Budget Savings Can Replace Recent Tax Hikes

Last year, the Mackinac Center for Public Policy published a list of 14 transformational government reforms that could save Michigan taxpayers $1.9 billion. Such reforms are vital, but in the short term the need is for immediate savings to allow repeal of the destructive $1.3 billion tax increase adopted as the capstone to this year’s state budget debacle.

Here is how:

Prisons — Gov. Jennifer Granholm has recommended sentencing reforms that move Michigan closer to the Midwest prison population average (we’re 40 percent above it now). Adopting most of these, closing three prisons and achieving several other modest efficiencies could save $136.0 million.

Social Welfare — Discontinuing optional services not required by federal law, screening out non-eligible aliens, eliminating some narrowly targeted health programs and improving Detroit-Wayne mental health agency accountability would save more than $80 million. More than $135 million can be saved by reducing welfare recipient day care reimbursements, imposing tougher welfare-to-work sanctions, revising some child welfare programs and closing certain facilities. Altogether it saves $217.9 million.

Schools — School districts must tighten their belts along with everyone else. This means forgoing a proposed 1 percent increase in per-pupil foundation grants. Also, preschool “readiness” programs, intermediate school district operations funding, middle school math grants and adult education can be reduced by varying amounts between 9 percent and 60 percent. We can snip a modest amount from “at risk” funding to low income schools, eliminate approximately $36.0 million in extra payments to wealthy districts, save an extra $20 million to districts with declining enrollment and cut $5 million in extra “equity” payments to lower-spending districts. This all saves $286.3 million.

Colleges and Universities — Deferring a 1 percent appropriations increase, trimming scholarships to students at independent colleges by one-third, cutting in half Cooperative Extension and Agricultural Experiment Stations, and slicing $5.1 million from two low-income “incentive” programs will save $82.7 million.

Other Departments and Programs — Policymakers should eliminate or reduce a wide variety of “business as usual” spending items, including:

  • Cut $2.3 million in agriculture “development” programs.

  • Forego putting $75 million more into the misguided “21st Century Jobs Fund,” and trim by $15 million the ineffective Michigan Economic Development Corporation.

  • Eliminate state arts grants, cut Mackinac Island and “historical administration and services” subsidies, and trim library spending to save $29.9 million.

  • Cut $7.0 million (50 percent) from “secondary road patrol” payments to county sheriffs.

  • Cut $40.7 million (10 percent) from local government revenue sharing.

  • Trim low-caseload judges to save $3.7 million, and excise $8.9 million from the Legislature.

  • Cut $4.4 million from “workforce training grants” and $10 million from lottery advertising.

  • Eliminate a $7.2 million state Amtrak subsidy and slice $32.4 million (20 percent) from local bus subsidies.

  • Close nine Secretary of State offices to save $4.7 million.

  • Repeal the state prevailing wage law to save more than $90 million on infrastructure projects.

These common sense frugalities will save $211.3 million.

Achievable Government-Wide Economies: — A $150.7 million state employee pay hike should be rescinded. Eliminating automatic “economic” increases in department budgets and cutting administration will save another $94.2 million. Shifting 10 percent of current spending on state employee health insurance to the employees themselves reflects private sector practice and will save $59.0 million. It adds up to another $303.9 million.

Total Savings: $1.358 billion. The exact amount of revenue projected from the tax hikes. A few of these savings were already included in the latest budget agreement, but most are still available.

Past failures to adopt public employee benefit reforms and competitive contracting for government services brought on the current budget debacle. Tax hikes won’t “fix” the problem because not all the sheep will stick around to be sheared — within a year or two the problem will be back. Better to tighten our belts now to allow getting our economic house in order.


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.


While transformational government restructuring is necessary to ensure Michigan’s future economic health, short-term budget savings can be realized that effectively eliminate the need for the recently passed $1.3 billion tax hike.

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