Due to the near-complete collapse of state revenues, the cuts have (finally) been forthcoming. Public schools received per-pupil cuts of approximately $300 for the current fiscal year. State agencies have been ordered by the governor to cut 10% of their budgets. The cycle of layoffs and reduced revenues continues.

The result? Governor Granholm and the MEA have begun hyperventilating. This week they staged a massive lobbying effort to get legislators to increase taxes. Apparently they don’t require Economics 101 in teacher colleges.

On the city level, Grand Rapids has seen a similar decline in income tax revenues and property tax revenues will probably see declines due to historic drops in resale values of homes and commercial property. Immediately upon announcing the layoffs of 125 city employees, Mayor Heartwell called for a ballot question to raise taxes in the city. He claims there hasn’t been a tax increase in 15 years. Apparently the constant reduction of the personal income tax exemption, the added property tax bill “service fee,” and the increase in trash collection property tax don’t count as tax increases in the mayor’s book.

Oh, and don’t forget that The Rapid is coming back, probably in early 2010 to ask, again, for a tax increase to build the redundant and wasteful “Silver Line” bus service, to clog up Division during rush hour.

But the fiscal problems are just beginning, and there is very little sign that anyone is proposing real solutions. The “easy” way out, increasing taxes, will only work so much. They will run in to the law of diminishing returns. The speaker of the state house, Democrat Andy Dillon, apparently grew some huevos and bucked his MEA masters by proposing the pooling of all public school health plans into one statewide health plan. The MEA, fearing the loss of their money-laundering cash cow health plan MESSA, promptly went ape-sh*t. This illustrates the difficulty of real, substantive change at the state level. So many special interests peddling their influence (in the form of money) makes it nearly impossible to propose an innovative solution to the state’s structural budget problems.

Of course, then there are the unsustainable defined-benefit Ponzi public pension plans. They will fail. It’s just a matter of time. Even politicians can’t repeal the laws of compounding numbers. But I’m sure they will try.

But we should turn to the local level, where real people can have the most chance of affecting change. We can, as a city, choose to continue down the ultimately disastrous path of “the easy way out,” or we can have real, substantive change in how city government does business.

A quick overview of what’s going on at the local level: As state revenue declines, so does the state subsidy to cities called revenue sharing. Revenue sharing has been on the decline for several years. City leaders keep pointing to how much has been “lost,” but their complaints fall on deaf ears – or at least ears that understand that cities fall further back in line from other special interest groups.

As revenue sharing declines, so have city income tax receipts. The city’s income tax revenue is down 14% (apparently year on year).

Not only has revenue been on the decline, the gigantic hydrogen bomb of the city’s pension system is preparing to detonate. The city’s 2010 fiscal plan (published before the layoffs were announced this week), is available here. One paragraph should stand out and set off all the alarm bells in the city:

In FY2007 our two pension retirement trusts were 110% and 120% funded.  Both employer and employee contribution levels were at or near the lowest possible levels.  This advantage was eliminated by the breathtaking decline of the financial markets over the past 18 months.  We now know that our retirement funds are significantly underfunded. This means that both employee and employer contributions must move dramatically higher.  Proposed changes to actuarial assumptions and plan provisions will freeze employee contributions at the bottom of the contribution range and provide additional time for the City to adjust to higher employer contributions.  Nonetheless, the employer share will go from 7.7% in to 9.29% in FY2010, and 13.62% in FY2011 for the General Pension and from an FY2010 rate of 0% to an estimated 23% in FY2011 for the Police/Fire Pension.  These percentages assume that we will be able to implement critical smoothing techniques that will mitigate the intense upward pressure on required contributions. The increase in employer funding requirements contributed to the FY2010 GOF operating deficit of $2.9 million.  Unless we see a significant increase in the market value of retirement plan assets over the next couple of years, the estimated pension contribution will continue to rise. (emphasis mine)

Translation: 2010 layoffs are just the beginning. Fiscal Year 2010 includes a pension contribution (as a percentage of salaries) for the police and fire employees of 0%. Yes, 0%. This will go from 0% to 23% (of salaries) in one year. A search of the fiscal plan shows that total personnel costs for police and fire are about $67 million. Let’s back out about 40% of that (just a wild guess) to come to actual base salary cost. We come up with about $40 million. Now,  re-read the above paragraph. The city is going from contributing $0 in the current fiscal year to the police and fire pension plan to (my estimate) of 23% of salaries in 2011 – or about $10 million. The increase in contributions for the other defined-benefit pension participants on the city’s payroll will increase from 9.29% this year to 13.62% next year. This is unsustainable.

The mayor’s solution? Raise taxes.

Lest I be declared someone who only points out problems and no solutions, here are a few suggestions:

1. Lay off all non-essential employees. This includes the “equal opportunity” department of five people.
2. Outsource information technology (IT) services.
3. Eliminate the Office of Children, Youth, and Families.
4. Convert all employees, now, to a defined-contribution retirement plan. NOW.
5. Eliminate the Downtown Development Authority. This entity sucks up about $17 million of local property tax revenue that would normally go to the city’s general operating fund. The DDA also currently owns the Van Andel Arena. Sell the arena, pay off the outstanding bonds, and use the excess to pay off some of the DeVos Place bonds. The DDA currently operates as a taxpayer-funded subsidy to developers, giving away free money to those who ask.
6. Implement a fire department response fee. Most (if not all) homeowners insurance plans offer coverage if you’re charged for fire department response.
7. Eliminate the city’s trash collection services. There is a special property tax levied for this. There are plenty of private trash haulers. Once the trash collection services are eliminated, go to voters and ask them if it’s ok to convert the current trash levy on property tax to a general fund levy so that it can be spent on other city services (including police).
8. Contact every citizen and ask them what their priorities are. Do you prefer Police and smooth roads, or do you prefer an equal opportunity department and subsidies for developers?

If serious, dramatic changes are not implemented, the city will go bankrupt. This has started to happen in other states. There is no chance in h*ll that the economy is going to return to anywhere near where it was at the peak of the last cycle in 2007 – at least not any time soon.

Tough choices need to be made now – if our politicians can stomach it.

Earth to Heartwell: We are entering Great Depression II.

The mayor’s justification for the request to spend $1,000,000 more on five buses was summed up thusly:

Heartwell argued the DDA should somehow come up with the money — he didn’t know where it would come from — because having buses labeled ‘hybrid’ plays well with the city’s efforts to market itself as ‘green.’

“If for no other reason than the important symbolic benefit of having buses around downtown that say ‘hybrid,’ it’s an investment worth making,” he said. “It’s terribly expensive to do, but if we don’t start making these kinds of investments in our environment, we’re being short-sighted.”

So, in other words, the word “hybrid” painted on the side of a bus is worth spending an extra $1,000,000 of taxpayer money. Right.

Wisely, the DDA voted 5-1 (with Heartwell being the “one”) to reject his request.

Just to drive the point home of how the mayor is completely out of touch and apparently has absolutely no idea what a position of public trust involves, I was just leaked the actual improvements in gas mileage that the hybrid-electric buses enjoy. Get ready for this. These are the numbers from The Rapid (ITP) itself:

A standard diesel transit bus gets 4.45 miles per gallon. The hybrid-electric buses get 5.12 miles per gallon. Yes, that’s right – an improvement of 0.67 miles per gallon – all for the spiffy additional cost of $200,000 each.

Remember this when the city commission comes to taxpayers asking for a tax increase to shore up the rapidly-deteriorating budget.

But an even more interesting issue arises here. Mayor Heartwell, along with all the public officials in the state of Michigan, are required to take an oath of office. That oath reads as follows:

I do solemnly swear (or affirm) that I will support the Constitution of the
United States, and the Constitution of this State, and that I will faithfully perform the duties of the office of __________________ in and for the City of _________________, County of ____________ and the State of Michigan, according to the best of my ability, so help me God.

Mayor Heartwell has taken a similar oath to “support… the Constitution of this State…” Proposal 2 is an amendment to the state’s constitution. The mayor is therefore looking at violating his oath and defying the state’s constitution. Filing a lawsuit to try and stop a state constitutional amendment certainly cannot be defined as supporting the constitution.

Perhaps the University of Michigan’s president, Mary Sue Coleman, has seen the legal light on this issue. She has decided to back off her earlier statements that she would fight Proposal 2 in court. When she addressed the university’s Board of Regents this week, she didn’t mention any lawsuit. In fact, she committed to working within the law:

“With last week’s passage of Proposal 2, I want to again assure the campus community that we remain fully dedicated to a diverse university and that we will obey the laws of our state,” said Coleman. “What will be essential is that all of us – students, faculty and staff and administrators – pursue all possible creative solutions to achieve diversity at the university within the boundaries of the law.”

We tried to find some statistics relating to minority enrollment at the U of M to compare with minority graduation, but we were unable to find that information. However, we did find some information on how California’s Proposition 209, similar to Michigan’s Proposal 2, affected universities in California.

The interesting outcome in California appears to be an increase in the number of minorities graduating from universities. That’s right, an increase. Why? Because enrolling students who would not otherwise qualify for admission to a top-tier university actually does the student a disservice. Think about it this way: if you were a B-average student and a top university admitted you based on something other than your grades, chances are you wouldn’t do so well, surrounded by A-average students in a very rigorous academic environment. Students not qualified to attend a top-tier university tend to drop out in higher rates. Therefore, it does them a disservice.

By admitting students to universities largely based on academic ability, students tend to apply for and attend the university that is closer to the academic rigor level they will succeed in. Therefore, the effect of Proposition 209 is that minority students tend to apply for admission at universities at the level of rigor they are more comfortable in. Therefore, instead of dropping out due to an inability to keep up, they tend to graduate at higher levels.

The reality of minority graduation rates bear this out. Rates stayed the same both before and after the passage of Proposition 209. That is, regardless of admissions levels of minority students, graduations rates were flat.

But of course, special interests to hate to see special favors melt away will do anything they can to preserve the status quo, as our mayor is demonstrating. Never mind the fact that the city is constantly complaining about a lack of funding and funds for critical services – apparently it’s more important to use our taxpayer dollars to try and overturn the vote of a majority of Michiganders.

The interesting thing is that Mayor Heartwell says that the second round of interviews for the three finalists will include more hard-hitting topics, such as:

He believes they will be asked about their stand on whether to ask voters for an increase in city property or income taxes.

He also expects they will be quizzed on whether they support a living wage ordinance that could raise minimum wages in the city.

Oh boy. In other words, the litmus test will likely be something along the lines of, “do you think city government should be bigger and more invasive?” The response of “yes” will work in the candidate’s favor.

If both those issues pass in the city, get ready for making a bad economic situation even worse.

First, he starts with cooperation between the city schools and the city government. Nevermind that his 2004 state of the city touted cost savings as a primary goal of collaboration between the two entities, now he says that they’re working together just great in building new schools. You know, bureaucrats are holding hands around the table. Wonderful news.

Second, the mayor reviews his commitment to reduce illiteracy in Grand Rapids. It’s a good and important goal. He says he wants to reduce illiteracy by 50% over the next 10 years.

The mayor then skips everything else he proposed in the 2004 state of the city, preferring not to review the things he did not accomplish, such as the education renewal zones. He also skips over his desire to strengthen the unaccountable Grand Valley Metro Council’s central-planning powers when it comes to land use, as well as his intense desire to expand wasteful and expensive mass transit systems, such as light rail.

He then moves on to a review of his second state of the city, in 2005, which was essentially a blabber-fest about pollution and saving the world’s environment, all from City Hall. He touts all the wonderful things the city government is doing without mentioning much in the way of specific end points. He does mention, however, the new hybrid electric busses which the ITP will be purchasing at the bargain basement price of $500,000 each.

The next portion of the speech focuses on the Grand Rapids economy and its growth. This is certainly good news. Several anecdotal items are cited as examples of local companies which are expanding.

However, the following section is where the mayor goes completely wrong. He makes the following statement:

Before I talk about our course of action for economic development, I want to address our “ship’s” fuel reserves and our prospects for refueling on our way to our destination of economic health. I want to talk about the city’s budget.

Does anyone notice something wrong? We’ll tell you if you haven’t figured it out. As we’ve previously pointed out, the mayor doesn’t distinguish between the health of the city and the revenue of city government. He says in his speech that City Hall is what keeps the “ship” of Grand Rapids moving forward. He doesn’t understand that city government is usually the road block to further economic growth, not the reason for growth.

However, Mayor Heartwell does go on to explain the Lean Thinking initiative the city government is using to improve operating efficiency. It’s good to see that they are working on making the government operate better within its means.

Then comes the big stink bomb. More taxes. Heartwell goes on, complaining about lost “state revenue sharing,” which has been reduced over the last several years. It’s the usual complaint from city governments. As the Michigan economy limps along, the politicians and bureaucrats want more money. Well, it’s not coming down the pike. Perhaps they haven’t looked at the unemployment rates in Michigan lately.

The point of this speech:

[W]e are rapidly approaching the time at which we must bring a tax increase question before the voters.

Yes, that’s right. Hang on to your wallets, again.

But! Here comes the logical fallacy that the mayor is so wonderful at espousing. Out of one side of his mouth he says that taxes need to be raised. But lo and behold, he then goes on to propose tax abatements for industrial facilities. Nevermind that manufacturing is going the way of the telephone operator, the real point is that he implicitly recognizes that tax reductions help economic development. If tax abatements didn’t spur growth, why would they use them? But, at the same time, he proposes a general tax increase to prop up the bureaucracy. Which one is it, Mr. Mayor? Growth of government or growth of the economy?

Finally, Heartwell closes his speech with a promise to build a sustainable business park. He want to provide everything anyone ever wanted for development: high-speed internet, wireless internet, rail transportation, green space, on-site recycling, storm water capturing, and even a chicken in every pot. Wait, he didn’t say the chicken part, but the mayor promises everything else. Perhaps he’s never heard of what the free market is. Should city government be in the internet service business? How about rail transportation? Is your wallet getting lighter?

Essentially, the speech was, once again, about further government expansion and tax increases, although this year the tax increase part was explicit. The mayor only proposed one item which reduces government – the lean thinking initiative. Hopefully, one day, the mayor will realize that the size of city government is inversely related to the economic health of the city.

Hmm… maybe they see the writing on the wall?

The school district, which spends over $10,000 per student, claims that it is near bankruptcy. At this point, that’s about the best thing that could happen. If a federal trustee takes over, he could rip up the contracts and start over. All the union contracts should be tossed, along with most of the administration. They maybe, just maybe, some reform could be implemented. But we’re not holding our breath.

With folks like Mayor Heartwell in the likely position to influence what happens to the district, there really is no hope. He’ll probably propose a group hug to make things all better.

The mayor, along with all the big-government spenders are panicking lately because of reduced revenues to local and state government.

But the real kicker is the mayor’s quote regarding these cuts and his mission to extract more money from taxpayers, saying he won’t stop, “until God’s reign of justice permeates our world.”

We didn’t realize that Community Development Block Grants were part of God’s master plan. In fact, we have yet to see a section of the Bible that commands those in government to use the force and effect of government to extract money from people, at gunpoint if necessary, to redistribute to the poor. We always thought that the most virtue in giving was when one is giving from the heart, not when one is forced to do so under the threat of jail.

Folks like the mayor, and other Great Society apologists, are going batty because they see their welfare state being dismantled. Nevermind they have nothing to show for it.

First, let’s go over last year’s state of the city speeches. He gave three, but only two were available online.

In his first 2004 SotC speech, Heartwell concentrated on education. His fluff-filled tome focused on adult literacy, city/schools operating partnerships, and education renewal zones, to divert more money to the schools. Oh, and he ended that speech with the old cliche, that it’s for the children, “…all the children.”

His second speech, which we analyzed here, was a typical stump for more political power, centralization, and central planning. He wants more money spent on a wasteful mass transit system and strengthening of the Grand Valley Metro Council for more “regional planning.” The one bright spot here is his stumping for tax-free renaissance zones. We wonder if he has any latent understanding of why tax-free zones work, but we’re doubtful.

This year’s theme? Sustainability. Whatever that means. Well, we do know what it means, but folks like the mayor won’t admit what it means. Essentially more government control of economic development. But we know that is a contradiction of terms.

Heartwell starts out the speech by touching on the issue of violence in the inner city. He looks forward to a committee’s recommendations to heal racism.

Next, he looks back at last year’s education speech and goes over accomplishments from the last year. He congratulates himself for raising taxes twice for Grand Rapids Public Schools. He discusses the success of an adult literacy program.

Then he talks about the joint operational project between the city and GRPS. The strange part about this is that it isn’t a joint operational project at all. All he can refer to is working with the schools to support more minority contractors and the sale of the West Middle School building to a developer. Huh? Last year he talked about saving money by using joint human resources, accounting, and groundskeeping departments. How have any of the above saved either the city or the schools money?

Finally, he says that a joint program with the West Michigan Environmental Action Council and GRPS has helped environmental education. But, as we pointed out previously, this program, basically to collect trash around streams, costs the city about $564 per bag of trash collected. And we thought the schools and city were hurting for money.

And then he laments the fact that the Education Renewal Zones concept hasn’t progressed as much as he liked.

Then we move on to the meat of the speech. What’s he going to do for us this year?

First, he goes over the usual doom and gloom predictions of how horrible the world will be if the government doesn’t take a larger role in our lives. For example, he cites this example: “The United States, which presently uses 40% of all the world’s oil production and 23% of all coal production will be experiencing crisis levels in these resources.”

Didn’t they make those types of dire predictions in the 70s? Yeah, and we’re still here.

So, we can see where this is going already.

He then blabbers on (see if you can make it through his speech without falling asleep) about sustainability and all kinds of government partnerships to make peoples lives better, in a sustainable way. He goes on to lament the state of the economy in Michigan and how social equity (another buzz-word of the extreme left) must be kept in mind.

The most fun (and laughs) comes from Heartwell’s diatribe about electricity usage in Grand Rapids. He wants to reduce the City’s dependence (he doesn’t clarify if he means the City government, or the people in the city – he probably doesn’t make that distinction in his own mind) on non-renewable resource power by 20% by 2008.

His plan to do so? Wind power. And you thought cellphone towers were ugly.

The mayor concludes with what he hopes the next generations will write about this one:

In 2005 and 2006, this diverse group of people in Grand Rapids found ways to interconnect business with the environment – maximizing commerce and nature.
This generation responded to the challenges of globalization by creating a city that led the state in productivity and returned the country to prosperity.

This generation created a city where neighbors cared for neighbors and children were safe.

This generation created schools that maximized each child’s potential and allowed us to respond to rich economic opportunities.

Truly, this generation created a city that sustained life.

Laudable goals. But government, bureaucrats, bureaucracy, high taxes, regulation, and central planning aren’t the way to get us there. Anyone ever look at the history of Detroit?

Notwithstanding the fact that here at GR Pundit we’re having a tough time remembering the last time a rally solved the world’s problems, we wondered exactly what this organization’s goals are.

We found on their website, as part of their mission statement, a typical explanation of what they look for:

We believe the American people are disgusted with politics as usual and hungry for political vision with spiritual values that transcends the old and failed categories that still imprison public discourse and stifle our creativity. The religious community should help lead that discussion and action toward new political and economic alternatives.

They are attempting to throw off the old political labels and look for a third way in using government to achieve their means. Which is exactly where they end up being like any other social favors organization. They pay lots of lip service to finding that “third way” to ending poverty, but they end up supporting the same partisan positions that end up bloating government, raising taxes, doling out money, and ultimately harming people more in the long run.

Their mistake is in thinking that government is the source of economic renewal and improvement – in thinking that government is the ultimate economic uplifter and equalizer. They err greatly on this front. Didn’t the so-called war on poverty demonstrate to these people that this isn’t the way to help people?

A few examples of the programs they want people to advocate for are listed on their web site: