Beware Claims of State Budget Cuts

A common refrain heard from policymakers is that there is no extra money in the budget for roads, or for most any other priority. Michigan’s continued economic growth, however, has in fact resulted in extra cash available to meet the Legislature’s spending priorities.

Legislators were able to find hundreds of millions of extra road funding in the past three years. While the stated preference is to fund the roads with fuel and vehicle registration taxes — those paid largely by people who use the roads — policymakers have supplemented this revenue with money from the state’s general taxes.

This year’s allotment is considered “one-time” funding that Gov. Snyder argues ought not be considered ongoing. Yet the revenue trends from the state keep coming in higher than the year before, so if Lansing chooses to end it, this one-time revenue will be available for other budget items.

And the state revenue is looking strong. General state economic growth is generating more revenue for the state budget. Jobs are up and unemployment is down by nation-leading levels. Personal income continues to increase, as does state economic production.

Income tax revenues are especially looking positive. Collections from the personal income tax increased 9.5 percent from the previous year. While the level of corporate income tax has been tough to estimate, the state expects 17 percent increase in revenue for the current fiscal year compared to two years ago.

All told, Michigan state budgeting of state revenues recently broke $30 billion for the first time.

A number of government cost drivers fell in our recovery as well. There are 76,000 fewer kids in the state’s K-12 schools than there were five years ago. Enrollment in state universities may have peaked as well. Employment in state and local government is down.

With all the positives, however, there remain some negatives. State and local pension systems continue to rack up unfunded liabilities. (To contain this underfunding, the state should enroll new employees only in a defined-contribution retirement system.) The bill for corporate welfare deals made in the past has come due and will continue to cost hundreds of millions. Health care costs keep on increasing, making Medicaid and prison more expensive. And of course, the roads need more work.

The state government should also re-examine its expenditures. The state is still spending millions from the Granholm-era 21st Century Jobs Fund, for example. That’s just one example — there are plenty of other opportunities to trim the spending side of the budget.

Too often policymakers resort to tax increases when they feel there is no other choice. This is not the current situation. The state has options to live within its increasing revenues and to control its expenditures.