Long-term Rx for State Budget-Take These 10 Ideas to Get on Road to Financial Recovery

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Gov. Jennifer Granholm and the Michigan Legislature are grappling with combined budget deficits of about $2 billion for the current and next fiscal years. Deep spending reductions will be required to meet the near-term shortfalls in revenue, but that also raises the question: What can be done to minimize the chances for similar crises in the future?

Make no mistake. Lansing needs to focus on more than short-term fixes. No one can forecast when future economic downturns will occur or how deep and prolonged they will be, but state government can reduce their negative impact with some long-term structural changes in the way it conducts its budgetary affairs. Here are a few ideas worth consideration:


*1. Employ “sunset” provisions. Far too many budget items are introduced in one year and are automatically included in subsequent years with little legislative scrutiny. If more line items automatically expired in one, two or three years, the Legislature would be forced to take a hard look at them on a regular basis. Isn’t this why we pay legislators to be full-time?

*2. Adjust user fees to reflect real costs and inflation. User fees are assessed for a plethora of state government services and many of them are woefully below the real cost of service delivery. For example, the Secretary of State’s fee for notary public applications is still a mere $3, where it was set 61 years ago in 1942.

*3. Phase down revenue shared with local units of governments. In recent years, the actual percentage of revenue sharing has exceeded the state constitutional mandates. The state should meet its constitutional requirement but otherwise let local governments raise additional revenue themselves. When we send our money to Lansing first, it tends to have a night on the town before it comes back anyway.

*4. Cut the pork. Just one whopper bill in 2000 appropriated more than $600 million in pork barrel projects that included a polar bear exhibit for the Detroit Zoo. If that revenue had been banked instead, today’s deficit would be one-third smaller. An ongoing, independent commission would be one way to blow the whistle when legislators go hog wild to bring home the bacon.

*5. Revive the PERM process. An innovative program in the first Engler term required departments to analyze their work to determine which makes the most sense: Privatize, Eliminate, Retain or Modify. It died due to bureaucratic resistance and lack of strong directives from the governor’s office. It should be revived. The best private businesses subject their work to such scrutiny every day.

*6. Apply the “Yellow Pages test.” If someone suggests that state government do something but the same service can already be found in the Yellow Pages directory, that’s as far as the suggestion ought to go.

*7. Renegotiate state labor contracts. Governors in other states are leveraging budget crises into a case for modifying overly generous contracts with state employee unions, saving millions in health care costs and outmoded work rules. With prescription co-pays now at a mere $7 and $12 for state workers, why shouldn’t Michigan?

*8. Consider a two-year budget. This idea has pros and cons, but policymakers in biennial-budget states focus more on long-term and strategic budgeting, rather than narrow “number crunching” for a single year. Most of Michigan’s Midwest neighbors work on two-year budgets. Ohio Gov. Bob Taft has already introduced executive budgets for fiscal years 2004 and 2005.

*9. Don’t crank up new initiatives. Granholm has properly emphasized spending cuts, but she proposed a dozen new programs in her State of the State speech. Any money spent on them means her cuts in everything else have to be even deeper. Nix the new stuff and focus exclusively on the deficit, just like families or businesses do when they overspend.

*10. Eliminate costly subsidies for special interests. The pain of budget cuts wouldn’t be so bad for schools if they didn’t have to spend $150 million more than necessary every year because of a 1965 handout to organized labor called the “Prevailing Wage Act.” The state itself spends more than necessary for its printing of everything from stationery to lottery tickets because of a similar law dating back to 1937. While there’s always a temptation to think no further than the here-and-now, today is the tomorrow that yesterday’s short-sighted policy makers didn’t plan for. Let’s not make that mistake again.

”’Lawrence W. Reed is president of the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland. Write to him in care of the Free Press Editorial Page, 600 W. Fort St., Detroit, MI 48226.”’