Dealing with the state budget deficit

Gov. Bill Milliken did it to Gov. Jim Blanchard. Mr. Blanchard did it to Gov. John Engler. Mr.Engler handed one over to Gov. Jennifer Granholm and she did the same thing when Gov. Rick Snyder came into office.

Each of those former chief executives left office and sheepishly left behind a substantial budget deficit for the new gov on the block to tackle.

And even though he has 17 more months in office, Mr.Snyder may be doing the same thing to whomever replaces him. It’s not a done deal yet but the fiscal hand-writing is on the wall.

The Michigan Citizens Research Council with a storied and honorable non-partisan history of diving into complex issues for decades fired-off the first warning shot with its recent analysis of Michigan’s budget.

You have a check book at home and let’s say you put $4000 in it every month. But each month you don’t get to spend that wherever you want because of fixed costs. A certain amount must be paid on the mortgage, car payments and the like. After those obligations are met, you can spend as you wish.

The state government check book, known as the General Fund, normally has about $10 billion in it, but just like you at home, increasingly a bundle of dough is baked into the G.F. and those bills must be paid first.

The CRC reports $600 million is earmarked for business tax breaks that began under the Granholm administration. $600 million is going to local governments as part of a promise from the Snyder administration. And then in an unprecedented move lawmakers also recently voted to swipe $600 million from the G.F. to begin to fix the roads. They did it because they did not want to hike the gasoline tax so high that voters might revolt. So they lowered the gas tax increase and dove into the G.F. for the rest.

CRC researcher Craig Thiel warns that $1.8 billion could reach the $2 billion plateau.

So what?

If your have a kid in college, if you have a senior on Medicaid health care, or have a young kid in school, the state aid to all those services may have to be reduced which means more money would come out of your checkbook.

“That could produce higher education tuition increases. It could impact the state prison system and what do we do with that population?” along with state health care assistance to the truly needy, he explains.

Actually lawmakers are talking about doing something: eliminating the state income tax.

Woo. That would blow another hole in the budget.

Mr. Thiel warns, “the General Fund at this point can’t support a major income tax relief plan.” With a potential loss of 6 billion dollars if the tax goes away, “I don’t know if state government could operate on that type of reduction.”

GOP Senators who are drafting a tax elimination plan promise they will find the revenue to plug that hole.

And if they don’t and the fixed costs keep going up, the good news is the current batch of lawmakers and this governor will be out of office when it reaches critical mass.

The bad news is the new governor and the new legislature will continue the tradition of getting stuck with a fiscal mess they inherited from those who created it.


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