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Compelling Vision,
Worrisome Strategy

Weekly Updateby Lou Glazer
March 19, 2011

Governor Rick Snyder laid out his vision for Michigan in his State of the State Address and his strategy for getting there in his budget. The vision is compelling, the strategy is worrisome.

Our new governor understands better than any of his predecessors what it takes for Michigan and its citizens to succeed in the global economy of today and tomorrow. If 2011 is to be a start of a long-term Michigan economic recovery, it will be because Gov. Snyder gets us on the path to the Michigan 3.0 he promised in his campaign. The goal is a Michigan that is more knowledge-based and entrepreneurial. (A challenge is that most of the legislature that got elected with him campaigned on restoring Michigan 2.0.)

The governor has issued the right challenge: No more putting off until tomorrow the difficult choices that need to be made to revitalize Michigan. And he told us specifically what outcomes he wants to achieve and be held accountable for.

As they relate to the economy, the measures he chose are the right ones. In addition to the obvious lower unemployment, he wants higher per capita income, lower child poverty, more students leaving high school college-ready, higher college attainment and a higher number of 25-34-year-olds choosing to live and work in Michigan.

We have been going in the wrong direction on each for years. Turning them around will be difficult, but essential.

Getting the metrics right is a major step forward, but ultimately what matters is making substantial progress on each. In his State of the State the governor outlined his priorities to turn Michigan around. There were four action areas he addressed that are particularly encouraging for a return to prosperity:

  • Moving to a P-20 education system, one that starts at birth and is available for a lifetime
  • Recognition of the essential role that our major research universities play in growing the economy
  • A call for the state to actively work to attract college educated immigrants
  • An understanding that vibrant central cities — particularly a Detroit that is an attractive place for young professionals to live and work — are an essential element in Michigan’s economic revitalization.

The last two — immigrants and Detroit — are particularly noteworthy because they show a governor willing to work on the necessary, but unpopular. Running against both has proven to be a way of getting elected all too often.

Then came the governor’s budget. This is where the worrisome comes into play.

His budget plan continues his willingness to do the necessary but unpopular, with recommendations to tax retiree pensions, sharply reduce targeted industry tax incentives and rein in the cost of public employee benefits. But in big-picture terms his budget continues the now decade-long pattern of his two predecessors: tax cuts accompanied by cuts in higher education and support for local government. It is a strategy that hasn’t worked the last decade. Why is it that we think it will work in the future?

The reality is that for the past decade, on a bipartisan basis we have systematically given away the state’s tax base. The claim was that we needed lower taxes to grow the economy. It didn’t work.

Contrary to conventional wisdom, the reality is state taxes are taking a substantially smaller proportion of Michiganians’ income today than in 2000. And over that period our economy has gotten substantially worse. In 2000, when the state had an unemployment rate of around 4 percent and was the 18th most prosperous state in the country, state taxes were about 9.5 percent of personal income. Today, with an unemployment rate of more than 10 percent, we are the 37th most prosperous state and state taxes are a little less than 7 percent of personal income. If state taxes were at the 2000 level of personal income we would have $7 billion more in revenue.

The governor estimates that his tax proposals net out at an additional revenue loss of $200 million. And like his predecessors, he pays for it primarily with cuts in education and revenue sharing.

His education cuts are broader and deeper than before; larger cuts to universities and, for the first time, real cuts to k-12. The k-12 cuts are deep enough that it is highly likely that even if he achieves the necessary reductions in labor costs without lessening the quality of the educators teaching our children, there will be a reduction in services to students.

All of which raises the essential question: “How do you achieve the governor’s compelling vision of a Michigan 3.0?” It is hard to imagine how we make progress on his dashboard metrics of higher per capita income (which is increasingly driven by college attainment), lower child poverty, more students leaving high school college-ready, and higher college attainment when we are reducing funding for education.

It is also hard to imagine how we make progress on his dashboard metric of a higher number of 25-34-year-olds choosing to live and work in Michigan when we are continuing the onslaught against revenue sharing, which makes it more difficult for local governments to provide the quality of place that is key to retaining and attracting talent.

To us, the more likely route to Michigan 3.0 is a budget priority of making public investments in preparing, retaining and attracting talent. Specifically, it means reversing a decade of decline in higher education funding and helping create an attractive quality of place — particularly vibrant central cities — with increased funding for basic services and key amenities like transit, the arts and parks/outdoor recreation.

Gov. Snyder in his campaign’s 10 Point Plan and in his State of the State made the case that these are important components in his plan to create Michigan 3.0

The governor has laid out a compelling vision where we need to go. So far, his policies and funding don’t seem likely to get us there.

Read the next article in the series >>

Lou Glazer is president and co-founder of Ann Arbor-based Michigan Future Inc., a nonpartisan, nonprofit organization committed to being a source of new ideas on how Michigan can succeed as a world-class community in a knowledge-driven economy.

March 19, 2011 · Filed under Features

7 responses so far ↓

  • 1 Art Myatt // Mar 20, 2011 at 4:09 pm

    From the Glazer article: “The reality is that for the past decade, on a bipartisan basis we have systematically given away the state’s tax base. The claim was that we needed lower taxes to grow the economy. It didn’t work.”

    And from the Ballard article: “If we had avoided even a small fraction of the tax reductions of the last 10 years, we would not have any budget deficit at all.”

    We know already that tax cuts will not bring the jobs Snyder promised during his campaign, because the past decade of tax cuts has not brought jobs. What Snyder’s tax cuts do is turn a state budget problem into a state budget crisis. The crisis is used to justify cutting education budgets, taxing pensions, and so on. Some of the cuts will help drive municipalities into financial crisis, and then the emergency financial managers will have the power to set aside contracts with unions.

    Instead of confronting public employee unions directly and state-wide, Snyder’s plan will weaken them piecemeal. Snyder may not be singing quite the same tune as the more confrontational union-busting governors of Wisconsin and Ohio, but his tune is from the same hymnal. Not only will there be fewer jobs as a direct result of the Snyder plan, remaining jobs will pay less and be less secure. However, some businesses may do well. That’s how the corporate state works.

  • 2 the Snyder budget :: Michigan Future Inc. // Mar 20, 2011 at 4:55 pm

    […] with differing points of view on our assessment of the Governor’s first 90 days. Here is what I wrote. If you have the time I would recommend all five of the columns. They provide a pretty good […]

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