Michigan Government Shows How to Cut Budget Deals

If one wanted to purchase a Michigan state lottery ticket at 1 am this morning, it was not possible. From midnight to around 4 am, the state government had shut down (lottery tickets included) due to lack of a budget deal. However, an all-night session of the legislature and some careful balancing of interests resulted in a victory for the entire system in wiping out a $1.75 billion deficit. Spending cuts and tax increases will keep the state budget balanced, a lesson for Washington, DC.

On the tax side, the state income tax rate is rising from 3.9% to 4.35%. For someone making $50,000, it would mean an increase of $225 a year, or about 75 cents a day. It isn’t crippling. What’s more, the bill that was passed is worded so that the rate will come back down to 3.9% in stages between 2011 and 2015. In addition, the state’s 6% sales tax will now cover some services starting December 1, but it will not go up.

On the spending cuts side, Medicaid health care providers will see a 1.1% reduction in reimbursement rates. Also Michigan universities and community colleges will not receive a budget increase this year, which is probably a mistake, but only because this journal believes that education spending is not spending so much as investment. Michigan needs to keep its workforce as educated and engaged in lifetime learning as possible as car making continues to decline.

Of course, there were those who were unhappy. House Minority Leader Craig DeRoche (a Republican), said, “This was vote for bureaucracy and special interests. This is one of the largest spending sprees in Michigan history, it is a 10% increase in the size of the bureaucracy. We stood on principle to cut and reform and have the state live within its means, like working families have to live within their means.” Working families, Mr. Deroche, often get more revenue whether from raises, overtime or a second job when expenses go up. Why should the State, which is after all, only the political expression of the working families in Michigan (and the Fords), do otherwise?

In the 38-member state Senate, 4 GOP members voted for the income tax hike. One Democrat voted against it. In the state house of 110 members, Democrats hold a 58-52 edge. Three Democrats opposed the increase while 2 Republicans voted in favor of the proposal. When party lines are crossed in this way, it is prima facie evidence that legislators are voting their conscience. That’s always more productive than voting one’s ideology.

© Copyright 2007 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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