Thursday, November 16, 2006

State Budget Gnashing

The stage is already being set for a possible state (and probably local) tax increase. Today's Detroit News reports that state revenues for the just-completed fiscal year 2005-2006 are down by $170 million. That's about 0.85% less than they anticipated, yet we are already hearing that the world is going to end for schools and no more police will be on the streets.

But, before we get ahead of ourselves, let's take a quick look at the budget. We compiled the graph at left from data published by the Senate Fiscal Agency. It is a summary of the total state revenue and expenditures since the 1990-1991 fiscal year. The only year when the expenditures actually went down was 2002-2003, when they declined by 0.28%, or about $118 million. However, every single year, revenue has increased.

A couple of quotes will show you how bureaucrats and politicians are so good at making situations sound much worse than they are in order to scare us into being more accepting of tax increases. From the article above:

The governor and lawmakers have erased more than $3 billion in cumulative deficits over the past four years by making budget cuts, increasing cigarette taxes and fees, and shifting money from other accounts.

You'll see, that even though one reduction in the budget from 2002 to 2003 occurred, a grand total of $118 million, bureaucrats seem to be able to conjure up at least $3 billion in "cuts" over the last several years. How do they do this? Here's how:

If a government budget is $100 million this year and it is budgeted to increase to $110 million next year, but the actual increase is to $102 million, it is called an $8 million cut, even though more real money is being spent. Our Grand Rapids city politicians are very good at making this sort of obfuscationary budget argument. You see, the "cut" isn't a real reduction in spending, it's a reduction in the anticipated increase in spending.

Now, of course, the bureaucrats' special interest groups are crying foul. Justin King, executive director of the Michigan Association of Schools Boards, the lobbyist organization for school districts, claims that any cut in school funding this year would be "devastating." He says that 50 school districts are approaching bankruptcy, even though schools have received a 35% increase in funding, after adjusting for inflation, over the last ten years. One presumes that he is including our own Grand Rapids Public Schools when he says that districts are on the verge of bankruptcy, even though GRPS spends $10,770 per student. You see, a reduction in the state budget of 0.85% is billed as devastating to schools.

But the sky doesn't stop falling there. Dan Gilmartin, executive director of the Michigan Municipal League (the lobbyist organization for Michigan cities), says, "Any additional cuts would be suicidal for communities," and, We're laying off cops, not paving roads and not attracting new jobs."

This is all attributed to a state payment to cities called revenue sharing. Basically it's a redistribution of state-collected taxes to city governments. Our city bureaucrats and politicians are fond of stating that the city government has "lost" $30 million in revenue sharing. However, we again look at the real numbers. Annual city revenue from revenue sharing has declined from a high of about $27 million a year to about $23 million this year. Yes, that's a real reduction of $4 million, but instead of saying that they have had to cut $4 million out of the budget (that doesn't sound too sexy), they add up what they would have gotten each year if the state continued to boost revenue sharing. Presto - they've "cut" $30 million out of the city budget!

The cry from cities is now that they will have to cut police and fire to make up the difference of any additional "cuts."

Never underestimate a bureaucrat whose job is on the line. They will obfuscate the budget numbers as much as possible to scare us. Instead of cities and schools engaging in simple and small (0.85%) wage cuts to preserve jobs, they will lay off teachers, policemen, and firemen, all the while still maintaining extremely generous benefits packages for those who remain.

While the rest of us have had to tighten our belts and deal with the still-stagnant and even declining economy in Michigan, government will continue to expand. Government never will have "enough" - don't forget that.


  1. You're comparing apples and oranges. The $3 billion in cuts didn't refer to the overall budget, it referred to the General Fund. The state General Fund is only about 1/4 of the totat state budget. The rest is school aid funding and medicare.

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