to Sound Public Policy’
Budget crises boost value of Citizens Research Council projects
by T. Scott
November 16, 2009
Earl Ryan retired as president of the Citizens Research Council of Michigan in October after directing the nonprofit, nonpartisan policy research organization since 1994 and being involved with it for 25 years. His successor, Jeffrey Guilfoyle, comes to the Council after serving as director of the Office of Revenue and Tax Analysis in the Michigan Department of Treasury.
Dome sat down with both leaders during Ryan’s last week in office to discuss their respected organization and the major issues confronting state and local government. Excerpts of the conversation follow.
Dome: Your website says the Citizens Research Council “believes that the use of this information by policy makers will lead to sound, rational public policy in Michigan.” Do you think that with regard to the state budget, we’ve had sound, rational public policy?
Ryan: (Smiling) There’s another statement from our founder, who said that a governmental reformer has to have a geologist’s sense of time. We refuse to make judgments on the performance of our organization based on a brief period of the last 10 years.
Dome: How about overall performance?
Ryan: This organization was founded back in 1916 because of a reaction to the way policy decisions were made, primarily in the major cities but also in state government. Those decisions were based almost completely on political considerations rather than on the basis of facts and reasonable conclusions. While you can always point to silly things going on in government, we like to think that we can point to reasonable choices that were made flowing from the results of our research.
Dome: And what gave rise to the organization in 1916?
Ryan: We were born out of the Progressive Movement. Basically, we were looking to bring a more business-like, scientific approach to making governmental decisions. Governmental budgeting was in its infancy in those days. There was almost nothing like annual budgeting. Modern personnel management was all pretty new in those days, and our organization helped to foster a lot of these kinds of approaches, including a greater focus on long-term planning.
Dome: What are your thoughts on the state budget process — or what appears to be the lack of one — going on now?
Guilfoyle: It certainly doesn’t seem to be going as well as anyone would hope. Obviously, it’s partly a reflection of how bad the choices are that policy makers are confronted with, and I don’t know that Michigan is atypical. Around the country, people are not particularly pleased with their legislators and their governor. The choices are so ugly that it can bring the process grinding to a halt sometimes.
Dome: The choices are so bad now partly because the warnings from you and others have been ignored, aren’t they?
Guilfoyle: Clearly, had they done more to address some of the structural imbalances that have been pointed out — that CRC pointed out in prior years — the problems would be easier than they are right now. But the state has lost 300,000 jobs in the last year, and so you’d be looking at bad choices right now no matter what you did. I mean, we hadn’t had a recession like this since the Great Depression, and it just brings a lot of fiscal challenges with it that are difficult to manage.
Ryan: There are three things. One is that these last 10 years have been unlike anything since the Depression, and it has led policy makers to take the point of view that if we can just hang on, patch things together for another year or two, then we can get through this without having to confront the real underlying issues. Second, they had the wherewithal for a long time to be able to put off these decisions because they used $8 billion worth of non-recurring resources over that period of time, plus now we’ve got the stimulus money as another non-recurring resource. And finally, term limits came along and provided them with every incentive to kick the can down the road, so that on their watch they didn’t have to make those hard decisions. You put those three together and you’ve got a witches’ brew of incentives not to have to confront the underlying structural deficit.
Dome: On top of all those problems, it seems like the process itself has broken down among the leaders.
Guilfoyle: You would hope that it would have gotten smoother. It’s been a tough summer, and I think it would’ve been better had decisions been made earlier. They pretty much had everything they needed to put the budget together by May.
Dome: Have you made recommendations about improving the process itself?
Ryan: Not really. As a matter of fact, we issued a report earlier this year talking about the bad consequences of late budgets and concluded that it wasn’t the process that was the problem, it was the actual operation of the players in that process. You can’t force policy makers to make choices that they don’t seem to want to make. The process here is generally considered around the country to be a good budget process. We’ve got a strong balanced budget requirement. You can’t spend without an appropriation. Since ’92 we’ve had a good consensus revenue forecasting operation. But at the end of the day, when you’re required to make decisions that no one wants to make, they can just keep pushing it off and pushing it off.
Dome: Are there one or two changes in the budget process that you would make?
Guilfoyle: It might be helpful to publish, as part of the budget process, a 10-year outlook for the budget based on what’s in current law. For example, in 2012 the income tax rate starts to fall, and that’s going to have an impact on the budget. It would be nice to see how things are going to be in 10 years, as an incentive to try and address some of those longer-term problems sooner.
Dome: Is there a research council type organization in every state?
Ryan: Not every state, and there’s no single dominant model of operation. States that have organizations similar to ours are North Carolina, Massachusetts, to some extent Florida, Louisiana, Washington. All together there are probably 30 around the country that we consider our kindred spirit.
Dome: Do you ever get together and compare notes?
Ryan: We do. There’s a conference every July or August. If you’ll notice on your way out there’s a plaque on the wall. One of our reports was the most distinguished research winner for last year, on interlocal cooperation. That’s been a big item on our agenda for the last two or three years, trying to get units of local government to cooperate in providing services, because they’re running out of cost-cutting and revenue-raising alternatives.
Dome: Publicly, the first thing the locals say is they’re already cooperating.
Guilfoyle: There is some interest, though, in our work. Local governments are looking for ways to save money. Interlocal cooperation is a good way. They need to do that. They’re looking at profound budget challenges, so I think there are things they’re a lot more interested in now than a couple years ago.
Dome: Locals are not just facing cuts in state revenue sharing but are facing serious drops in property tax revenues.
Guilfoyle: Yes, and 2010 is going to be significantly worse for locals than 2009 was. I just saw some numbers yesterday. I think Oakland County is looking at a 13-percent decline in its taxable value in 2010 and Wayne was like 10 percent. The state’s still going to have to cut the budget next year, so there’s not a lot of hope that revenue sharing is going to be better.
Dome: How do you keep from getting caught up in the politics of the serious policy decisions that have to be made?
Ryan: I guess it’s part of the culture of the organization. We’ve maintained that stance since we were founded in 1916, and although our board as individual members may have their own agendas, they park them outside the door when they come to our meetings. They understand that the value of this organization would be greatly compromised if we were to espouse one group’s interest over another or take on a partisan or ideological bent. They realize that this organization has a niche, and we’re the only one in the state that fills it. They view this as something worth preserving and make sure that our work is what we say it is.
Dome: Can a group hire you to do a study?
Ryan: Not really, no. We view our clients as the citizens of the State of Michigan. I had somebody once say that as a financial supporter, he was our client. And I said no, you’re an investor, you’re not a client. There’s a significant difference between the two. You are investing in an organization that makes every attempt to be unbiased and nonpartisan and accurate in what we do. We let the conclusions fall from the facts, not the other way around.
Dome: So how do you ascertain what the truth is?
Ryan: The truth, I suppose, is debatable in any given situation. But, again, we try to assemble whatever facts we can on a given issue. Sometimes they can be very emotional. The stem cell ballot issue research last year was a good example. We don’t recommend a yes or a no on these issues, we essentially present what we think is factual information that would help a reasonable voter come to a conclusion on the issue. I don’t think we have ever been accused of slanting our ballot analyses toward one side or the other. We don’t rack up pros and cons; I don’t think that’s a productive way of going about it. They may emerge from the report, but what we try to do simply is say, okay, what are the facts, what can we reasonably find out about what’s going on in other states, what does federal law say, and put it together that way.
Dome: Obviously you are both students of government and must feel passionate about some of these issues. How do you keep yourself in check on hot issues?
Ryan: Take a cold shower, I guess.
Guilfoyle: I’ve only been here a month, so I haven’t had enough opportunity to step on my tongue yet.
Dome: You’re always aware of the credibility of the organization.
Guilfoyle: And that is the mission of the organization, so it’s front and center all the time.
Dome: You have an office in Lansing, but why is your headquarters located in the Detroit area?
Ryan: It’s all historical. The organization was founded as the Detroit Bureau of Governmental Research, and we were in Detroit for a long time, heavily involved in issues dealing with Detroit and Wayne County. That was part of the roots of the organization, because part of the Progressive Movement was cleaning up corruption in cities — not so much state government, but cities. [The organization moved out of Detroit in 1997 and into donated space at Ten-Mile and Grand River when it lost its donated space in the city. When it lost its latest office space, it scrambled quickly and found space at Six-Mile and I-275]. This turned out to be a good deal, it’s a pretty good location all the way around.
Dome: When did you expand into state government?
Ryan: There was an outfit called the Michigan Public Expenditure Survey, which was founded during the Depression as a kind of watchdog organization over state taxes. It was a small outfit and substantially more vocal than the Detroit Bureau of Governmental Research, but they frequently asked the Detroit Bureau to do research for them. After the Depression and the war, support for that group tended to fall off. A lot of their battles had been fought and there were overlapping boards, so they said why not combine these two organizations? So they did, and the Michigan Public Expenditure Survey became the Lansing office of the newly created Citizens Research Council.
Dome: How do you keep from being dismissed as unrealistic do-gooders?
Ryan: I guess we can point to the fact that once in a while we’re actually right about something. We were the first organization to identify the state’s structural budget deficit. We plotted out state revenues and expenditures, basically going back 10 years and out 20 years, and said, wait a minute, the line between revenues and expenditures [shows an increasing gap], largely the result of healthcare and corrections. We said there would be a billion-dollar shortfall by fiscal ’04, and it turned out to be $1.4 billion at the time. A lot of people who pooh-poohed us suddenly took a fresh look, realizing that we had some rough idea of what we were talking about.
Dome: What are some other important recent accomplishments?
Ryan: This is kind of a wonky thing, but we introduced a new distribution formula for Community Mental Health dollars. It brought some rationality to what was previously a purely political process. The current actions to reduce prison populations — you can point to our work on that.
Dome: The corrections work stemmed from your study of the structural budget deficit?
Ryan: Corrections grew from one dollar in 20 in 1980 to one in four in recent years. The question then, of course, is do we get the public safety benefits from that kind of incarceration? We could not find any, particularly when compared with our Great Lakes neighbors. We took that information to policy makers and things have begun to happen. Going forward, our work on interlocal cooperation is going to be looked at as significant as well. We’re getting increasing attention from local groups around the state that realize that they can’t make ends meet and want to figure out how to continue to provide services to their residents without going bankrupt.
Guilfoyle: There’s a lot of demand for the work right now because people have to change how they’re doing things. So they’re looking for factual research that they can base some of their decisions on. This is a time when the CRC is really needed. There’s more work out there than we’ve got the staff to do. We’re also looking at education right now in a big way. That’s a big project to undertake.
Dome: Is expansion possible?
Ryan: We’re talking about it. It’s all dependent on the revenue; like any other organization, our fundraising hasn’t been helped at all by this economy. Although in March we received a million-dollar grant from Kresge Foundation to keep us going, and that was very welcome.
Dome: Have you had foundation grants before?
Ryan: We’re a 501(c)(3) so we can take foundation money, and it has been a conscious policy over the last 15 years or so to seek greater support from foundations.
Dome: In round numbers what is your budget?
Ryan: A million. It’s not a big budget. We like it when people say, gee, we thought you were much bigger than that, based on your productivity.
Dome: Jeff, when is the first time you remember hearing about the Citizens Research Council?
Guilfoyle: That’s a tough question, because I’ve known about it for a long time — certainly my entire time working for the state. I had a copy of their tax outline on my shelf that I could pull off at any moment. That was the appeal of coming here — I knew they did great work. I knew that the work was interesting and it would be a good place to try to make a contribution to the state.
Dome: You’re running the show now, what are some of your plans?
Guilfoyle: Next year the big focus for us is going to be education. We’re going to look at all aspects of education — governance, funding, spending pressures. We’re going to look at service collaboration between school districts, and potential reforms and the whole K–12 and beyond or zero to college. We’re going to release that as the pieces are done. It’s going to be a big study and we don’t want to wait until every last thing is done before anybody has access to it. I’m hoping the first piece will either come out toward the end of this year or very early next year, and we’ll just keep releasing them as they’re done.
Dome: What is the first piece?
Guilfoyle: The first piece will be on governance. How are school districts organized? How many districts do we have? We’ll probably break that into two pieces: one what we’re doing now and then a second paper that follows with potential reforms.
Dome: You’ll include recommendations?
Guilfoyle: Absolutely. And then 2010 is an election year, so we’ll have the whole trove of ballot initiatives. In particular, it’s the year of the constitutional convention question, so we’ll put out a piece on the issues associated with the con con.
Dome: Again, you must have personal feelings about these extremely important issues.
Guilfoyle: We get to vote like everybody else.
Dome: But what if someone is talking to you about an issue at a reception or other event?
Ryan: I have trained myself over the years — I’ll leave Jeff to his own devices as to how he handles these issues. I was always very careful to make sure that I didn’t let my personal judgment bleed into [conversations]. I ran something called the Indiana Fiscal Policy Institute before I came back to Michigan — I was trying to create the same kind of organization in Indiana. The woman who, essentially, was the dean of the State House Press Corp came around to interview me as I was leaving. At the end of the interview she closed up her notebook and said, “the reporters over in the State House have been following your career for the last six or seven years, and we really can’t figure out what your politics are. Will you tell us how you vote?” I said, “The only person who knows that other than me is my wife, and I would not want to deprive her of that position.” The integrity and credibility of this organization are so important that I would rather err on the side of being reticent about my own personal feelings.”
Dome: Earl, what’s your most distinct memory of your time here?
Ryan: You want an anecdote? Before she moved to Lansing, Jennifer Granholm was my next-door neighbor. She was making noises about running for governor, and this was back at the time we had identified the structural deficit. I had made a habit of stuffing our reports in her mailbox. We came out with one that was particularly gloomy. So I put a little sticky note on it that said, “Jennifer, are you really sure you want to be governor?”
Dome: I wonder if she remembers that.
Ryan: She does. She spoke at our Annual Meeting a couple years ago and made reference to it. She said she knew me when I had hair, and I said I did this because I was afraid she was going to tax haircuts.
Dome: If there were one or two things you could change in state government, what would you change?
Guilfoyle: I’m going to take the Fifth on that and let Earl express his opinions.
Ryan: If you could ask for one policy that would weaken and make ineffective the legislative branch, it would be term limits. I think it has created such a tremendous incentive to, as we said before, kick the can down the road and avoid making decisions. Even the staunchest defenders of term limits would have a hard time pointing to an improvement in legislative policy making since term limits were adopted.
Dome: And yet the public appears to favor them.
Ryan: One of the things I am particularly disappointed in, and it’s not unique to Michigan, is the cynicism with which a large portion of the electorate treats government. It has resulted in a feeling that government officials can’t do anything, or if they do, they screw it up. That’s not true. Government has its appropriate role, and instead of simply being cynical about it, maybe … it’s always said that democracy is not a spectator sport, so maybe they ought to come off the bench and work to help make it better. And a lot of it is ignorance. The thing you’ll see on our website is “the right to criticize government is also an obligation to know what you’re talking about,” and too many people really don’t. Another thing [cynicism] has done, is to poison the well so that qualified people, people who might want to help make things better, will ask, why do I want to go there — I’m just asking for a world of hurt if I get involved in electoral politics or in public policy. I think that all that goes together to seriously impede the solutions to a lot of the problems that we’ve talked about so far.
Dome: Any parting remarks?
Guilfoyle: The Council has a good reputation and a lot of it can be attributed to the fact Earl has been a good steward. He’s been here since 1994, and that’s a long time to keep the reputation of the organization up. So it’s a little daunting to follow.
Ryan: I can tell you that when the search committee interviewed Jeff, it basically said, that’s it, we’ve found our man. There was no hesitation, and we had some good candidates.
T. Scott is editor and publisher of Dome magazine.