On February 17th, Governor Rick Snyder presented a proposed budget for 2011-2012 to a joint session of the state legislature. The Governor made it clear that he thought his plan was fair, but that it would require what he called shared sacrifice. Proposed spending reforms in Education, Health and Human Services, and Revenue Sharing are relatively minor, and do little to attack the continuing growth in the scope and cost of the public sector. For 2012, his spending level, at 45.9 $billion, is $1.1 billion less than current year spending and $300 million more than 2010. The budget proposal is a step, albeit a small one, in the right direction and deserves our support. Most Michiganders will find something to complain about in the budget proposal, but isn’t that what fairness is about?
The centerpiece of his plan is the replacement of the MBT with a 6% flat income tax on C Corporations. Other business entities will be exempt from business tax but will be pay the 4.25% state income tax. This will eliminate the business tax for 95,000 Michigan businesses and represents a $1.8 billion tax cut for job creators, and that’s what Michigan needs. Whatever its shortcomings, and there are some, Snyder’s budget is pro-growth, pro-jobs and pro-taxpayer.
Unfortunately, the state budgets have for years been designed to curry favor with special interests and favored constituencies, with carve-outs designed to accommodate public and private sector unions, environmentalists, AARP, and other organized pressure groups. For Americans who don't think the welfare state riots of France or Greece can happen here, we recommend a look at the Democratic Party and public union spectacle that has unfolded in Wisconsin. Over the past few weeks, thousands have swarmed the state capital, to trash the Capitol Building, intimidate lawmakers and disrupt the Governor’s plan to balance the state budget, while the Democratic legislators have gone AWOL. It is noteworthy that Governor Snyder asks very little of public employees.
In The Detroit News on Thursday, March 10, Nolan Finley wrote "Of all the groups that are being asked to share in the sacrifice to save Michigan, the public employee unions have the least reason to feel aggrieved. And yet they are in the streets of the Capitol this week, their entitlement mindset on full display, waving signs and decrying the perceived assault on labor". The Governor has asked state employees for $180 million in concessions, an amount that Finley notes they can cover by paying just 20% of their health care premiums. UAW local 6000 has complained that state employees are bearing more than their share of pain by being asked to pay higher health care premiums and other (unspecified) concessions. Meanwhile, seniors and the working poor are being asked to contribute almost $1.3 billion.
With the governor’s proposal to eliminate the exemption of public and private pensions from the state income tax ($900 million), I am in the unusual position of having the democratic leadership in the State Senate fighting for me. AARP has said that this plan declares war on the elderly and has promised that its 1.4 million members are ready to fight. The elimination of credits and deductions related to the individual income tax is likely to reduce the amount of private money contributed to food banks and homeless shelters, but it’s also possible that there will be less need for them. The same might also be true with regard to the phase out of the earned income tax credit. Phase out or elimination of other special privileges embodied in the tax law also deserves to be supported.
The reduction in overall revenue sharing of $142 million will likely result in some job losses from local and county governments that rely on revenue sharing for a big part of their budgets. Summer Minick, director of state affairs for the Michigan Municipal League complains that the deep cuts in state and local revenue sharing for municipalities will mean "fewer public safety officers, reduced services out of city hall, (and) reduced ability to fill potholes and salt the roads". Mark Gaffney, president of Michigan AFL-CIO laments that the governor's blueprint for solving Michigan's fiscal crises leans too heavily on workers and not enough on those who can best afford it.
The state's reduced contribution to school systems are expected to put the crunch on teachers and support staff, according to officials with the Michigan Education Association. And that, they said, will likely have a snowball effect on the state. "This would ultimately end with the elimination of positions and the elimination of programs," said Don Noble, an MEA lobbyist. "The reality is we're going to see a significant increase in class sizes in our districts and that usually means layoffs."
Apparently everyone agrees that the solution to Michigan’s economic problems will require shared sacrifice. Unfortunately not everyone is in agreement about what that means. To those democratic constituencies who have learned to depend on the state’s largesse, it means that someone else sacrifices. The Governor’s concept of shared sacrifice seems to be that everyone is treated equally. I think that’s fair.