in our view, when the government takes more money from you than it
promised it would take from you, that’s a tax hike. Such a move will raise
doubts about whether Michigan can muster the political will to restore our
state’s competitiveness, doubts that fortunately will be partially allayed by
another, helpful part of the budget deal: future reductions in the Single
Business Tax. In any event, the Governor should have pressed for additional
spending reductions so that the income tax cut could have taken place on
Education reform, desperately needed by the tens of
thousands of Michigan children who are victims of failing public schools,
represents easily the greatest disappointment of the governor’s first year. The
administration’s performance in this critical area has been marked by
incompetence, indecision and a singular lack of initiatives that would genuinely
address the problem. Threatening charter schools with new regulation in the
name of "accountability" and standing in the way of the expansion of the charter
school option for parents has hurt the causes of parental choice and quality
education. There have been no important administration initiatives that would
improve education through greater choice, competition, and efficiency.
Without a doubt, the governor’s handling of a $200
million proposal by Plymouth philanthropist Robert Thompson to build 15 new and
innovative charter schools in Detroit was her biggest leadership failure of the
year. The children of Detroit are the losers because she did not stand up to
the mayor and the school unions. It was a shameful spectacle of a political
regime bungling a generous private offer to help where help is needed most.
Gov. Granholm has exhibited a penchant for
policy-making-by-commission as opposed to direct leadership, and it sometimes
comes across as a lack of personal substance and philosophy or even a desire to
dodge tough decisions. We urge her to form fewer task forces for such nebulous
concepts as "cool cities" and tackle head-on those issues that require a
governor’s direction. Commissions, gimmicks and catch phrases are not good
substitutes for sound, tangible policy.
The governor is an
enthusiastic proponent of so-called "smart growth" and, as such, is prone to
hyperbole. "We are gobbling up land at a rate that our population won’t
support, the land base won’t maintain and that we can no longer tolerate," she
said last summer. In reality, less than 10 percent of Michigan’s total land
area is actually developed.
Gov. Granholm set the
stage earlier this year for new land-use regulation by convening a panel to
recommend state action to curb urban sprawl. The agenda of the Michigan Land
Use Leadership Council was tightly controlled by advocates of expanded land-use
regulation. For example, the council was charged with
developing proposals to achieve "sustainability" and "equitable distribution of
benefits," which effectively demand restrictions on private property rights.
Moreover, diverse opinions weren’t as welcomed as some council members had
hoped. The governor should be more concerned about undue assaults on property
rights and more interested in non-emotional, market-friendly perspectives on
Gov. Jennifer Granholm can easily fix the shortcomings
and build on the successes of her first year. She still enjoys a honeymoon of
sorts with most Michiganians. We all want to see her be a good chief executive,
moving Michigan forward for the good of all its citizens.
For 2003, Gov. Granholm earns a
"B-" grade for overall performance. We wish her the very best for 2004 and
sincerely hope we will be able to assign her an "A" at mid-term.
Lawrence W. Reed is president of the Mackinac Center for
Public Policy, a research and educational institute headquartered in Midland,
Michigan. For in-depth analysis of Michigan issues and to keep an eye on legislative action in Lansing, visit the Center's two web sites at www.mackinac.org and www.MichiganVotes.org.