State Government Needs Structural Change, Not Reorganization

(Note: The following commentary first appeared on June 21, 2007. It is being featured again as a Current Comment in light of the Michigan House’s Oct. 29 approval of House Bill 4354, which would raise certain fees levied by the state Department of Natural Resources. Below, the Mackinac Center’s Russ Harding, a former director of the Department of Environmental Quality, argues that state policymakers should restructure the state’s environmental agencies, rather than raise fees paid by Michigan’s residents and businesses.)

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As Michigan’s budget problems worsen and pressure mounts to cut the cost of running state government, natural resource and environmental programs are almost certain to come under scrutiny. Policy recommendations regarding the merging of departments are floating around Lansing, but these changes will save relatively little and may actually cause harm by making the state’s regulatory climate even more business unfriendly (if that’s possible).

Current proposals to close projected budget shortfalls in these areas fall into two categories:

  1. Increase fees. Gov. Jennifer Granholm has already asked for eight new fee increases that would generate approximately $19.6 million in additional revenue to fund Department of Environmental Quality programs. In addition, the Department of Natural Resources has asked the Legislature to roughly double the amount sportsmen would pay to hunt and fish in the state (that request was dead on arrival).

  2. Combine the DEQ, the DNR and the Department of Agriculture into one giant agency. The first department was created when the DNR was split in 1995 during Gov. John Engler’s administration. The primary purpose of that was to move the regulatory programs that affect business and individuals into one agency that would be directly accountable to the governor. The previous structure had imposed an intermediate body of appointed natural resource commissioners.

Both of these proposed changes have problems. Fee increases have the same effect on the bottom line of business as do tax increases — less money left to pay salaries, purchase equipment or invest in growing the business in other ways. Raising fees makes Michigan a less attractive place for job providers to expand or locate. In addition, many environmental fees are based on the amount of pollution that is emitted or waste that is created. Ironically, as Michigan businesses do a better job of limiting their emissions, they are rewarded by the state wanting to raise the per unit amount they are charged, which is not the kind of positive signal the state should be sending to encourage businesses to be good environmental stewards.

Some money could be saved by combining the three departments, but not much. Two director positions could be eliminated along with a handful of administrative positions. Optimistically, perhaps $1 million could be saved by combining the three departments, but the actual number would probably be less. The price for these meager savings would likely be additional costly delays for both business and individuals seeking environmental permits from the larger bureaucracy created by the merger. Not many legislators are left who remember the huge permit backlogs that existed in the DNR during the late 1980s and early 1990s before the agency was split.

In contrast, a more practical and effective way to significantly cut the cost of state government is to eliminate nonessential programs. Government keeps growing in both size and cost, and keeps trying to do too much. The following is a list of programs that could be eliminated from the DEQ budget without sacrificing the protection of our natural resources:

  • Eliminate the Environmental Science and Service Division. This division was created to help businesses understand how to comply with new environmental requirements. While the division may once have served a useful purpose, this is no longer the case as job providers have developed a good grasp of environmental requirements. Also, they can obtain assistance from private firms that are in competition with the state to provide this service. Cost Savings: $2.5 million.

  • Substantially restructure the groundwater discharge program. This program is not required by federal statue. Its ineffectiveness has been pointed out by the state Auditor General, who found that the permits are complex, often not issued in a timely fashion and lack sufficient follow-up to make sure standards are being met. The DEQ should abandon its efforts to write individual permits — which are complex and time-consuming to prepare — and instead do simpler "general" permits that only have to be prepared once and cover various routine discharges, such as car washes. If a company desires to have a more complicated groundwater discharge they could pay for the permit review. Cost Savings: $1.3 million.

  • Turn landfill inspections over to local government. There is no federal requirement that the state inspect landfills. Landfills are sited and operated under host community agreements that are usually between a local unit of government and a private waste company. It only makes sense that the local unit of government that enters into the agreement should be responsible to ensure the company operating the landfill meets environmental standards. Cost Savings: $4.2 million.

  • Return federal wetland program to the U.S. Army Corps of Engineers. Michigan is one of only two states that issues federal dredge and fill permits for the Army Corps of Engineers. The Corps has streamlined their process, so there is no longer an advantage for the state to operate the program. Estimated Cost Savings: Between $1 million and $2 million.

These reforms could save between $8.9 million and $9.9 million dollars. They would also reduce some of the burdensome fees that businesses currently must pay, thereby reducing a disincentive to do business in Michigan.

This state is not suffering from a budget crisis but a spending crisis. To turn Michigan’s economy around, both the governor and legislators must be willing to upset special interest groups and make tough choices. These common sense reforms would be a good place to start.

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Russ Harding is former director of the Michigan Department of Environmental Quality and is senior environmental policy 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.