Government Spending: The Biggest Fiasco Behind Michigan\'s Budget Crisis

Posted In: Politics, State, Opinion,   From Issue 648   By: State Senator Kenneth Horn

01st November, 2007     0

Editor's Note:

Last issue we published a guest column by State Representative Ken Horn concerning the expansion of Michigan's sales tax to service oriented businesses and the debilitating effect this will have on Michigan's economy, especially insofar as the budget deficit could be readily fixed through a combination of outsourcing, eliminating government waste, and ridding ourselves of the perks awarded to government officials, which are among the third highest paid in the country.

As we go to press, the Legislature is still conflicted over how to reduce spending. Insofar as the 'devil is in the details', we once against asked Representative Horn to inform our readers about how spending issues were being addressed in Lansing.
We received this update 24-hours before press time, with yet another government shutdown looming on the horizon.

Treat, or TRICK?

by State Representative Kenneth Horn
As the month end approaches, I want to bring you up to date on what's happening with the state budget in Lansing.  With a shutdown averted last month, many residents believed a final budget was in place. Not True. 

Taxes were raised, the prior year's budget was extended for one month, and a promise was made to make $440 million in cuts before we passed final budgets for all state departments. 

Is progress being made to meet the October 31st deadline and get budgets in place? Yes. But my issue with the $440 million in "cuts" is that they are being accomplished by taking out new programs instead of reducing state spending. 

The Governor had wanted $196 million for new all day pre-school for some - that's off the table now and included in the so-called cuts.  AndŠ they still want to discuss a proposal to increase hunting and fishing fees, which doesn't sound very much like a cut to me.

"No new spending" should be a given in this economy, but there's more to it.  We need to fix our true structural spending problem, not just eliminate new programs.  We should be giving the taxpayers REAL cuts - - real spending reductions.  And, I'll say it again - it can be done rather painlessly.  

It goes back to my Two-Penny Plan - - we begin by cutting two cents from every dollar we spend on our state departments.  It's much more compassionate to trim 2% from the top of every bureau in Lansing than to propose cutting half of our funding for libraries, or even 6.25% from indigent healthcare proposed earlier this year.  We don't need to pull the ax out of the chopping block; all we need is a scalpel to scrape the surface.   

It bothers me greatly that our front line teachers, police and firefighters consistently face layoff threats when we have nearly 2500 state employees who earn over $80,000, with salaries going as high as $162,000.   Why are troopers, conservation officers and teachers under attack when every one of us should share this burden equally?  

Think about itŠ this administration laid off 29 troopers last spring. At the very same time, candidates who ran for elected office, and lost, were just settling into newly created positions appointed by the Governor.  Trooper's unions were paying out cash from their own reserves to protect their members, while new appointees were snuggling into their cozy $85,000 per year, plus benefits, jobs across the state.

The Real Fix

My fix, of course, begins with the Horn Two Penny Plan:  for every dollar we spent last year, we spend 98 cents this year. Both pennies need to come out of the very top of the bureaucracy, with no threats to frontline services as we've experienced already this year. Again, if two pennies isn't too much to tax my constituents, then it can't be too much to save on their behalf.

And, yesŠ I recognize the difference between the general fund, restricted spending, and the federal dollars Michigan receives. But, Lansing's stubborn bureaucratic groupthink is strangling this state's economy. A decline in the auto industry isn't the only thing that is causing our state to be dead last in our nation's economic recovery. Finger-pointing to previous administrations and Washington D.C. isn't required of the 40 some states that are trying to figure out what to do with their budget surpluses this year.

The two penny plan would require tough leadership, but would save this state an estimated $900 million per year - plenty enough to repeal the new sales tax on services.

Once the budget is stable, the state needs to revise its employee pay-grade system. I have a benchmark study on my desk showing that Michigan ranks number one in the speed in which an employee goes from starting pay to the top of the pay scale. This causes our administrative budgets to be extremely top heavy. The rate of rising to the very top needs to better reflect the current economic job climate.
Once we make these changes for new employees, the state needs to be extraordinarily creative in offering early out incentives to our dedicated employees. Early retirements, and cash buyouts of long and expensive contracts, need to be considered again.

Organizational charts need to be dramatically revised and permanently changed to reflect our modern government. The administration points out that it is down to 52,000 employees, however, the 2008 budget has money set aside for 57,000 state employees. We need to redistribute the dollars set aside for these 5,000 unfilled positions and use current resources to get the work done. 

We need to privatize more services, rather than compete for top talent with the private sector. While some services need to remain in the hands of state government, others might be better served in the hands of the experts outside of our steep bureaucracy. As I said before, we have nearly 2,500 hundred employees that earn $80k plus benefits, with many at $100k plus.  We pay these people top dollar and say we are "competing with wage scales in the private sector", and then demean the private sector as not being a viable option for government services.

The bottom line is that this government should be lean and nimble - ready to respond appropriately to any new economic change.
Another example is the situation with the Department of Natural Resources. Voters have approved ballot measures in past elections dedicating funds to our parks & natural resources.

Once again, there are 48 people at the top of the DNR pay scale making $80,000 plus benefits. Twelve of these department heads make $100k+. Before they lay off fourteen front line conservation officers and close 37 parks, the organization needs a true top-down shake up.  We all need to share equally in our down times. 

This new service tax is an attack on the small budding entrepreneurial class, willing to work hard, but with very little capital for business start-ups. This new sales tax on services is not only onerous, but also frightening in the face of today's economy in Michigan.

And, it flies in the face of the very American Dream that brought both my parents and my grandparents to this country.

With or without a replacement, this tax must be repealed. Now!


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