Will Michigan be ready for 2018?

July 8, 2010

Peter Ruark

We at the Michigan League for Human Services have written extensively about the need for Michigan to invest in postsecondary education and training. A new report from Georgetown University called Help Wanted provides projections for future job demand that underscore this need.

According to the report, the number of Michigan jobs requiring postsecondary education will grow by 116,000 between 2008 and 2018, while jobs for workers with no education past high school (including dropouts) will grow by only 22,000.

In Michigan, 62 percent of jobs in 2018 will require some postsecondary education and 28 percent will require a bachelor’s or graduate degree. These figures are close to projections for the nation as a whole.

Jobs that require some level of postsecondary training (such as an associate’s degree or a recognized vocational credential) but not a bachelor’s degree are called “middle skill jobs.” This is where a large part of the job growth will be in the next several years.

What is driving the increasing need for postsecondary education? According to the report, it is technology. Throughout our country’s history, technological development has favored workers with more education, and in turn, demand for these workers grows as the technology spreads throughout the economy.

So what are Michigan and the United States doing in light of all this? The good news is that No Worker Left Behind has been very successful in its first three years. It has enrolled more than 131,000 workers, and 75 percent of the 58,000 program completers have found new employment or retained a job that had been at risk.

However, in contrast to the $40 million in state funds that Gov. Jennifer Granholm recommended for its first year, the state only invested $4.5 million in No Worker Left Behind this fiscal year, with the vast majority of funding coming from the federal government.

This may have worked fine when there was federal money to be had. But, according to the Lansing State Journal, federal funding will be cut by $92.4 million as the need in other states becomes greater and as stimulus funds begin to dry up. Because workers already in training programs will receive highest priority for the remaining funding, No Worker Left Behind will not be able to enroll many new trainees in the near future.

There has to be serious monetary investment in adult learning by both the state and the nation if we are going to have a workforce that can meet the job demands of the upcoming decade. If Michigan plans to be competitive, it must make sure it has the money to upskill its workforce when federal funds are scarce.

Right now our state doesn’t have the money. And though it sounds like a broken record to say so again, we won’t have the money until we devise a way to increase state revenues.

— Peter Ruark


Dog days of the budget cycle

June 22, 2010

Sharon Parks

Webster defines “dog days” as a period of stagnation and inactivity.  It’s the day after the start of the summer, and in Lansing it already feels like the dog days of summer.

Michigan is 100 days away from the new fiscal year, and we don’t appear close to having a budget. There is no agreement as to how to close the gap between revenues and expenditures; targets haven’t been set, and the whole process appears stalled.  Meanwhile, we creep closer to campaign season when there’s little likelihood of rational policymaking.

Monday’s Spotlight on Poverty, a national online source for news, ideas and action, focuses on the importance of federal aid and a balanced approach to state revenues, rather than cuts, as the immediate short-term solution to state budget problems. The article highlights the difficulty that many families and individuals have in making ends meet, and cites the harm of continued state budget cuts. 

In Michigan this is particularly true.  While we moved last month to No. 2 in the nation’s unemployment rate, we still have a long road ahead of us.  That journey could be made easier if policymakers would get over their fear of the “t” word and tackle the important job of overhauling our tax structure.  Wishing doesn’t make it so; action is needed now rather than later.

— Sharon Parks

Ouch! Survey results pinch

June 17, 2010

Judy Putnam

A recently released survey of local Michigan officials has a depressing finding: Only 1 percent of local officials think the American Recovery and Reinvestment Act has helped improve local economic conditions “very much.” Two out of every three say it has not helped at all to date, and more than half predict it won’t help at all over the long term.

Ouch! That’s a blow for those of us who have been advocating for extending vital features of the ARRA. (Those include extending the enhanced federal Medicaid match that will offer more than $500 million for next year’s state budget, Earned Income Tax Credit expansions, Child Tax Credit to benefit working poor families of nearly 600,000 kids in Michigan and 99 weeks of unemployment benefits for the state’s long-term unemployed.)

ARRA has poured critical dollars into our state at a critical time. Few of those dollars, however, went directly to local governments, a fact pointed out by the Michigan Municipal League in a well-publicized letter to Vice President Biden last year. Local governments struggle with the double whammy of sharply reduced revenue sharing from the state and declining property values, causing layoffs of public safety workers and other hardships.

But the Recovery Act money has flowed to many people in the communities: the unemployed, households on food assistance, those on Social Security and taxpayers. It is credited with saving an estimated 12,000 jobs in Michigan, most of them in education.  That help doesn’t go into a black hole — those are dollars that are quickly circulated in local economies.

The survey of more than 1,000 local officials was completed last fall. Perhaps, with time, more will see the benefit to their communities in projects such as weatherization.

Without doubt, the ARRA has paid off for local communities, even as tough times continue. What’s hard to imagine is how much worse it would be without the Recovery Act.

Michigan needed the Recovery Act in 2009. It needs it now – it’s important that Congress votes to extend the enhanced Medicaid match, EITC expansions, unemployment benefits and the Child Tax credit.

— Judy Putnam

Real fiscal hang-up nailed

June 10, 2010

Sharon Parks

Talk about spot on. Today’s Detroit Free Press editorials zero right in on the real hang-up in resolving Michigan’s ongoing fiscal problems. Too many current and wannabe lawmakers think the answer to Michigan’s problems is more tax cuts, and no tax increases.

This approach ignores the fact that tax cuts actually got us into this mess. Michigan cut taxes aggressively throughout the 1990s and enacted multi-year tax cuts in 1999. Lawmakers foolishly continued these tax cuts, even as Michigan and the rest of the country slid into a recession.

The implosion of the auto industry and the 2008 recession only compounded our problems. An improved economy, which is not around the corner, won’t entirely solve our revenue problems, as the Free Press points out. The League’s graduated income tax (pdf) plan is cited.

If Michigan is ever to have a revenue base (pdf) that can restore viability to this state, it must look to the growth sectors of the economy and to those whose incomes are growing the fastest.

Tax cuts have not pulled Michigan out of this mess, nor will they in the future. Those who want to lead Michigan in the future, yet take a “no tax” pledge, would lead Michigan nowhere.

— Sharon Parks

New budget gap of $244 million

May 21, 2010

Karen Holcomb-Merrill

The state Treasurer and the heads of the Senate and House fiscal agencies gathered today to hear economists talk about Michigan’s future. At the end of this meeting, known as the Revenue Estimating Conference, the three of them reached consensus on projected revenues available to the state.

While the Conference did bring some encouraging news about Michigan’s economy, it is clear that the state continues to have a serious General Fund revenue problem.  Revenue estimates from today show a new budget gap of $244 million for the 2010 budget.

A sharp decline in business tax collections is the cause for the recent fall in revenue. This unexpected news means that more revenue must be found or more programs and services must be cut. The Legislature, which has been working to address an anticipated $1.8 billion budget gap for the 2011 budget, must now also turn its attention to this new budget shortfall.

As state Treasurer Bob Kleine said today, this is a revenue problem, not a spending problem. Michigan has been in a budget-cutting mode for much of the last decade. Most recently, deep cuts have been made to health care, public safety and education.

On the heels of years of cutting, a balanced approach to this shortage of state revenues must include the evaluation and closing of some tax expenditures, which cost the state about $35 billion a year. As state revenue has plunged, tax loopholes have increased every year.

Michigan also needs to modernize its tax structure to provide for stable revenue.  In the short-term this can be done through extending the sales tax to most services.  And in the long-term, Michigan should adopt a graduated income tax which would produce more revenue and would provide a tax cut for 90 percent of tax filers.

Without structural changes, the state will continue to face budget gaps and programs and services will be in jeopardy each year. Earlier this week, Senate Fiscal Agency Director Gary Olson indicated that without revisions to the tax structure and even with an assumed 3 percent increase in revenues, the state faces continuing budget shortfalls.  His projections were that the gaps would range from $1.2 billion to $1.8 billion a year over the next several years.

Economist George Fulton, one of the presenters at the Conference, described Michigan’s economy and budget situation as “despair followed by hope.”  Part of that hope rests on lawmakers taking action now to close tax loopholes and to modernize the state’s tax structure.

 — Karen Holcomb-Merrill

Taxes — We’re No. 30 and 39

May 10, 2010
Picture of Karen Holcomb-Merrill

Karen Holcomb-Merrill

A recent report by the Senate Fiscal Agency confirms what some have been saying for a while, but may surprise others — Michigan’s tax burden fell significantly between 1999 and 2009. In 1999, Michigan had the 16th highest state and local tax burden. By 2009, it had fallen to 30th.   

There are some who continue to argue that Michigan is a high tax state and that taxes should be reduced. Well, the facts seem to indicate otherwise, especially when it comes to taxes paid by businesses in our state.

According to the report, Michigan’s corporate tax burden fell from 12th in 1989 to 39th in 2007.  This was the largest drop in tax burden among all of the states.  These numbers make Michigan look like a pretty low-tax state for those doing business here.

Michigan taxpayers are paying a slightly higher percentage of their income toward the state education tax, but less toward the income, sales and use taxes. But however you look at it, their tax burden has fallen significantly overall.

Understanding tax burden is important as debate continues about how to address the short-term $1.8 billion budget gap for the 2011 budget and the long-term budget deficit.  There are those who refuse to consider any change to the outdated tax structure in our state, often citing that taxes are already too high.  Perhaps after considering the facts they will reconsider their position. 

The League and A Better Michigan Future  see the new fiscal agency report as further evidence that the time is right to modernize the tax system. Extending the sales tax to most services and instituting a graduated income tax will generate more revenue for the state and will help the state keep pace with the changing economy.  That’s a win-win.

— Karen Holcomb-Merrill

Exemptions, deductions and loopholes, oh my!

April 26, 2010

Jacqui Broughton

It’s budget time again in Michigan and unfortunately, as in previous years, the state is facing a shortfall of close to $2 billion.

There are several options on the table to remedy this situation, and not just in the short term. One of the solutions gaining traction is to end tax expenditures (also commonly referred to as loopholes or incentives) that no longer serve their purpose as discussed in a new League report.

Some lawmakers are supporting the idea of ending ineffective tax expenditures by linking departmental budget bills to their closure, and there is also public support. A recent poll by Epic MRA found that 72 percent support reducing the amount of tax breaks allowed to various corporations and other special interest groups. There is support for using those funds to ensure that important local and state programs can be funded.

Policymakers and residents of the state are coming to realize that tax revenue has a direct impact on how much can be spent. Constantly cutting and eliminating programs is not a solution — real structural reform must occur.

Each year, the amount that Michigan gives away in the form of credits, exemptions, deferrals, or exclusions continues to grow. From 2005 to 2009 tax expenditures grew over 21 percent while total tax revenue actually declined by 5 percent. We are giving more away than we are taking in.

It is becoming clear that if Michigan is serious about getting its fiscal house in order, and investing in education and training programs that prepare workers for a changing economy, we can no longer afford to give away tens of billions of dollars each year ($35.4 billion in fiscal year 2009, approximately four times the state’s entire general fund) in tax breaks that are out of sync with consumer spending or to businesses that fail to create new jobs.

Evaluating tax expenditures and ending some is an important part of a balanced approach to closing the budget gap.

-Jacqui Broughton