by Eric Freedman
February 16, 2009

This is the winter of our discontent, as Shakespeare’s Richard III proclaimed, or perhaps the winter of our hardship, as Barack Obama somberly acknowledged, but winter — meteorological or economic — isn’t new in Michigan. And although there’s not much that state leaders can do about snowstorms, other than plow the roads, they can and do wrestle with the financial climate. From big chills — think Detroit 3 and Steelcase layoffs — to smaller chills — like BorgWarner layoffs in Cadillac — to shivers at the sight of shuttered storefronts and mall vacancies across the state, Michigan is in a deep freeze.

But on a comparatively balmy — temperatures in the low 20s — January afternoon, Jim Curran doesn’t sound panicked as he sits in his East Lansing living room, where large windows overlook the backyard and sunshine reflects off the snow, creating a brightness that clashes sharply with the gloom-and-doom discussion inside. He surveys the sorry state of the state and says there are answers out there, somewhere, and he believes more searching — including soul-searching — can find those answers.

Curran and his seven colleagues on the Legislative Commission on Government Efficiency, which he co-chairs, are among those searchers. So, independently, is Lt. Gov. John Cherry, delegated by his boss, the governor, to “lead a comprehensive effort to dramatically change the shape and size of state government” — a government Cherry yearns to lead after the 2010 election. So, independently, are a bevy of business, think tank and advocacy groups. So are state agencies. So are individual legislators in both chambers and both parties.

With so much need and focus on finding ways to sharply increase government efficiency and reduce costs, why is the state going about the quest in such an inefficient, scattershot way? More important, with so many searchers and the added pressure of the state’s continuing downward spiral, why have there been so few answers, successful or not?

The first question isn’t hard to answer. Politics isn’t efficient, and one politician’s targeted cuts are another’s essential government services. Restructuring efforts cut across many and varied political agendas; hence, the existence of many and varied restructuring efforts.

The second question, about the dearth of widely acceptable solutions, is tougher and more complex. It involves partisan politics, of course, as well as inertia, state and federal mandates, public perceptions and expectations, unpredictable economic developments, competing interest groups, labor contracts, the fiscal status of local governments and school districts, and factors outside the state’s sphere of influence — let alone control — such as world oil prices, national economic policy, corporate decision-making, international demand for Michigan-made products and even the weather.

To begin with, the simple, noncontroversial and one-shot changes have largely been made. As commission member Fern Griesbach puts it, “We believe the low-hanging fruit has already been picked.” For another, the depths of this winter of our discontent and hardship weren’t accurately foreseen. For another, successive years of slashed budgets have undermined elements of state and local governments’ abilities to innovate, to plan, to plow forward against the tide. Even after past budget debates ended, Curran says, “we’re right back now to the disconnect between program pressures and the revenue stream.”

The legislative commission is nonpartisan, and the directors of the Senate and House fiscal agencies are among its members. Legislative leaders chose the rest — Curran is an appointee of House Speaker Andy Dillon (D-Redford), and co-chair Kevin Prokop, co-founder of a private equity firm in Livonia, was picked by Senate Majority Leader Mike Bishop (R-Rochester). Its charge comes from a 2007 law that was part of that year’s budget compromise: review and investigate ways to make state government more efficient and to evaluate services provided by each state agency.

Curran heads its working group on revenue sharing and is the backup for its corrections working group — both areas of past experience. He’s seen local government from the inside as a member of the Grosse Pointe City Council and as an official of Wayne County’s Office of Intergovernmental Affairs and Management, the Detroit-Wayne County Community Health Board and the county departments of Jails and Community Justice. He’s no stranger to Lansing after a series of top positions at the departments of Corrections and Management and Budget. He’s also done a bit of consulting for the Michigan Sheriffs’ Association and a Detroit charter school.

The commission faces a June deadline for its interim report and a Dec. 31 deadline for a final report.

Curran insists partisan politics have played no role in the commission’s work, saying, “I’ve been impressed that neither the majority leader or speaker has tried to say ‘No, don’t touch that.’” His own stint in elective office was nonpartisan as well with, as he remembers, “maybe three non-unanimous votes” in his five years on the city council — a “reform” this legislature is unlikely to emulate — and where, he says, he never heard residents complain about taxes. “People are willing to pay taxes if they perceive value for the money.” As for his own partisan leanings, “I was perceived as a Democrat.”

Even if Bishop and Dillon aren’t saying “No, don’t touch that” to the commission or to other “reform” and efficiency advocates, it’s clear that some things will be a lot tougher to touch — that is, cut or eliminate. For instance, Curran describes K-12 education as a definite “lightning rod” and talks about community loyalty to schools districts — Michigan has more than 500 of them, 10 times the number in Maryland.

Everyone has ideas
Of course, the mantra of efficiency and “reform” has long been chanted in Lansing. And reform in particular lies in the eye and mind of the beholder because the word itself suggests change for the better, or improvement. For example, think back to Gov. John Engler’s executive decision to split the Department of Natural Resources into two departments, DNR and Environmental Quality. The political, administrative, financial and public impacts of that move took years to settle down, with an outcry even from Engler’s former GOP colleagues in the Senate. And in the search for “reform,” ideas sometimes come full circle: consider Granholm’s 2002 proposal to recombine the two departments and Bishop’s January 2009 proposal to do the same.

Similarly, Engler’s conversion of the Department of Social Services into the Family Independence Agency in the name of “reform” triggered protests. Privatization and contracting out became the buzzwords. Early retirement offers reduced the number of experienced state workers, but lack of strategic planning meant insufficient control over where people left from. As a result, the state retained many of the same people as consultants to handle more or less the same duties as before — while they collected their pensions.

Phil Power’s Center for Michigan has laid out a plan for $1.5 billion in savings. Photo by David Trumpie.

As for Gov. Jennifer Granholm, she was “dealt a tough hand” when she took office, Curran says. “The vault had been pretty much cleaned out when she came into office. All the rainy day funds were drained.” She, too, has had “reform” and efficiency on her mind from early in her administration. For example, she merged two departments into a Department of Labor and Economic Growth, recently redubbed the Department of Energy, Labor and Economic Growth.

Her February 3 State of the State address intoned the word “reform” or a variant eight times. She proposed consolidating 18 cabinet departments into eight without specifying how much money that overhaul — or “reform” — would save or how it would make government more “efficient,” especially if functions and personnel are transferred rather than eliminated. She did announce plans to abolish the Department of History, Arts and Letters — an entity Engler created — and spoke hopefully but vaguely of “finding other means to support these important functions.”

Her budget proposal on February 12 for the new fiscal year starting October 1 provided some macro detail: $670 million in cuts and 1,500 state employee layoffs.

The governor’s intent to eliminate more than half the state’s full departments — if implemented — would be a far more sweeping structural “reform” than even the free-market-oriented Mackinac Center for Public Policy or business groups have advocated. In fact, the Mackinac Center has recommended establishing a new department “whose sole function is to issue permits,” taking over that responsibility from all other agencies.

A new study by the national Council of State Governments estimated a $262-million savings over five years in its recommendation to cut the length of time inmates stay behind bars, but at an undetermined additional cost to provide intensive probation and other effective alternatives to incarceration and to get more police on the streets. Under the plan, all inmates would be required to serve at least their full minimum sentences and most would be paroled at least nine months before their terms expire. About 12,000 of the state’s 48,000-plus inmates have already exceeded their minimum sentences.

Wait a minute, cautions Tom Hickson, legislative director of the influential Michigan Association of Counties. The prison population and the number of prisons already have dropped over the past few years, but not the number of employees, and the annual tab continues to climb — now topping $2 billion.

Hickson lauds the fact that the Council of State Governments report emphasizes public protection but warns that if the state’s approach to sentencing guidelines and minimum sentences changes, more convicted felons will end up in county jails — at county rather than state expense. He says Michigan judges already send only 22 percent of convicted felons to prison, roughly half the national average, while county jails already “are bursting at the seams.”

Asking fewer to do more
All the while, the number of state workers has been dwindling. Curran puts the payroll at about 15,000 fewer than 10 to 12 years ago, excluding Corrections employees. That means fewer hands to provide the services the public expects — trooper patrols, plowed freeways, clean campgrounds, quick permit approvals, worksite safety enforcement, accurate gas pumps, secure prisons, swift responses to salmonella outbreaks — and the list goes on. “We’re literally asking people to do the same amount or more with less,” he says.

Griesbach, whose day job is director of talent management at Consumer Energy’s human relations department, heads the commission work group on personnel practices. A priority is developing a five-year forecast that looks to match supply — personnel — with demand — including changes in programs and the state’s demographics. That means likely savings, she says, because staffing needs can be matched with plans and programs. “Don’t hire people you don’t need or offer across-the-board-everybody-who-wants-to-go-can-go” early retirement options. 

And with the state signing three-year contracts last December with unions representing a majority of state workers, “this is a good time to begin the dialogue, a good opportunity for joint review of issues and problem-solving,” she says.

One high-profile ramification of the workforce reductions was the recent outcry over handling of unemployment benefit claims in light of Michigan’s seasonally adjusted jobless rate of 10.6 percent in December — the highest since late 1984, when Democrat James Blanchard was governor and the nation was in recession. As part of his downsize-the-government “reform” drive, Engler closed local unemployment offices across the state.

Now with the rate cracking the double-digit ceiling, the Michigan Chamber of Commerce pummeled Granholm and her administration for insufficient staff and computer capacity to handle the torrent of claims. Granholm quickly responded with a press conference — vowing, “If I have to go in and answer the phones myself, I’ll do it” — and promises to expand hours and quickly hire 276 more workers within following weeks.

Another in the latest round of “reform” proposals comes from the Michigan Chamber, Detroit Regional Chamber, Detroit Renaissance and Grand Rapids Area Chamber of Commerce, along with the Center for Michigan, an Ann Arbor-based centrist think tank. Their plan addresses prisons, Medicaid, education and local government contracting. Cap school superintendents’ salary and cut judges’ pay and health benefits? On their list. Reduce the state’s prison population? It’s there too. Privatize prison and school food services? Yup. Eliminate binding arbitration in police-management disputes? That too. Add to that their “reforming potential waste, fraud and abuse” to-do list drawn from Auditor General reports. Projected savings, they say, total $1.5 billion while simultaneously creating jobs and spurring investments.

Changes to the state’s corrections system are common to most restructuring plans.

The plan proffered by those groups are pretty modest compared to some of the 101 ideas to “revitalize Michigan” laundry-listed by the Mackinac Center in Midland. Don’t hold your breath waiting for enactment of such recommendations as abolition of intermediate school districts, elimination of most occupational licenses, repeal of the minimum wage law, lowering the cigarette tax, wiping out collective bargaining for civil service employees and repealing teacher certification requirements. The Mackinac Center also suggests, “Eliminate the Michigan Business Tax and replace it with nothing.”

In the GOP response to Granholm’s State of the State address, Sen. Bishop sounded the usual clarion cry for lower taxes, including eliminating the 22-percent Michigan Business Tax surcharge adopted in a prior budget compromise. “Tax cuts work and are an effective way to create jobs and attract businesses,” he insisted. However, his remarks didn’t explain how the state and, importantly, local governments, should make up the lost revenue.

Meanwhile, the Michigan Fiscal Responsibility Project, a coalition of human services, education and local government groups, has been sounding its own cry about what it says is the overlooked impact of the state’s tax cut-based economic policy. “Combined simultaneously with Michigan’s massive job losses,” the coalition said, that policy has “resulted in staggering funding cuts to health care, public universities, police, fire and other local government services since the late 1900s.” And Curran ponders a related question: “If tax cuts drive the economy, shouldn’t our economy be in much better shape than it is?”

Mitch Bean, the director of the House Fiscal Agency and a commission member, sounds grounded in Capitol realities rather than wishes. “Everything is very difficult to accomplish politically. The things the commission is trying to do in dollar terms cannot be accomplished with just ‘efficiencies.’ It requires reductions in service.”

So are there realistic areas for big savings? Prisons, Bean answers, but only by reducing the number of inmates. What about privatizing prison services? “If there’s any savings, it’s nickel-and-dime.” What about eliminating Medicaid coverage for services that aren’t federally mandated? Whoa there, Bean warns. First, that would mean hundreds of thousands of uninsured state residents, mostly children, who will end up costing the health care system more. Second, every $1 the state spends on Medicaid means $1.60 back from Washington.

Identifying real questions
To successfully search for answers, it’s essential to ask the right questions, the deep ones, the most challenging ones, Curran says. Among them: what’s the difference between what state government does and what it funds? That requires understanding why something’s in the state budget. Another is identifying overarching issues, such as controlling health care costs, which has implications for revenue sharing, fringe benefit costs for state and local workers, prisons, health providers, technological resources and the general public.

Another big question: should public policy and spending to deliver public services be driven by which units of government are involved or by the services themselves? There are many examples of intergovernmental cooperation, such as multi-unit solid waste and airport authorities, and some municipalities have abolished their police departments and contracted for coverage with county sheriffs. Consolidating road patrols doesn’t save much money, according to Curran, but it makes sense to centralize 911 services at the county level — and withholding state assistance to municipalities that insist on running their own 911 systems. And if a massive data center makes sense for Google, why not for state agencies?

Curran continues his questioning. Who or what is the client for these services? With state purchasing, is it the departments or the process through which businesses compete to supply goods and services? With human resources, is it placing the right people in the right jobs or is it the process by which government hires?

Does a push to consolidate services make sense in a state where most proposals to merge townships or school districts have flopped? The Senate Transportation Committee is looking at the possibility of regionalizing the 83 road commissions. It’s an idea advanced by Sen. Jud Gilbert (R-Algonac), who observes, “This is the perfect time to get reforms done.” The influential County Road Association of Michigan disagrees. And what about the hue and cry from an aroused citizenry when the nearest schools or government offices close due to consolidation and when beloved mascots are put out to pasture?

Curran poses yet another deep question: what hasn’t Michigan done that would have better positioned it to survive the recession? “As we cut, cut, cut, there haven’t been the investments necessary,” such as construction of university research facilities “to help us get to the new economy. What if we’d put $1 billion into research facilities for alternative energy?” He continues, “What are the two or three things we need to focus on to survive and thrive? Research institutions, natural resources and the need to make investments.”

Prospects for action
Certainly some “reform” and efficiency proposals are running on similar tracks, including ideas for changes in sentencing practices to reduce the prison population. “The governor’s been very clear on the need for reform in Corrections and sentencing policy, and we’re going to be there too,” Curran says of the legislative commission. And it can look to other states for good ideas — New York on intergovernmental cooperation, Minnesota on sentencing guidelines, Pennsylvania on prison administrative and transportation costs. But as tough as the Michigan situation is, the state has made some progress in Curran’s view. For example, the state leads the nation in controlling Medicaid costs per enrollee.

The bottom line? Ask Bean, the realist, about the odds of an economically rational and politically palatable solution that meets the constitutional mandate for a balanced budget and he replies, “‘economically rational’ and ‘politically palatable’ don’t always match.” Even so, “one way or another we will pass and maintain a balanced budget.

“I know the state budget well enough because that’s what I do for a living. If somebody says ‘Find $1 billion of cuts,’ I can find $1 billion of cuts. It’s up to the legislature to decide whether they want to do them,” he says. “A few people will be satisfied with the outcome. Most people won’t.”

Curran observes, “It’s a lot more fun being in government when there’s money there.” Of course, the money isn’t there, but he insists there’s a good chance that the commission’s work will pay off. “I’m basically an optimist or I wouldn’t have taken the damn job.”

 

Pulitzer Prize-winning reporter Eric Freedman is associate professor of Journalism at Michigan State University and director of its Capital News Service. His latest book, with Prof. Stephen A. Jones of Central Michigan University, is African Americans in Congress: A Documentary History (Congressional Quarterly Press).