Balancing the state’s budget in an era of substantial, structural revenue decline is difficult. The bottom line, is getting poorer is hard. You have to give up a lot that we have enjoyed for years. But when you go from eighteenth in per capita income to thirty seventh (and going lower) in eight years, there is no option. Michigan in a blink has gone from one of the most prosperous states to one of the poorest.
We can no longer afford the level of public services we put in place when we were prosperous. We will, for sure, end up with substantially fewer publicly funded services. And probably with higher taxes. And probably with real cuts in salary and benefits for public employees and retirees. What matters, of course, is the mix of the three.
The focus in Lansing has been on how to mix tax increases (if any) and spending cuts to balance this year’s budget. As hard as that is, its not what we need. First, we need an agreement on how we are going forward for the long term. Next year’s budget will be even tougher. And the declines we implement the next couple of years will be the new base for a long time. This will not be a normal recovery from a national recession. For decades Michigan did worse than the nation in recessions and better in national expansions. Not this time!
Maybe even more important than balancing the budget for the long term, is the need to also free up resources to grow the Michigan economy. We can either adopt budget priorities that align with the new reality that Michigan is now one of the poorest state in the country or we can use the budget to reverse the trends. To once again put Michigan on the path back to prosperity. To do that requires more sacrifice now, so that we can invest in what will make us better off in the future.
Just balancing the budget is not enough.That would be a big mistake. We need to pursue an agenda to recreate a high prosperity Michigan. That is where public investments come in. We need to do spending cuts, tax increases and reductions in public employees and retirees compensation in a way that create enough revenue to invest in things like education and quality of place. Those are the keys to putting Michigan back on a path to prosperity.