By Susan J. Demas
For the Enquirer
Gov. Jennifer Granholm on Tuesday trumpeted an ambitious education and economic development agenda during her State of the State address, but vowed not to raise taxes this year.
The Democrat will fill in some of the fine print when she unveils her fiscal 2009 budget next week. The House Fiscal Agency forecasts the state is on track to be $275 million in the black.
But missing from her 53-minute address were many recommendations made by her own Emergency Financial Advisory Panel on solving the state’s short- and long-term budget problems.
In January 2007, Granholm appointed the bipartisan, 12-member panel chaired by former governors William Milliken, a Republican, and Jim Blanchard, a Democrat. The group (nicknamed the 12 Apostles) penned a 19-page report on Feb. 2 as the state was facing a $3 billion shortfall for fiscal 2007 and 2008.
"I honestly don't know how many people read our report," Blanchard said.
That sentiment was echoed by several members of the panel -- former state Senate Majority Leader Dan DeGrow, former state Rep. Don Gilmer and former U.S. Rep. Joe Schwarz.
"The report is applicable today as it was when it was written," said Schwarz, I-Battle Creek. "I would make a strong suggestion for all men and women in the Legislature to reread it. Some of them never read it in the first place. This should be their top priority. The bell rings as soon as the governor's State of the State and it's not going to be any easier in fiscal 2009."
The report’s general theme of solving the state's structural deficit with “cuts, reforms and revenues,” popped up frequently in speeches by Granholm and other Democrats. Last year, she and lawmakers struck an 11th hour deal to increase business and income taxes by more than $1 billion and allow competitive bidding for school employee health insurance, which Republicans have tried to get through for years.
Schwarz called last year’s cuts and reforms “nip and tuck.”
“The fact remains, you can clearly point out structural problems. The structural deficit is still there," Schwarz said. "Taxes and spending and the structure of state government still have significant problems."
"My advice would have been to solve it all at once so you don't have to do it again," said DeGrow, R-Port Huron. "(Former Gov.) John Engler always said, 'If you have to take a hit, take it early, so you get it over with and don't have to take the hit again.'”
Several of the report’s recommendations, like the Internet tax, were left on the cutting room floor. The report notes the growing service sector is not taxed, but the Legislature made little headway, passing and quickly repealing last fall a tax on a hodgepodge of services.
But in spite of last year’s messy budget wars, Blanchard says he “remains optimistic about Michigan’s future.
“It’s too great of a state to be kept down,” he said.
Making the cuts
On Tuesday, Granholm made scant mention of cuts and reforms, besides promising to slash red tape for businesses by making Michigan a regulatory “one-stop shop.”
Though Senate Majority Leader Mike Bishop, R-Rochester, said the governor had “borrowed a page from the Republican playbook” with her promise not to raise taxes, his caucus wants action to reduce spending and make government leaner.
"It's time to focus on reforms and making investments to lead Michigan into the future," agreed Gilmer, R-Augusta. "We're still providing more government than we have the resources to pay for it."
The Emergency Financial Advisory Panel made several recommendations, including cuts to the $2 billion Corrections budget. Michigan incarcerates more than 50,000 at a cost of $31,000 per prisoner. The nonpartisan, Lansing-based Citizens Research Council reports Michigan could save $500 million if its incarceration levels matched other Midwest states.
Gilmer urges a bicameral, bipartisan committee meetings taking 30 to 40 hours worth of testimony on sentence reform, rehabilitation and recidivism.
The report also said skyrocketing state employee and retiree benefit costs need reform and schools and local governments must consolidate services.
DeGrow said the state could restructure revenue sharing with local governments. The time might be right to let local taxpayers decide what priorities they want to fund instead of getting a blanket amount of state revenues, he said."In an era where state government is so strapped, do we fund something that's optional?" DeGrow said.Consolidation needs to happen on both the local and state levels, Schwarz said.
"There are 19 state departments and I'm not sure they're all necessary," he said. "There can be a consolidation of functions — I'll leave it at that."
Strategic investments
In her State of the State, Granholm did address some of the panel’s findings.
She pushed spending on infrastructure to create 28,000 jobs. She also proposed several education initiatives, such as incentivizing colleges and universities to turn research into businesses. Her Michigan First Health Care Plan providing access to the uninsured popped up, although the state has been in a holding pattern, waiting on a federal waiver for several years.
Panel members want the state to prioritize infrastructure and education, strategically investing in areas research shows will attract businesses and skilled workers.
"You still hear voices that we should cut taxes by $1 billion," Gilmer said. "That would completely destroy any opportunities to invest in our infrastructure, things for people to take notice of Michigan."The gas tax — which hasn't been raised since 1995 — should be on the table to fund road projects, Schwarz said.
Higher education has taken the hardest hit by the budget crisis, he said. Funding has been slashed by 11 percent from 2002 to 2007, the Presidents' Council, State Universities of Michigan reports. Tuition has soared, with most of the state’s 15 public universities last year passing double-digit tuition hikes.
"We've already damaged that a lot," DeGrow said. "Say what you will about Gov. Engler, but he valued higher education. We never cut higher ed."
If Schwarz could pass on one piece of advice to leaders during this year’s budget negotiations, it would be: "Have the courage to do what's right, not what's expedient."This isn't going to be easy to try to run a state of 10 million people with a rapidly changing economy with a government structured for the 1960s. Be bold and courageous."
Showing posts with label Tom Clay. Show all posts
Showing posts with label Tom Clay. Show all posts
Tuesday, February 5, 2008
Saturday, December 1, 2007
Everyone loses on service tax
“Senate Republicans are not obstructionists. We are standing up against a mammoth tax increase. This caucus stands for something.” - Senate Majority Mike Bishop, R-Rochester
So far, that something is failure.
After two months of endless bellyaching, Republicans have proven they can’t butcher a wildly unpopular tax.
The oft-slandered service tax – the part of the last-minute state budget deal instantly deemed dead on arrival - now seems poised to take effect Saturday.
Bishop hoisted the white flag Wednesday night after the Democratic-led House passed an alternate business tax and skedaddled home for the weekend.
Republicans seemed stunned they hadn’t gotten their way. After all, they’d slapped their final offer on the table – probably generously written for them by the Michigan Chamber of Commerce – but the Dems’ plan for a permanent, higher Michigan Business Tax surcharge came out of nowhere.
Faced with hardball tactics, Bishop reamed the “uncompromising, partisan” opposition.
“It is clear that the service tax introduced by the governor and carried to fruition by the House Democrats, has been their goal all along,” he sniffed.
What an incredible statement. Despite having public opinion and the entire business community behind him to ax the tax, the baby-faced Bishop admits he was outsmarted by the dynamic duo of Gov. Jennifer Granholm (as Batwoman?) and her Boy Wonder, House Speaker Andy Dillon.
Does anyone really think Bishop has the gravitas to be governor?
The epilogue to the state budget fiasco seems to be following the same script. Much of the GOP and its interest groups can’t quite grasp that they’re not running the show anymore and they need to give a little more – if they want to get anything at all.
Republicans kept congratulating themselves for considering any tax hike. But no one could really think they’d win a small boost to the MBT that died in three years and relied on raiding yet another rainy day fund.
Life’s unfair, kiddies. Minority Democrats learned that the hard way during the era of perpetual tax cuts and cuts to schools and local governments.
Now if hard-line Republicans could have stomached a slightly higher income tax back on Sept. 30, they could have gotten the last two months of their lives back. But more on that in a moment.
As for Granholm and her Democrats, they may have won a pyrrhic victory in shutting down debate. The GOP certainly seems to have acted more gentlemanly in this round and legislators are rightfully milking it for the media and business.
Dillon’s refusal to appoint a conference committee last week – the traditional path - was both bad policy and PR. Ditto the House’s shotgun vote Wednesday night.
Democrats, per usual, seem splintered. For Granholm, keeping the service tax on the books may well be the goal. She christened the idea with her ill-fated two-penny plan, after all, and economists believe the current tax will rake in far more than the $650 million estimated this year.
But Dillon’s contending with a tide of recalls - including his own – and an election for control of the House in 11 months. He’s been much more responsive to business and has pushed tweaks to the MBT in an effort to quell the clamor.
If the service tax starts up anyway, the backlash may have only just begun. That’s exactly what the GOP and Leon Drolet – its anti-tax, recall-happy pal with a big foam pig – fall asleep fantasizing about.
The truth is, everyone’s got it wrong.
The service tax stinks – it’s a capricious, cherry-picked list. And tinkering with the MBT – before it even goes into effect – could well drive business out of our state.
Leaders need to stop focus-grouping the budget. Business lobbyists testifying before Tax Policy committees act like they’re ordering off a menu (“We’ll take a 12 percent surcharge on the MBT with a side exemption for compensation”) - and some feel they’re entitled to skip out on the bill entirely.
Politicians would be better off sitting down with Tom Clay of the nonpartisan Citizens Research Council and letting him scare the crap out of them about the state’s finances, services and schools and where we’re headed.
What they need to do in the short-term is repeal the service tax and hike the income tax from 4.35 to 4.8 percent.
Then for next year, it’s time to think long-term. Bishop could show his leadership chops by championing real reforms to legislator and employee benefits and Corrections, coupled with a graduated income tax that takes a constitutional amendment, but provides a steadier revenue stream. Exploring a fairer service tax would also be prudent policy, since that’s the growing sector of the economy.
Of course, that will never happen. Constructive solutions are the enemy of the poisonous partisanship Lansing is drunk on.
And political courage always shrivels up in an election year.
So far, that something is failure.
After two months of endless bellyaching, Republicans have proven they can’t butcher a wildly unpopular tax.
The oft-slandered service tax – the part of the last-minute state budget deal instantly deemed dead on arrival - now seems poised to take effect Saturday.
Bishop hoisted the white flag Wednesday night after the Democratic-led House passed an alternate business tax and skedaddled home for the weekend.
Republicans seemed stunned they hadn’t gotten their way. After all, they’d slapped their final offer on the table – probably generously written for them by the Michigan Chamber of Commerce – but the Dems’ plan for a permanent, higher Michigan Business Tax surcharge came out of nowhere.
Faced with hardball tactics, Bishop reamed the “uncompromising, partisan” opposition.
“It is clear that the service tax introduced by the governor and carried to fruition by the House Democrats, has been their goal all along,” he sniffed.
What an incredible statement. Despite having public opinion and the entire business community behind him to ax the tax, the baby-faced Bishop admits he was outsmarted by the dynamic duo of Gov. Jennifer Granholm (as Batwoman?) and her Boy Wonder, House Speaker Andy Dillon.
Does anyone really think Bishop has the gravitas to be governor?
The epilogue to the state budget fiasco seems to be following the same script. Much of the GOP and its interest groups can’t quite grasp that they’re not running the show anymore and they need to give a little more – if they want to get anything at all.
Republicans kept congratulating themselves for considering any tax hike. But no one could really think they’d win a small boost to the MBT that died in three years and relied on raiding yet another rainy day fund.
Life’s unfair, kiddies. Minority Democrats learned that the hard way during the era of perpetual tax cuts and cuts to schools and local governments.
Now if hard-line Republicans could have stomached a slightly higher income tax back on Sept. 30, they could have gotten the last two months of their lives back. But more on that in a moment.
As for Granholm and her Democrats, they may have won a pyrrhic victory in shutting down debate. The GOP certainly seems to have acted more gentlemanly in this round and legislators are rightfully milking it for the media and business.
Dillon’s refusal to appoint a conference committee last week – the traditional path - was both bad policy and PR. Ditto the House’s shotgun vote Wednesday night.
Democrats, per usual, seem splintered. For Granholm, keeping the service tax on the books may well be the goal. She christened the idea with her ill-fated two-penny plan, after all, and economists believe the current tax will rake in far more than the $650 million estimated this year.
But Dillon’s contending with a tide of recalls - including his own – and an election for control of the House in 11 months. He’s been much more responsive to business and has pushed tweaks to the MBT in an effort to quell the clamor.
If the service tax starts up anyway, the backlash may have only just begun. That’s exactly what the GOP and Leon Drolet – its anti-tax, recall-happy pal with a big foam pig – fall asleep fantasizing about.
The truth is, everyone’s got it wrong.
The service tax stinks – it’s a capricious, cherry-picked list. And tinkering with the MBT – before it even goes into effect – could well drive business out of our state.
Leaders need to stop focus-grouping the budget. Business lobbyists testifying before Tax Policy committees act like they’re ordering off a menu (“We’ll take a 12 percent surcharge on the MBT with a side exemption for compensation”) - and some feel they’re entitled to skip out on the bill entirely.
Politicians would be better off sitting down with Tom Clay of the nonpartisan Citizens Research Council and letting him scare the crap out of them about the state’s finances, services and schools and where we’re headed.
What they need to do in the short-term is repeal the service tax and hike the income tax from 4.35 to 4.8 percent.
Then for next year, it’s time to think long-term. Bishop could show his leadership chops by championing real reforms to legislator and employee benefits and Corrections, coupled with a graduated income tax that takes a constitutional amendment, but provides a steadier revenue stream. Exploring a fairer service tax would also be prudent policy, since that’s the growing sector of the economy.
Of course, that will never happen. Constructive solutions are the enemy of the poisonous partisanship Lansing is drunk on.
And political courage always shrivels up in an election year.
Saturday, October 20, 2007
Long-term thinking still lacking in Lansing
"Sha-la-la-la-la-la, live for today/ And don't worry 'bout tomorrow, hey, hey, hey."— Grass Roots lyrics, 1967, and unofficial motto of the Michigan Legislature
Who knew that a risqué ode to sweet lovin' could so perfectly encapsulate the state's ongoing budget fiasco?
No, it ain't over yet.We still don't have a 2008 budget, and there are only 13 days left until the Halloween deadline — which, for the superstitious or policy wonks among us, are very bad signs, indeed.
When the Capitol gang held their Oct. 1 slumber party (House Speaker Andy Dillon forgot the beer), they only finished half the job. At least legislators were true to the work ethic they brandished when going on holiday for most of July.
Lawmakers finally swallowed $1.35 billion in new taxes, prompting Gov. Jennifer Granholm to sign a 30-day budget extension. But nobody had the stomach to send programs and jobs to the guillotine that night (witness once-slash-happy Republicans surrender their plan to cleave $600 million.)
Since then, the Legislature has gone on a great treasure hunt to find $440 million to cut, which probably will mean prisoners being let out, fewer poor people seeing doctors and fewer child abuse investigations.
Gotta find the money somewhere, and the state budget office says the departmental bleeding can't be absorbed solely by attrition and efficiencies.
The budget battle begins anew next week when bills come to the floor.Oh, and here's the bad news. We're fewer than four months away from having to do it all over again for 2009.What's worse, the nonpartisan Citizens Research Council estimates we'll have a $200 million to $500 million hole to patch.
How's that possible? You can almost hear the sound of seething taxpayers surrounding the Capitol, pitchforks in hand.
After all, you now have to pay taxes on all your astrological and escort service needs. That wouldn't be so bad if we could stave off future draconian cuts to schools, health care and police.
It could work if we were investing in what would grow jobs and modernize Michigan — higher education, culture and natural resources. It would be worth it if Lansing finally licked the state's structural budget deficit.
If you're going to ask people to sacrifice, do it right.Here's the hard truth: They didn't.Extending the sales tax to some services isn't a bad idea, since our economy increasingly has shifted in that direction. Problem is, our tax system remains out of touch, said Tom Clay, former deputy state treasurer and the council's emeritus state affairs director.
The key is to draft a less capricious list than lawmakers cobbled together at the last minute. (Forget about fees to tee off, but pay up for phrenology, that staple of 19th century pseudoscience.)
Meanwhile, the economy and the auto industry are still in shambles — though there's some hope on the horizon for the Big Three with recent union contract talks. Still, there's little chance we'll see a boost in tax revenue for a while, especially if more people lose their jobs.
The new bump in the income tax to 4.35 percent doesn't stabilize revenues, Clay said. What's more effective is to raise the rate even more, and increase taxpayers' personal exemptions.
There's also initiating a gradual income tax rate, as most states have. Of course, that would take a constitutional amendment.
"This stuff is pretty straightforward," Clay says. "But it's pretty tough politically."
And there's the rub.Politicians have flaunted their "live for today" mantra since term limits kicked in, knowing they could shun unpopular reforms and pass unsustainable tax cuts to ride to re-election and sweet lobbying jobs afterward.
They no longer have $4.2 billion in reserves to raid, but lawmakers have done their damnedest this year to avoid tough choices anyway.All except Dillon, who truly gets it, but has been bogged down by the partisanship of his peers.
Like that of Senate Majority Leader Mike Bishop, who's busily plotting a gubernatorial bid, and Minority Leader Mark Schauer. who's picking out curtains for his new congressional office.
Though there's little love lost between the two, they might well break into a soulful Grass Roots rendition betwixt fundraisers:
"We were never meant to worry the way that people do/ And I don't need to hurry as long as I'm with you/ We'll take it nice and easy and use my simple plan ..."
Simple plans often carry heavy price tags. The bills are coming due for Michiganders today, in more taxes and fewer services.
But unless politicians shed their tunnel vision, you can bet you'll keep paying more in years to come.
Who knew that a risqué ode to sweet lovin' could so perfectly encapsulate the state's ongoing budget fiasco?
No, it ain't over yet.We still don't have a 2008 budget, and there are only 13 days left until the Halloween deadline — which, for the superstitious or policy wonks among us, are very bad signs, indeed.
When the Capitol gang held their Oct. 1 slumber party (House Speaker Andy Dillon forgot the beer), they only finished half the job. At least legislators were true to the work ethic they brandished when going on holiday for most of July.
Lawmakers finally swallowed $1.35 billion in new taxes, prompting Gov. Jennifer Granholm to sign a 30-day budget extension. But nobody had the stomach to send programs and jobs to the guillotine that night (witness once-slash-happy Republicans surrender their plan to cleave $600 million.)
Since then, the Legislature has gone on a great treasure hunt to find $440 million to cut, which probably will mean prisoners being let out, fewer poor people seeing doctors and fewer child abuse investigations.
Gotta find the money somewhere, and the state budget office says the departmental bleeding can't be absorbed solely by attrition and efficiencies.
The budget battle begins anew next week when bills come to the floor.Oh, and here's the bad news. We're fewer than four months away from having to do it all over again for 2009.What's worse, the nonpartisan Citizens Research Council estimates we'll have a $200 million to $500 million hole to patch.
How's that possible? You can almost hear the sound of seething taxpayers surrounding the Capitol, pitchforks in hand.
After all, you now have to pay taxes on all your astrological and escort service needs. That wouldn't be so bad if we could stave off future draconian cuts to schools, health care and police.
It could work if we were investing in what would grow jobs and modernize Michigan — higher education, culture and natural resources. It would be worth it if Lansing finally licked the state's structural budget deficit.
If you're going to ask people to sacrifice, do it right.Here's the hard truth: They didn't.Extending the sales tax to some services isn't a bad idea, since our economy increasingly has shifted in that direction. Problem is, our tax system remains out of touch, said Tom Clay, former deputy state treasurer and the council's emeritus state affairs director.
The key is to draft a less capricious list than lawmakers cobbled together at the last minute. (Forget about fees to tee off, but pay up for phrenology, that staple of 19th century pseudoscience.)
Meanwhile, the economy and the auto industry are still in shambles — though there's some hope on the horizon for the Big Three with recent union contract talks. Still, there's little chance we'll see a boost in tax revenue for a while, especially if more people lose their jobs.
The new bump in the income tax to 4.35 percent doesn't stabilize revenues, Clay said. What's more effective is to raise the rate even more, and increase taxpayers' personal exemptions.
There's also initiating a gradual income tax rate, as most states have. Of course, that would take a constitutional amendment.
"This stuff is pretty straightforward," Clay says. "But it's pretty tough politically."
And there's the rub.Politicians have flaunted their "live for today" mantra since term limits kicked in, knowing they could shun unpopular reforms and pass unsustainable tax cuts to ride to re-election and sweet lobbying jobs afterward.
They no longer have $4.2 billion in reserves to raid, but lawmakers have done their damnedest this year to avoid tough choices anyway.All except Dillon, who truly gets it, but has been bogged down by the partisanship of his peers.
Like that of Senate Majority Leader Mike Bishop, who's busily plotting a gubernatorial bid, and Minority Leader Mark Schauer. who's picking out curtains for his new congressional office.
Though there's little love lost between the two, they might well break into a soulful Grass Roots rendition betwixt fundraisers:
"We were never meant to worry the way that people do/ And I don't need to hurry as long as I'm with you/ We'll take it nice and easy and use my simple plan ..."
Simple plans often carry heavy price tags. The bills are coming due for Michiganders today, in more taxes and fewer services.
But unless politicians shed their tunnel vision, you can bet you'll keep paying more in years to come.
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