Grand Rapids Pundit

Michigan’s Budget - The Numbers

Posted by: GRPundit on Wednesday, 3rd Oct, 2007

There seems to be some confusion lately about the state’s general fund budget. Have there been cuts? Has revenue gone down? Are $440 million in cuts necessary to balance 2007-2008’s budget? What is the impact of the new $1.5 billion in taxes just passed by the legislature?

The Budget

We’d like to go through the numbers and explain a bit how government budgeting works. Michigan, like most units of government, has several funds. The General Fund, the one that the legislature can spend on pretty much whatever it wants, is the budget that everyone refers to when there is talk of a deficit or the need for tax increases. The General Fund is about $9 billion of the state’s total $40 billion budget. We discussed the total growth of the budget, as well as how government does accounting, in a previous post. Please follow that link and come back after you have read the explanation of the politicians’ definition of a budget cut.

We’ve heard the Governor and many politicians talk about cutting the budget. However, when the numbers are examined, the state’s General Fund has seen an increase in revenue every year of the Governor’s term. However, there has been a reduction in spending, but only to match the government’s revenue. You see, the state government has been good at spending more than it brings in, whether under Democrat or Republican control.

But wait! Governor Granholm boasts about having to cut billions from the state budget. From the Governor’s office: “Since taking office in 2003, Governor Granholm has cut nearly $3 billion in state spending to resolve more than $4 billion in budget shortfalls - more than any other governor in the state’s history.” Really? Here’s a list of the total annual General Fund spending during Governor Ganholm’s tenure:

Fiscal Year - Spending (millions)
02-03 -       $8,830
03-04 -       $8,770
04-05 -       $8,702
05-06 -       $9,106
06-07 -       $8,966

In other words, in absolute numbers, a grand total of $268 million has been cut during the Governor’s tenure. Just for fun, let’s factor in inflation, so that 2002-2003 is our baseline. If that were the case, and spending had gone up just at the rate of inflation, then 2006-2007 spending would have been about $9.938 billion. Subtract actual spending, and the total possible cut the Governor could take credit for is $1.108 billion. You see, the Governor is using politician math where possible spending is taken into account when declaring a deficit or cut, not actual spending.

The New Taxes

According to the non-partisan House Fiscal Agency, the entity that estimates for the State House how much money the state will bring in, 2007-2008 revenue will be about $8.186 billion. Governor Granholm proposes to spend $9.941 billion in 2007-2008. So this is the deficit that she’s referring to when she has said that $1.8 billion in “cuts” have needed to be made to balance the budget. You see, it’s not actual spending that is being cut, it is proposed spending. The new, higher income tax rate, along with the new 6% tax on services, will raise, according to estimates, somewhere between $1.4 and $1.5 billion this fiscal year. That brings our total General Fund Revenue to about $9.6 billion. That’s an increase in spending, from 2006-2007, of 9%. That’s an increase in revenue, if the tax hadn’t passed, of over 17%. In one year! When’s the last time you got a raise of 9% or even 17%?

But there’s more! Governor Granholm, even after the passage of the new taxes, is declaring that $400 million of cuts still need to occur! But, as hopefully you have figured out, the cut is not in spending, but a cut in what she wants to spend!

What do the new taxes mean to the average Michigander? A $1.5 billion increase, divided by approximately 10 million residents of Michigan, equals a $150 tax increase per person. That includes every single man, woman, and child. According to the Census Bureau, there are about 3.7 million households in Michigan, which means that the tax increase is over $400 per household. That’s in addition to the $7,183 annual cost of state government on a per household basis.

Freedom Rang Across Michigan for 258 Minutes

Posted by: GRPundit on Monday, 1st Oct, 2007

Our state government shut down this morning at 12:01 am and remained shut down until 4:18am, when two Senate Republicans broke ranks and voted in favor of $1.5 billion in tax increases. Freedom rang across the land for 258 minutes, but alas, the politicians relented and voted to destroy more jobs by raising our state income tax to 4.35% from 3.9%, as well as adding a 6% sales tax to services.

Michigan, the land of the one-state depression, will get even worse. $1.5 billion extracted from the populace and added to the general fund budget is an increase in spending of 18% in one year. That’s right, Governor Granholm has increased spending 18% in one year.

We’ll have more detail on the vote and the associated reforms later today. We are also attempting to confirm that those who voted in favor of the tax hikes will be recalled.

Budget Boondoggle

Posted by: GRPundit on Thursday, 27th Sep, 2007

For those that still think that the state government has “cut to the bone” with no more that can possibly be cut, and that our income tax should be raised from 3.9% to 4.6% (as the Governor is pushing for), check out the below news clip from WXYZ in Detroit.

The short introduction is this: Governor Granholm is having a new State Police headquarters built to replace the one that the state currently leases from MSU for $1 a year. The price tag? $116 million - $42 million more than it would cost the state to build itself. And who is the contract going to for the construction? A friend and campaign contributor of the Governor’s. The legislature has the power to stop it, but they haven’t. The video is entertaining to watch - especially as the Governor tries to squirm away from the reporter’s questions.

Video Part 1
Video Part 2
Video Part 3

State Budget Meltdown - Enjoying the Spectacle

Posted by: GRPundit on Friday, 7th Sep, 2007

Both the Detroit News and the Grand Rapids Press have articles today about the apparent near-meltdown occuring in Lansing over the state government’s budget. Apparently, late last night, the State House was flooded by all members of the State Senate, along with the Governor, in an effort to get the members of the House to agree to an increase of the state income tax from 3.9% to 4.4% (a 13% tax increase), as well as an increase in the state sales tax from 6% to 7% (a 17% tax increase). Ultimately the effort failed. According to the Grand Rapids Press, “…Democrats are paralyzed by ‘political fear that if they stick their necks out, there will be voter retribution.’”

This is outstanding news. In case you’re not aware, a taxpayer advocacy organization called the Michigan Taxpayers Alliance has been threatening to mount recall campaigns against legislators who vote in favor of any tax increase. Leon Drolet, the former State Representative who is leading the campaign, has been much-maligned over his efforts, but we applaud him and his organization. In fact, he is teaming up with the local taxpayer advocacy group Kent County Families for Fiscal Responsibility, who helped to defeat the GRCC millage last month. KCFFR filed the preliminary campaign reporting statements yesterday to begin the effort to recall Senators Bill Hardiman and Mark Jansen, as well as Representatives Robert Dean, Kevin Green, and Dave Hildenbrand, if those individuals decide to for in favor of a tax increase, according to the KCFFR web site.

People are talking about a possible government shutdown in October if the budget battle isn’t resolved by that time. We can only hope for such a pleasant October surprise. The more gridlock in Lansing, the better off our state is. There are plenty more cuts that can be made, and it is our hope that those cuts see the light of day before job-killing tax increases are considered. Stay tuned for more Lansing fireworks.

Tax Ourselves into Prosperity?

Posted by: GRPundit on Friday, 6th Apr, 2007

State government is having a tough time these days. The Governor and Legislature are arguing over how to close a supposed $940 million deficit for this fiscal year (which ends in September). But wait. As GR Pundit readers already understand, the way government budgets its money is different from how normal people and companies budget. Let’s take a closer look at the numbers.

Is this “deficit” due to a reduction in revenue? According to the Michigan House Fiscal Agency, fiscal year 2005-6’s General Fund revenue was $8.266 billion. Fiscal year 2006-07’s General Fund revenue is expected to be $8.230 billion. That’s a slight increase in reveues. So what’s the problem? Well, spending, of course. According to the same agency, appropriations (spending) for 2006-07 are set at $9.2 billion. Houston, we have a problem.

So, as usual, Governor Granholm and the Democrats in the state House are proposing all sorts of tax increases, including a 2% sales tax on services, an increase in the death tax, higher taxes on cigarettes, higher taxes on insurance, and higher liquor taxes.

The problem here is that residents of Michigan already enjoy the 16th highest tax burden in the United States. The average tax burden is 10.6%, when combining all state and local taxes.

Any company or individual would cut back on spending to balance the budget. But, since government has a monopoly on the police and will put you in jail if you don’t pay taxes, it’s a heck of a lot easier, for politicians and bureaucrats, so simply force us to pay more tribute.

This is one of those times where having a split government is better for all of us. The Republicans and Democrats in the state have to fight it out to get an agreement. No rubber-stamping, as our Federal government was for the past six years.

GR Pundit Election Wrap-Up

Posted by: GRPundit on Thursday, 9th Nov, 2006

GR Pundit would like to express contentment with the outcome of the elections in Michigan this year. We have been in favor in a split government, that’s why we weren’t very big fans of a DeVos election. The re-election of Jennifer Granholm will ensure that continued split, with the addition of a Democrat-controlled State House. We just hope that the legislature and governor can get together and see the light about really turning Michigan around. Pet economic development plans won’t work - and when government picks economic winners and losers, we all lose. It’s time to make Michigan friendly to all businesses, not just a few that the governor likes.

As for the proposals, we are very pleased about how they turned out.

Proposal 1 - Ensuring that state park funds are actually spent on state parks - Passed

Proposal 2 - Banning racist hiring, admissions, and contracting practices by any unit of government in Michigan - Passed

Proposal 3 - Allowing morning doves to be hunted - Failed

Proposal 4 - Banning eminiment domain for economic development purposes - Passed

Proposal 5 - Setting up mandatory funding levels for K-16 education - Failed

We were most worried about Proposal 5 passing because it would have caused the most economic damage and would have done nothing but protect the bloated public education bureacuracy and continue the lack of accountability of education in Michigan. Now it’s time to lift the cap on charter schools - which cost less than traditional public schools and do a better job. Parents desperately want and need the choice.

Proposal 2, which we were also hopeful would pass, did so handily. Michigan, and any unit of government in Michgian, will no longer be able to engage in racist hiring, admissions, and contracting practices. We now have true equality in Michigan. Of course, groups such as By Any Mean Necessay (BAMN) have filed lawsuits trying to overturn the passage of Proposal 2. This just shows their complete contempt for the will of the people. In addition, their lawsuit invokes the equal protection clause of the 14th Amendment in trying to argue that creating a color-blind government somehow creates unequal treatment.

Let the gnashing of teeth begin.

Granholm Campaign has Jumped the Shark

Posted by: GRPundit on Thursday, 12th Oct, 2006

It’s official, the Granholm campaign has jumped the shark. In their desperation to find one thing that Amway manufactures in China, they’ve found it - tissues.

According to the Detroit News, the Chairman of the Michigan Democratic Party, Mark Brewer, says that he is in possession of a packet of facial tissue from Amway, manufactured in China. The only problem is that it was manufactured in 1989. That’s the best they can do.

The governor’s campaign is in serious trouble if this is all they can come up with to counter DeVos’ campaign. It seems as though the issues aren’t really part of the discussion. Both candidates need to answer these questions:

Granholm - What have you done for the last four years? No one we ask seems to know.

DeVos - What will you do that’s better?

So far, even though we’re not DeVos fans, DeVos seems to be answering the necessary questions better than the governor.

State of the Statist

Posted by: GRPundit on Monday, 30th Jan, 2006

Governor Granholm’s State of the State speech was a surprising call for expansion of government, even for our current governor.

According to the Mackinac Center for Public Policy, the governor called for 20 expansions of state government and only one reduction in state government. Apparently our governor has yet to take Economics 101. Michigan has been competing to be the worst economy in the nation, and the governor is doing a great job of proposing greater bureaucracy, government, and taxation to make sure things stay that way.

Among the highlights of the governor’s proposed expansion of government, and consequently, increased taxation, are:

Favorable Job Market Predicted for Grand Rapids

Posted by: GRPundit on Tuesday, 20th Sep, 2005

MiBiz reports that the job market for the Grand Rapids area is looking up for the fourth quarter of 2005.

The trend is continuing in favor of service industries. The construction, wholesale/retail trade and finance/insurance/real estate industries are expected to add the most jobs, with manufacturing staying stable with no growth anticipated.

But we’ll remind our readers that Governor Granholm wants to tax service industries more in favor of tax cuts for manufacturers. It doesn’t make much sense to increase the tax burden of those industries which are creating jobs, which will result in the creation of fewer jobs. The single business tax needs to be cut across the board, so all industries benefit. The lower the taxes, the more money employers will have to create jobs. It really is that simple.

Michigan has the nation’s worst economy and people are leaving the state. It’s time to get government out of the way so businesses can be allowed to create jobs.

Granholm Complaining

Posted by: GRPundit on Monday, 25th Apr, 2005

Governor Granholm is complaining that her “Jobs Today” and “Jobs Tomorrow” plans aren’t sailing through the legislature, as she’d like them to.

Gee, let’s think about that. Her plan is to lower the Single Business Tax for the industries that are fleeing Michigan such as manufacturers. So far so good. Ah, but she wants it to be revenue neutral. Therefore the tax is also raised on the industries in Michigan that are actually creating jobs, such as the insurance and financial services industries. Wow, great idea. Tax the growth industries in Michigan more.

In addition, her plan to sell bonds so that bureaucrats can invest the money in startup businesses isn’t going so quick. Again, as though bureaucrats are better than the market at investing. She’s trying to borrow the state into prosperity.

And a third aspect is for the state to offer low or no interest loans to school districts so that they can build new buildings, again, with the hope that this will increase construction jobs. State borrowing to create jobs doesn’t help the economy. It hurts in the long term.

Our governor (and much of the legislature) need to go back to Economics 101. They should start by reading Frederic Bastiat’s That Which is Seen and That Which is Not Seen.