I had a chance a few weeks ago to lay out for the State Board of Education how I would deal with the state’s long term structural budget deficit. Here is the agenda I presented:
1. Restructuring the Michigan tax system so that it produces adequate revenue now and, most importantly, grows with the Michigan economy long term. That means increasing income taxes and expanding the sales tax to consumer services. It should be done in a way that eliminates the MBT surtax and possibly lowers other business taxes.
2. Restructuring state and local spending. The deficit Michigan faces is more structural, than cyclical. Although, the current great recession makes it much worse. Over the decade we have gotten poorer: falling from eighteenth to thirty seventh in per capita income. Getting poorer means you can afford fewer publicly funded service. No matter what you do with taxes, we need to cut low priority services and reduce compensation to state and local public employees and retirees. Hard to do, but essential.
3. But stopping there would not do much to grow the economy. If you only do items one and two you are managing decline: adjusting to the new realities of a low prosperity Michigan. 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 items one and two in a way that create enough revenue to invest in things like education and quality of place that are key to preparing, retaining and attracting talent. Talent is what matters most to recreating a high prosperity Michigan.
4. Increasing transportation taxes. Ultimately through a mileage tax. Combined with a restructuring of transportation priorities. Including fixing roads, rather than building new; quality transit systems in all our big metros; high speed rail; rail over trucks for freight movement and support for biking and walking as alternatives to driving. All are key amenities that will characterize successful new economy regions and states.
5. In terms of K-12 education we are having the wrong debates: more of the same vs. less of the same and charter vs. public. The key, at whatever funding level we decide on, is transforming teaching and learning so that it is aligned with the realities of a flattening world. All of education needs reinvention. Most important is to substantially increase the proportion of students who leave high school academically ready for higher education.
All five are politicly difficult. But this is one of those times that doing the difficult is required. We are on the wrong path. Our only chance for future prosperity is if we follow a new path.