May 28, 2007

Budget deal does not mean crisis is over yet

After a rare and marathon session on Friday, House Democrats avoided a shutdown of state government and avoided cuts in health care, education by eliminating most of the $800 million deficit in the current budget that ends in three months with just spending cuts and other measures.

The deal on Senate Bill 436 ensures there are no cuts to the per pupil foundation grant,
Medicaid and it avoided a government shutdown. Despite a majority of Michigan residents supporting a tax increase to avoid further cuts that have given us less state employees since 1973, there will be no tax increase for this year’s budget that ends Sept. 30. However, there is still a $300 million deficit left to find to balance the budget. Apparently, that will be done with a mix of further reforms, one-time fixes and accounting changes. Lansing insiders say the basic structure of that plan is mostly agreed upon, but the exact details are still being worked out in sessions that begin tomorrow.

They will only have two session days to get it done because the annual lobbyist orgy called the Mackinac Policy Conference begins Wednesday.

The tax cuts that have taken place every year for the last 15 years has required numerous “one-time” fixes to balance the budget over the last 5-6 years as the state’s largest employer lost market share and put a huge dent in tax revenue coming in to state coffers. Wall Street has made it pretty clear it will again look unfavorably on any more one-time fixes, and it will further lower our credit rating that will cost the state more money to borrow money for future projects. However, the good news – or bad news depending on your point of view – is there cannot possibly be anymore one-time fixes left, and lawmakers will have to find a permanent, structural fix to the annul budget problems.

The other piece of good news is the cuts will only steal $50 million from the future instead of $300 million the Senate GOP initially approved taking from the 21st Century Jobs Fund. The 21st Century Jobs Fund – part of the Michigan Economic Development Corporation –was created with strong bipartisan support to stimulate and diversify our economy and create jobs. It has only been around a few months, and experts said it would take up to three years of investment to start creating jobs. This is not tax money, and it comes from the tobacco settlement money.

The crisis continues, and the Legislature has to balance next year’s budget that begins Oct. 1 that is expected to have a $1.8 billon shortfall, and a replacement of the Single Business Tax (SBT) that accounts for some $2 billon in revenue.

Clearly, we cannot cut ourselves out of this economic crisis, and tax cuts for the past 15 straight years has proven that. After House Democrats and the Governor compromised on spending cuts, it’s time for the Senate Republicans to compromise. The Senate GOP has said they will not block a vote on a tax investment; wow, really big of them. One thing that has been proposed is increasing the state income tax from 3.9 percent to 4.4 percent. That is expected to cost the average family less than the cost of a cup of coffee a day, about $1 a day.

It’s interesting to look at how the bill setting the deal, SB 436, was passed. It passed in the Senate 26-10 and the House voted 69-37 in favor.

Livingston County’s Legislative delegation voted 1-2 in favor. Sen. Valde Garcia voted for it, but the House delegation, Chris Ward and Joe Hune, voted no. Hune and Ward voted against their own party. House Republicans voted 35-14 for the bill, but Hune and Ward were not only in the overall minority but they were in the Republican minority. That vote needs some explanation.


WCTaxpayers said...

On April 18, hundreds of taxpayers
descended on Lansing to tell the
governor and legislature not to raise
their taxes. It was cold, damp and in
the middle of the week but people
were willing to gather on the steps of
the capitol. Some people had to use
their personal time or vacation time
to come. Others came to chant “we
want jobs”.
We must keep up the pressure on
Lansing because you can be sure
that the special interests will. Unlike
taxpayers they have daily access to
our legislators through their lobbyists.
We however do have other means to
. Phone,
email, write
or grab them
when they
are in the district.
We have
got to convince them to save our state
rather than kill it with more taxes. We
need to change the way they think.
Keep on their backs and remind them
that we are the people they represent
and not the special interests. Good
government takes work on your part
as well as theirs.
Let them know you want NO NEW

Rose Bogaert, Chair
Wayne County Taxpayers Association

LiberalLucy said...

Wow. So you're basically asking the state government to create miracles. Take care of us, the citizens without any kind revenue.

What's next, turning water into wine?

To you and everyone else living in their personal fantasy lands, this state is only going to get 'fixed' by a solid combination of cuts, reforms and revenue enhancements. Ask any economist, any state leader, anyone who lives in reality, the rest of us have accepted it, now it's time for you to do the same.

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Communications guru said...

I could not disagree with you more, Ms. Bogaert. I happen to work part-time in a legislative office, and we have gotten plenty of calls from constituents saying they would be willing to accept a tax increase if health care or schools were not cut. These are citizens not special interest groups, unless you consider parents and senior citizens special interest groups.

Taxes are an investment in our community and country, and they are the price of living in a civilized society. I do not have a full-time job, and I am barley make ends meet. However, I am willing to pay my fair share to live in this great state. Why are you not willing to help?

The good news is you are in the minority, Ms. Bogaert. Six in 10 Michigan voters believe a tax hike is necessary to alleviate the state's budget crisis, and more of those people support an expanded sales tax than an income tax hike, according to a statewide Detroit News poll on May 7.

New taxes will not kill our state it will help save it. Only a small minority - such as you, Ms. Bogaert - disagree with the fact that we cannot cut ourselves out of this economic crisis. There is no way possible we can win a race to the bottom, and we will never have lower wages or a tax base than Mexico, China or some other third World Country. Hell, why would we want to? What we can and must do is make this a much more inviting place for the best quality of life possible to attract and retain companies and job providers. How do we do that with no services, no adequate police protection and crappy roads, Ms. Bogaert?

Republican Michigander said...

I'm waiting to see what Chris and Joe have to say as well. I know the argument in favor of the budget, but I'm not real sold on this without holding my nose. It's like my vote for Bush - a hold my nose stopgap measure to avoid the worst - tax increase.

It was bipartisan vote in favor and against in the house. 24 dems opposed it. 13 Republicans opposed it. The majority in both parties supported it, and wasn't all a left v right vote. Elsenheimer, Stakoe, Hune, and Ward aren't liberal republicans. Some of the most left wing democrats (Tobocman, Condino, Vagnozzi) supported this as well. Many of the house moderates in both parties seemed to support it (Simpson, Gaffney)

I'm waiting until I see what happens in 08 before I say that this was a good idea or not.

Communications guru said...

I agree with you, scary; I also want to know why they voted the way they did. However, to save myself from that position, I disagree with you that a tax increase is the worst thing that could happen. The worst thing that could happen is another tax cut that sidelines more police officers and state employees.

This was a compromise on cuts, and as in any compromise, not everyone both dislikes it and likes it.

I too, am waiting to see what happens with the 08 budget because they have pushed a lot over into that budget. In fact, they have pushed things over into the next year’s budget since 2001, and you have to wonder when the bag they are shoving it into will burst. There can’t be any more one-time fixes left.

Jeremy Nielson said...

"Another tax cut that sidelines more police officers and state employees."

So uh... who in the Legislative offices has been proposing a tax cut? Why hasn't this hit MIRS and Gongwers yet? It's rather faulty to say a lack of tax increases is the equivalent of a tax cut.

"Wow. So you're basically asking the state government to create miracles. Take care of us, the citizens without any kind revenue. What's next, turning water into wine?"

This is a nice emphatic argument. $43 billion in spending is apparently "without any kind [of] revenue." But even more, we're not asking the state government to "take care of us". This might be a liberal dream... have Daddy Government pay the bills. But in the real world, we can take care of ourselves.

But you're all probably right. I'll concede. After 5 years of Granholm borrowing money, we've gone from earning $100+ million in interest per year... to paying $66 million in debt interest. Granholm's Five Year Plan to borrow ourselves into prosperity sure didn't work. So now, after five years of failed leadership we might... just might... need a tax increase.

Which translates to - punish the citizens for failed leadership in Lansing. Whomever said "People get the government they deserve" must be right.

Communications guru said...

The tax cuts I am referring to are the tax cuts that have been made every year for the past 15 years, and that proves you can’t cut your way to prosperity. As my friend Liberal Lucy says, it’s going to take a combination of spending cuts, restructuring and new revenue streams to stop this backwards slide of our state. The time has come to realize it was a mistake for that many tax cuts that go that deep. Again, we are not going to cut our way to prosperity by cutting, either taxes or spending.

The Governor’s 12-person, bipartisan Emergency Financial Advisory Panel - made up of two former governors and state budget directors, legislative leaders and longtime Lansing policy experts from both political parties – said the very same thing in February when it said a combination of cuts in spending and creating a modern tax structure that abandons the focus on the economic system of the 20th century will address the shortfall and combat the immediate shortfalls and position us to thrive in the future.

It’s like respected Pulitzer Prize-winning journalist Jack Lessenberry said in his May 30 online column, “We have had tax cut after tax cut for the last two decades. Those who really know about state government will tell you that all the so-called fat is gone. All the emergency and rainy day funds are gone. We’re even selling off money we are supposed to get in the future.

Providing basic police protection is not “taking care of us” or having “Daddy Government pay the bills.” Taxes are an investment in our community, state and country, and it’s the price of living in a civilized society. I can never understand how people can claim to be patriotic, but don’t want to give one penny to help their country or the people in their country other than themselves.

I don’t know where you got those figures, but the simple fact is that this has been going on before the current governor took office. The first time I heard of collecting property taxes early to balance the budget was under Engler, and the borrowing from the future to pay for today began then. Like the Emergency Financial Advisory Panel said, our largest employer has suffered market share loss and the state has seen a huge loss of manufacturing jobs. In fact, this country has seen the loss of more than 3 million manufacturing jobs, and that can be placed at the feet on the man in the White House who refuses to enforce trade polices or even offer any help, hell even meet, with auto makers. The governor of any state has very little effect on the economy, and the biggest problem facing Michigan is the trickle down effect caused by the downturn in the auto industry.
I fail to see how trying to create a modern tax structure that address the fact that we are now a primarily a service-based economy is punishing the citizens.