THE state of Michigan has fumbled a golden opportunity to put its financial house in order. For a long time the state has had a budget structured to produce a billion-dollar deficit every year, a product of politically popular tax cuts in the 1990s made by lawmakers who knew that, thanks to term limits, they wouldn t be around to pay the piper when the roof fell in.
For the last five years, the legislature has cooked the books with accounting gimmicks, by raiding rainy day funds and cutting higher education, Michigan s best hope for an economic future in a world where the domestic auto industry will never be what it was.
This month, the books showed the state running an $800 million deficit for the fiscal year ending Sept. 30, when the budget has to be balanced.
Gov. Jennifer Granholm, a Democrat, suggested a 2 percent sales tax on services, but evidently didn t bother to sell it to her fellow Democrats, who control the state house. Republicans, who control the state senate, dug in their heels and said no taxes, no way. Something had to give. The legislature was expected to be in session throughout Memorial Day weekend.
But lawmakers eager for a vacation threw together a balanced budget last Friday that is nothing short of a disgrace. They cut higher education again, and deferred another $165 million the universities were supposed to get this summer. (If your tuition payment goes up, thank a legislator.) They raided a fund that repairs leaky underground petroleum tanks, guaranteeing an increase in groundwater pollution. They dealt with the rest of the problem by rolling most of the debt over to the fiscal 2008 budget, meaning it starts off $1.6 billion in the red.
Worst of all, they decided to sell off future proceeds from the tobacco settlement agreement for a fraction of their worth, making the state seem like one of those people who depend on payday loans, complete with an expensive day of reckoning.
Essentially, the Republicans got their way, though they also quietly agreed not to block a vote on a future tax increase. Virtually every sane observer thinks some kind of revenue boost next year is inevitable, unless the state wants to, say, close down the prison system. The most likely scenario is returning the state income tax, now 3.9 percent, to the 4.4 percent it was a decade ago.
Most of all, what is needed is some vision, courage, and fiscal responsibility. Kalamazoo County Administrator Don Gilmer is a Republican who knew how to watch pennies when he was Michigan House Appropriations Committee chair a few years ago. He thought what the lawmakers did last week was monumentally stupid.
It absolutely defies logic that they are disinvesting in higher education at a time when we know that high-tech, knowledge-based jobs are our future.
The current legislators ought to listen, before Michigan becomes the economic equivalent of Mississippi, with snow.