News Story

Budget Cutting Ideas Abound

Spending by Michigan’s state government has gone up in nine of the past 10 years. It has risen more than 30 percent, from $40.0 billion in the 2005 fiscal year to $52.3 billion this year. With the state’s economy now on the mend it is past time to start reversing this trend.

There is no shortage of good ideas for doing so. In recent months the Mackinac Center for Public Policy has offered reform and cost cutting suggestions worth $2.1 billion. Either the current “lame duck” Legislature or the new one that takes office in January should review this work and start enacting measures that save taxpayer money. These savings could be used to shore up underfunded pensions, improve roads or even … wait for it … cut taxes.

Legislators don’t have to limit their savings search to Mackinac Center ideas. During Gov. Granholm’s time in Lansing, the State Budget Office and a special commission each produced separate reports describing a total of 234 ideas for trimming $1 billion in gross spending, and another $3 billion in General Fund savings reforms, respectively.

The first of these reports was called “Charting a Way Forward: A Path Toward Fiscal Stability for the State of Michigan.” The second was dubbed the “Mystery Document” for its lack of pagination, such as title or named author. Both are available online. In addition, in March 2011 several Michigan groups convened a symposium to discuss reducing prison spending by $500 million.

Here are a few more ideas for reforming the budget, old and new.

  • Eliminate or reduce the taxpayer subsidies for the University of Michigan’s Ann Arbor campus: $279.2 million.

UM-Ann Arbor is a magnet for grants, gifts and affluent students from all over the world; it can get along quite well on its endowments and tuition revenue.

  • Replace Michigan State Police road patrols with less expensive county sheriffs: $25.5 million.

In this scenario the state would provide grants for far less costly county sheriff’s deputies to replace far more costly state troopers in this role. When the Mackinac Center first proposed this idea in 2003 we estimated savings of $65 million, which included corresponding overhead reductions. In 2010 the State Budget Office proposed a less expansive version with savings of $25.5 million, which we will adopt for this essay.

  • End Agriculture Industrial Welfare Subsidies: $4.6 million.

Subsidies for agribusiness come at the expense of other Michigan families and employers. Line items to be eliminated include “agriculture development” ($1.6 million) and a “food and agriculture industry growth initiative” ($1.0 million). This last item also appears to have received an extra $2 million in “one-time” subsidies elsewhere in the state budget that should be cut.

  • End Renaissance Zone reimbursement to community colleges: $3.5 million.

The state’s Renaissance Zone program draws little boxes around select areas in which politicians choose to grant special property tax breaks, some of which come out of the hide of community college tax districts. This program has wandered far from its original mission, and increasingly amounts to little more than corporate welfare for favored areas or industries. Maybe if community colleges didn’t get the money back they would pressure lawmakers to ditch the cronyism.

  • End “Health and Wellness” initiatives: $3.3 million.

This line item provides a smorgasbord of government spending on various health-related initiatives. The savings figure is an estimate of General Fund savings for 2015.

  • Merge House and Senate Fiscal Agencies: $1.8 million.

Both chambers of the Legislature maintain their own agencies to provide fiscal analysis of legislation and related products. Somehow, neighboring states Ohio, Illinois and Wisconsin get by with one such agency. If merging the two shaved 25 percent off the cost the savings would total $1.8 million.

  • End Legislature “Association Dues” Payments: $437,100.

If lawmakers want to make junkets to meetings of the National Conference of State Legislatures and similar groups they can spend less of their office budgets on districtwide “newsletter” mailings and redirect the savings to this purpose.

These ideas are worth more than $311 million. Budget reforms are available if lawmakers have the courage to embrace them.

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Michael LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

News Story

UAW Dues Hike Was Unnecessary

(Editor’s note: This commentary originally appeared in The Detroit News on Sept. 25, 2014.)

At the United Auto Workers’ 36th Constitutional Convention in June, delegates voted to hike the membership dues rate for the first time since 1967. The 25 percent increase is expected to bring in an extra $45 million annually.

The UAW claims that this money is needed to bolster its “Strike and Defense Fund” in preparation for 2015 contract negotiations including with Detroit’s Big Three automakers. This dues hike, however, may be unnecessary and won’t be fully used for funding strikes. At the same convention, delegates also voted to allow their leadership to siphon $60 million from the strike fund over the next four years.

Delegates argued in favor of the hike by saying that the UAW has not altered its dues formula for nearly 50 years. The union’s dues, however, are tied to hourly wages. Each time workers receive a raise, dues go up accordingly. The new dues rate is two and a half hours of pay per month, compared to the previous rate of two hours per month.

The union’s website says the purpose of the fund is to “lessen the financial burden on striking UAW members and their families,” but the current fund is sufficient for this purpose. A serious look at the numbers calls the union leadership’s cry for more funds into question.

Calculating figures from the UAW’s 2014 Report of the Secretary-Treasurer, dividing the strike fund balance by the amount of dues-paying members shows that the fund contained $1,638 per member in 2013. This number is in line with the fund totals for most of the past three decades. For the last 30 years, the fund has contained an average of $1,583 per member when adjusted for inflation.

Prior to 1980, the amount per member in the strike fund was much lower. Over the last 57 years, the average balance of the strike fund per dues-paying member was only $836 in 2013 dollars.

UAW strike benefits are $200 per week plus medical and life insurance coverage. With the strike fund balance currently at $1,638 per member, the strike fund has enough cash right now to pay every single one of the UAW’s 382,789 members strike benefits for eight weeks.

The chances of every single member striking at the same time, however, are ridiculously small. As well, large strikes are relatively uncommon and usually don’t last very long. According to the Department of Labor, only about seven out of the 69 strikes in the last five years that involved more than 1,000 employees lasted longer than a month.

The last time the UAW called a major strike against one of the Big Three was against General Motors in 2007, and it only lasted two days. So if the fund is as healthy as ever, and strikes are so rare, why did the UAW insist a dues hike was needed?

The answer has less to do with work stoppages and more to do with politics. In recent years, the strike fund has become more of a slush fund. UAW executives raided it to pay for attempts to organize more employees under the union banner. Since 2006, union leadership has obtained permission to reallocate $330 million from the strike fund for other purposes such as organizing. In 2011, then-UAW President Bob King claimed on the cusp of an organization campaign that the union had “pretty deep pockets in terms of what we’re willing to spend.” A mere three years later, he told reporters, “We’re at the point where we don’t think [taking money from the strike fund is] the wisest decision.”

Selling the dues hike as gathering funds for an “emergency” allows union leadership to cloud the issue to workers while using the money for whatever they wish.

For the thousands of UAW members who live in Michigan and Indiana and enjoy right-to-work protections, there is a silver lining to this hike. Once UAW contracts expire, the union can no longer get workers fired for refusing to pay them. These workers will finally have the chance to decide if financially supporting the UAW is the best use of their hard earned paychecks — and this unnecessary dues increase may be the last straw that convinces many workers to decide it is not.

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Nathan Lehman was a summer 2014 labor policy intern and F. Vincent Vernuccio is the director of labor policy at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich.  Permission to reprint in whole or in part is hereby granted, provided that the authors and the Center are properly cited.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.