Download - Michigan’s Challenge, Michigan’s Opportunity
Michigan’s Challenge,Michigan’s Opportunity
Gov. Jennifer M. Granholm
and the Future of Local Governments
500
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700
800
900
1,000
1990 1992 1994 1996 1998 2000 2002 2004 2006
Mon
thly
Em
plo
ymen
t Lev
el
(100
0s)
Michigan Manufacturing Employment
Source: U.S. Department of Labor, Bureau of Labor Statistics.
Apr 2007634,500
Jan 1992780,300
Jul 1999906,200
Source: Economic and Revenue Forecasting Division, Michigan Department of Treasury, 5/30/07
Global Shift in Manufacturing Jobs Causes Loss of More Than 1 in 4Manufacturing Jobs Since Mid 1999
State GF Revenue Down 40 Percent Since 1999
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
$12.0
$13.0
$14.0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Billion
s of
200
7 $
Totals exclude transfers and are adjusted to 2007 dollars using Gov’t Price Deflator.Adjusted for inflation.
Tax Cuts Since 1999 Reduce Revenue $1.9 billion
SBT rate cut (Begun in 1999) ($419.0)
Other SBT cuts ($206.5)
Income Tax Rate Cut (Begun in 2000) ($901.4)
Other tax changes ($207.1)
Subtotal State Cuts ($1,734.0)
Federal Estate Tax Repeal ($200.0)
TOTAL State and Federal Tax Cuts ($1,934.0)
Background: Spending CutsEven Before Latest Round, Already Made Significant Cuts Including…
$585M cut from our local cities and townships in 5 years (29%) – now there are 1,600 fewer cops, 2,400 fewer firefighters on the street
$275M cut from our Universities and Community Colleges in 4 years– tuition has increased 34.5%
$172M cut from the Department of Human Services in 5 years– 4,000 fewer employees are helping more citizens in need and protecting more children than five yrs ago
Cut state fleet by 2,500 cars, sold 4 state airplanes, eliminated travel, ended subscriptions, ended personal use of state cars
Adult Education was cut, cuts to K-12, including talented and gifted programs, now total more than $500 million
General Fund support for the MEDC – our job creation agency – has been cut by 72%
Arts and cultural funding in Michigan cut by 75% - we are now at the bottom of the heap
Background: State Gov’t is Smaller Today
FiscalYear
1973
1978
1989
1999
2000
2006
Governor
Milliken
Milliken
Blanchard
Engler
Engler
Granholm
NumberState
Employees
52,673
64,456
64,560
60,066
61,493
52,259
Non-CorrectionsState
Employees
50,316
59,990
52,038
43,003
43,841
35,813
Background: Michigan Government Among
Smallest in Nation
Govt. EmployeesPer 10,000
State of Population Rank
Ohio 537 30Minnesota 527 36Indiana 527 36U.S. Average 539Wisconsin 518 39Illinois 495 44Michigan 482 46
Convened A Bipartisan Panel of Experts
Hon. James J. Blanchard
Hon. William G. Milliken
Dan L. DeGrow, Superintendent of St. Clair County RESA, frmr
Republican State Senate Majority Leader
Don Gilmer, Kzoo County Administrator, frmr Budget Director under Gov. Engler
Paul Hillegonds, Senior VP of DTE Energy, frmr Speaker of
Republican-led House of Representatives
Sr. Douglas B. Roberts, frmr State Treasurer under Gov. Engler
John J. H. Schwarz, frmr Republican U.S. Congressman
Emergency Financial Advisory Panel
Emergency Financial Advisory Panel A Comprehensive Solution
“….Michigan must develop a fiscal plan that includes a combination of revenue increases, spending cuts and reform of how public services are delivered”
- Emergency Financial Advisory Panel Report
Comprehensive Solution: Spending CutsPut Michigan’s Fiscal House In Order Now,
Prevent Massive Cuts to Health Care, Education, Public Safety
$440 million more in cuts for FY 2008 – spending targets set, details to be determined in appropriations bills before the end of the month.
Comprehensive Solution: ReformsTo Save Taxpayer Money in the Long Term, Keeping Michigan Competitive
and Keeping Future Spending in Line With Revenue
SO FAR:
Allows school districts to shop for competitive and quality health insurance plans.
Tightens vesting requirements, eliminates loopholes, increases contributions to pension for new teachers
Creates incentives for healthy behavior for Medicaid recipients
Requires a common calendar for school districts within each intermediate school district.
Eliminates “double dipping”
More to do …
Comprehensive Solution: New Revenues
Income Tax temporarily restored to 4.35%, slightly lower than the rate in 1999. Starts to phase out in 2011.
Sales tax extended to certain non-essential services.
The result of political compromise – costs the typical Michigan family just $1 per person each week.
Michigan Taxes vs. Other StatesMichigan’s State and Local Tax Burden Ranked 32nd
(as a percent of personal income)
Michigan is now ranked 27th overall in the number of services taxed.
# SERVICES TAXED
Michigan 53
Minnesota 67
Ohio taxes 68
Wisconsin 74
Michigan’s new income tax rate of 4.35% is still the fourth lowest among states
Impact on Local Gov’ts
Freeze in revenue sharing (Original budget proposal recommended 2.5% increase with consolidation plan)… avoided massive cuts.
Your local government costs continue to increase, driven by health care… (CRC)
Local governments will continue to face structural deficits (due in part to the cap on property tax assessment increases and Headlee amendment limitations reducing local revenue growth)… (CRC)
Reforms, investments on the state level can help…
More Reforms Will Continue to Help Local Gov’t Continue to consolidate and collaborate on services at the local
level
Health care – rein in costs, expand accessibility of private plans to move people off of Medicaid and reduce “hidden tax” in insurance premiums that subsidize uninsured; push for federal solution.
Budget agreement created government efficiency commission to further target waste and red tape.
Prison reforms to bring state incarceration rates and corrections spending in line with our neighbors
Continued reform of civil service – eliminate layers of management
Legislative pay and benefits must be cut too
State employee health care savings
Reform the way we fund universities to reward degree completion, type, and commercialization
Michigan’s Economic Plan
DIVERSIFY ECONOMY: Focus on Alternative Energy, Advanced Manufacturing, Homeland Security, Life Sciences
MARKET MICHIGAN INTERNATIONALLY: Show MBT/other tools to Companies in Other States, Countries
DOUBLE COLLEGE GRADUATES: Prepare Displaced Workers and Students for the Knowledge-Based Economy
UNIVERSAL ACCESS TO AFFORDABLE HEALTH CARE: Make Workers and Businesses Competitive By Fighting For Health Care For All
GROWTH IN COMMUNITIES: Cities Are Partners; Vibrant Cities Drive Growth, Keep Young People
Michigan’s Economic Future: Diversify, Innovate, Invest
“The typical response, which is to retrench and focus just on efficiency and cost-cutting by eliminating jobs, reducing programming, streamlining operations might not be really the best approach once business picks back up again. Across industries, companies that have continued to pursue innovation during tough times often achieve a significant competitive advantage, and position themselves far more effectively for growth.”
– Steve Ballmer, CEO of Microsoft