OP-ED

Michigan legislators putting general fund on a highway to ruin

1/18/2018

LANSING — I’m not sure what the best-selling Christmas book was this year, but I know what it wasn’t.

Five days before Christmas, the Senate Fiscal Agency published a slim little volume, available online for free: Michigan’s Economic Outlook and Budget Review. The title wasn’t exactly sexy.

But if you know how to read between the lines, it was actually a very gripping horror tale, because it is true.

What it tells is the story of a state whose financial house appears to be in good order, something the governing politicians are bound to tell voters this summer and fall.

But if you know how to read, what it really says is that Michigan is headed for a massive budget shortfall within a few years that could devastate schools, prisons, health care, and public safety.

Those in the know — our legislative leaders — know very well the iceberg is approaching, but have done nothing to change course.

Possibly that’s since, thanks to term limits, most will be gone when the worst of the effects begin to hit.

Nobody likes a spoiler who tells you how a good novel ends before you’ve finished it. But this is real-life horror, and in the interest of our citizens, here’s a summary of the plot:

For years, Gov. Rick Snyder, supported by an increasingly angry public, attempted to come up with money to fix our deteriorating roads. His first proposal, to do it primarily by raising the tax on each gallon of gas, was probably the best and fairest.

Most consumers would have probably scarcely noticed, since the price fluctuates wildly, and the proposal would have some rough justice, since those who used the roads more would pay more.

But the Legislature, many of whose members had signed no tax pledges, wouldn’t buy it. Mr. Snyder then backed a proposal to raise the sales tax by one percent, but was humiliated when 80 percent of the voters rejected it in May, 2015.

Six months after that, the Legislature reluctantly passed and the governor signed a bill that hiked fuel taxes and registration fees.

It was billed as raising $1.2 billion a year for the roads — but this was deceptive. It doesn’t fully kick in until 2021, for one thing.

For another, it does so by gradually taking $600 million a year from Michigan’s $10 billion general fund, the place where the money for all so-called “discretionary spending” is.

That’s the money used to pay for the prison system, aid to higher education, foster care, public safety — you name it.

But there is really not a lot of discretion to most of it. Adjusted for inflation, it is considerably smaller than it used to be.

And few have faced the fact that when Michigan’s general fund starts being seriously raided for road repair, it is going to either mean new revenue — taxes — will be needed or that there will have to be massive cuts to programs that have been cut and cut again.

A savvy economist who worked for the Legislature for years alerted me to what was coming, and suggested I read the nonpartisan Senate Fiscal Agency report carefully.

Michigan’s fiscal year, unlike that of most businesses, runs from Oct. 1 to Sept. 30. We ended fiscal 2017 with a healthy balance of $643 million in the general fund.

But that’s due to evaporate, fast. This fiscal year will be the first in which money starts to be sucked out of the general fund to pay for road repair. The fiscal agency estimates that by October, the general fund account balance will be down to $285 million.

“The state will operate by spending a bunch of money left over,” said my economist, who didn’t want to be identified because she now works for a trade association and lobbies the Legislature.

This fall, when they are campaigning for office, she said, the messaging — primarily from the ruling Republicans — will be that “our budget is balanced and everything is great.”

But it won’t be.

This year, the general fund will be nicked for $150 million for road repairs. Next year, that rises to $325 million.

By October, 2019, the Senate Fiscal Agency estimates the General Fund balance will be down to $1.6 million.

Soon thereafter, the road repair bill will be $600 million from the general fund — in perpetuity. “Will anyone say, ‘hey, we need more money than we have revenue to run the state?’” she said.

“Probably not.” If they don’t, that means either suspending road repair or making massive cuts to programs, almost certainly including education. By then, most of those lawmakers who gave us this destructive formula will have left office.

For those who think we are overtaxed, it might be useful to note that not only is the state’s infrastructure falling apart, but total projected revenues in 2020 will be less than in 1968, adjusted for inflation. A century ago, U.S. Supreme Court Justice Oliver Wendell Holmes, a decidedly conservative Republican in his day, said that “taxes are the price we pay for civilized society.”

Too few of us seem to remember that today.

Jack Lessenberry, the head of the journalism faculty at Wayne State University in Detroit and The Blade’s ombudsman, writes on issues and people in Michigan. Contact him at: omblade@aol.com.