State Budget Is Business as Usual

MI Budget Growth

For the past year, the public was told that even with nearly $1.4 billion in new state tax hikes, severe cuts would still be required to "balance the budget." Surprise! The "deficit" turns out to have been a gap between expected revenue and the level of desired additional spending. The state will spend $900 million more this year than last, most of which is from state taxes and fees. The following items from the just-passed budget illustrate the overall pattern:

  • Total prison spending will be $2.01 billion, compared to $1.94 billion enacted last year.

  • The Department of Labor and Economic Growth will spend $1.30 billion, compared to $1.23 billion enacted last year.

  • $1.89 billion will be spent on universities, compared to $1.79 billion enacted the previous year.

  • The Department of Community Health will spend $12.05 billion, compared to $11.02 billion enacted last year.

  • The Department of Human Services (welfare) will spend $4.59 billion, compared to $4.47 billion enacted last year, and the department will gain 171 new employees.

There were a few cuts: Government arts grants will fall by
$2 million, four prison facilities will close and a juvenile justice facility will downsize, to name a few. An attempt to contract out the state’s foster child and adoption services to private social service agencies will be implemented to some degree, but much less than was hoped for.

That half-a-loaf foster care reform is a good example of how the political establishment’s priorities are misplaced. Despite bipartisan recognition that money could be saved and better outcomes realized for children from troubled backgrounds, what appeared to trump everything else was the possibility that outsourcing could replace some 800 government workers. The same calculus has stymied every recent effort at bringing about transformational government restructuring, from prison privatization to devolving State Police road patrols to less costly county sheriffs.

The debate over these reforms is not ideological. Neither liberals nor conservatives benefit from paying corrections officers wages that an American Federation of Teachers survey shows are almost one-third above the national average for corrections employees. The education of children is not advanced by granting school employees benefits so extraordinary that even a state panel chaired by former Govs. Jim Blanchard and William Milliken suggested they be scaled back. The public is not served by a budget that includes $150 million for raises to state workers — members of a class that on average already earns substantially more than Michigan residents in the private sector, even in many apples-to-apples job comparisons.

And Michigan’s economy is in serious trouble. Between 2001 and 2006, the real per-capita personal income of residents fell by 0.9 percent; nationwide, it rose by 5.3 percent. The state’s inflation-adjusted gross domestic product actually shrank last year, and our 7.7 percent unemployment rate is the nation’s highest. Most sobering of all, there are indications that Michigan’s population may be beginning to fall, as has been happening in Detroit for several decades.

Michigan has become a poor state — and compared to the rest of the country, it’s getting poorer.

One would expect state government’s top priority to be finding ways to do more with less and make Michigan a place that encourages entrepreneurs and investors, rather than drives them away. However, the just-concluded budget saga demonstrates that the real priority is to preserve the government status quo, quite literally at all costs.

This raises a disturbing question: Who runs state government? Most people would answer "the governor," or "the Legislature," but lawmakers are beginning to look like the agents of a very different set of bosses — the state’s public employee unions. Michigan residents may not be aware of the powerful pressure these unions brought to bear in Lansing over the past year; those of us in Lansing saw it regularly in loud demonstrations, e-mail campaigns and uncompromising letters to legislators. When the governor announced her budget back in February, public-sector union members in T-shirts were already handing out fliers supporting tax increases as an alternative to budget cuts.

There are now indications that lawmakers may postpone some of the tax hikes passed a month ago. This is promising only if lawmakers genuinely reduce spending to lighten the burden on the residents they serve — not just obsess on the hardships that may be faced by public servants.


Jack McHugh is senior legislative analyst for 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.


Michigan’s new budget increases spending by $900 million, proof positive that no “crisis” existed and that tax hikes were designed to preserve the status quo.

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