Smothering the Hope
of an Early Budget

by John Lindstrom
Gongwer News Service
May 28, 2010

Let us not talk falsely now, because the hour is getting late. So would Bono have sung at the U2 concert at Michigan State University on June 30 had not middle age caught up with him and found him having emergency back surgery?

But the lyric could apply just as easily to the world of Michigan politics and legislating. So while we cannot have U2 live (at least this year), we can consider the current status using U2 lyrics. While one may think daddy’s gonna pay for your cracked car, daddy instead gonna talk about the world, at least in Lansing.

With June approaching, the legislature has to be telling itself “there must be some way out of here” as it confronts the big task it has set for itself: completing the 2010-11 budget.

Oh, they may wanna run, they may wanna hide, they may wanna tear down the walls that hold them inside, but after struggling with budgets for the last decade, including two short-lived government shutdowns, the whole political world came crashing down on lawmakers this year with one mission above all else: finish the budget by July 1.

Governor Jennifer Granholm joined the chorus, reminding the legislature that we don’t have the time to watch the world go tumbling down. Get the budget done by July 1 or, by all rights, you should be docked pay, the governor said. Oakland Sheriff Mike Bouchard, who is running to succeed Ms. Granholm, went even further by saying the budget should be done in May. The schools want the budget done in July, the cities and counties and townships want the budget done in July (because, after all, their fiscal years begin in July) so they can then know the amount of their state revenues.

And the legislators want the budget done because it’s an election year. The less time spent in town the better, not only because, as the Irish boys would tell us, the more you see the less you know, but because it means less time on the campaign stump.

So the governor wants the budget done by July 1, the gubernatorial candidates do, all local officials do, even the legislators want it done. Why then is all the betting that the budget won’t be finished until closer to the start of the 2010-11 fiscal year on October 1?

Well, because hope and history won’t rhyme. Or in this case, the history of this legislature and its members’ ongoing open distrust of each other, and their inability to find compromise short of exhausted exasperation, stand at the ready to smother the hope of an early budget conclusion.

From a timing standpoint, there is no reason agreement could not be reached. After all, there is a full month before July 1. There is the complicating factor of the Detroit Regional Chamber annual meeting on Mackinac Island, which can either accelerate agreement or retard it, depending on who talks to whom, who gets to whom, what issues are stressed, and possibly whether play liquor or grownup liquor is consumed.

Even in this age of term limits, there is no experience factor at play this year, since every legislator has been through at least one budget cycle and has a more intimate view of how budgets are constructed. So knowledge, experience and desire are all there, yet here everyone outside of the legislature is, standing with the sons of Cain, betting against the legislature resolving the budget.

Perhaps it would be best summed up by State Budget Director Bob Emerson, who told reporters (in regards to a different issue, but clearly applicable to this question), that in his more than three years of working with the legislature (from that side) he has never known a time when they would not delay when they could delay. Mr. Emerson is clearly, to quote the song, dangerous, ’cause he’s honest.

Part of that inclination to delay is ideological. The Senate Republicans have proudly trumpeted that they have passed a proposed budget with no tax or fee increases (and in its own way it is a budget that seems retributive, since most areas are cut. Again, where was the creativity in terms of putting more money in areas that could boost the state’s economy, such as higher education, and using that as the call to cut spending elsewhere?). Just this past week in the House, however, a Department of Education budget passed that presumes elimination of a business tax credit.

This comes after Treasurer Bob Kleine strongly argued at the revenue estimating conference a week ago that the state does not have a spending problem, it has a revenue problem. Corrected for inflation, Mr. Kleine said, the state has the same revenue it did in 1967, the year the income tax was created, the year of the Detroit riot and the year of the greatest pennant race in baseball history.

But Mr. Kleine’s argument was rebuffed by Rep. Darwin Booher (R-Evart), who insisted spending remains the state’s biggest problem.

With such an ideological divide, one could be forgiven for thinking they would go crazy if they didn’t go crazy tonight.

Add to the ideological standoff the overwhelming timidity that the legislature has shown, which will not be helped in this election year when the fear of an anti-incumbent drive by the electorate is palpable.

Yet the budget can be accomplished, it could be done by July 1. If Elvis ate America before America ate him (okay, that might have been a touch weird, but how could you pass up a lyric like that?), the budget can be done.

In accomplishing the budget, however, will the legislature at least look at some fundamental finance issues? For just as we thought that we had the answers, it was the questions we had wrong, there are some underlying facts of the state’s finances that merit deep reflection.

One comes from the 10-year study of the state’s economy that was published by the Senate Fiscal Agency. In that study comes a disturbing fact that federal revenues are becoming a larger part of the budget. Part of that is inevitable when the economy tanks, state revenues fall and the gaps are made up with federal money designed in part to help stimulate the economy.

But from a state perspective, relying on federal money also means ceding some authority for setting priorities to the federal government. Plus, it also it makes the state more vulnerable should congressional and presidential priorities change and they either cut spending drastically (which one might want to assume, given that someday the federal debt must be tackled). One answer to that, of course, is to cut spending further, reducing the overall need on any revenue from any source. To that comes the question when the roads are crumbling and college is being priced out of the reach of too many, should the state cut more?

A second fact that bears reflection came from the revenue estimating conference when officials said the revenues for the current fiscal year are expected to be some $8.8 billion less than the limit set by the Headlee Amendment.

Put another way, the state could technically collect almost $9 billion more in taxes from residents and businesses before running afoul of the constitution. Never mind that politically it would not happen; legally it could. Of course, if it did, the state’s spending pressures would be relieved (until someone said their program was not getting enough), but the body politic probably would go feeble over the increased taxes.

But the concept to consider is what if Mr. Kleine is right? What if the state’s tax structure simply can no longer support the demands of a modern state, even a state that has severely cut back how and where it is spending? Yes, there is a spending question, a decision that has to be made on what and where the state should spend, but what if even at that level there is simply not enough revenue to support the programs the state has decided it needs? And what if the revenue issue is not that the economy won’t support and tolerate the needed revenue level, but the taxes are structured such that they cannot provide that revenue in a fair and sustainable fashion?

That question won’t be answered before July 1. But will it even be asked as lawmakers work on finishing the budget?

Or as U2 might put the question: “How can you stand next to the truth and not see it?”

John Lindstrom is publisher of Gongwer News Service. For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.