A decade of state spending restraint

Back to the must read new report from the Senate Fiscal Agency on state taxes and spending over the last decade or so. As you know, conventional wisdom is that the new Administration and Legislature took over from a high tax/high spending regime. Turns out to be complete baloney.

The facts as laid out in the SFA report are the complete opposite. An era of remarkable – almost certainly unprecedented – spending restraint. State spending from all state resource in FY2002 (the Engler Administration’s last year) was $26.087 billion. In FY2011 (the last Granholm Administration budget) it was $26.050 billion. For the general fund (what everyone focuses on) it went from $9.189 billion to $8.280 billion. Nearly a billion dollar reduction. And for school aid from $11.220 billion to $10.776 billion.

These numbers are not corrected for inflation. They are the actual spending levels. The report uses FY2012 as the comparison year. But the numbers won’t be much different for 2011. From FY2002-FY2012 state spending from state resources are up 0.6% while Michigan personal income up 22.4% and the Detroit Consumer Price Index up 18.5%.

You read that right: Michigan personal income up 22.4% over a decade, state spending from state resources up 0.6%. So much for the nonsense told over and over again that Lansing was spending more and more, oblivious to the pain of Michigan residents during our decade long slump. My guess is no other state showed as much spending restraint the last eight years and there is more than likely no other eight year period in Michigan since the Great Depression with this kind of spending restraint.

As for taxes – as we have written previously – revenue as a percent of personal income down by more than $7 billion. With tax revenue declining as a percent of personal income combined with big increases in Community Health and Corrections, everything else suffers substantial spending cuts.

And what gets crowded out the most are the public investments that would help grow the economy. Those that help prepare, retain and attract talent: education, particularly higher education; transportation; revenue sharing which helps local governments provide quality basic services and important quality of place amenities like the arts and parks and outdoor recreation. Not smart!

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Lou Glazer

Lou Glazer is President and co-founder of Michigan Future, Inc., a non-partisan, non-profit organization. Michigan Future’s mission is to be a source of new ideas on how Michigan can succeed as a world class community in a knowledge-driven economy. Its work is funded by Michigan foundations.

This Post Has 2 Comments

  1. Lou,
    Not only did Michigan “restrain” more spending (read: cut) than any state in the country for the past decade — by far –the previous SFA report showed that Michigan’s per capita taxes for income and businesses had dropped more than any state in the country. Of course much of that was due to the changes in the economy, but I also cut taxes 99 times (small and large) in the first 4.5 years of my terms in the hope that Friedman/Adam Smith/Reagan were right. They were not. We still had the highest unemployment rate in the country. Enough of that experiment. Let’s move to what we know works. The President is in Michigan today because of a decision by the federal government to invest in the technologies associated with the future — such as electric vehicles and clean energy breakthroughs. This is what people must learn from Michigan’s laboratory of democracy: laissez-faire trickle-down theory might have been a fine strategy last century. But in a global economy our economic competitors are playing a much more aggressive, hands-on game. We’ve got to do the same: invest and grow rather than cut and lose. By the way, strategic federal and state investment caused Michigan’s economy to finally grow faster than the nation’s last year and our unemployment rate dropped six times faster than the national average — and lo and behold, that growth produced the budget surpluses we’re seeing today. Anyway, thanks for your continued effort to show the importance of a long-term growth agenda rather than a continued adherence to “austerity” or “restraint” or cuts.

  2. Governor, your desperation to re-write your legacy truly knows no bounds. You’re now claiming credit for per capita taxes dropping, which you slyly note was “was due to the changes in the economy.” In other words, profit and income plummeted under your tenure, so you spin the consequences–a lower overall tax burden–as a check mark in the Granholm column. Unbelievable.

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