News Story

$2.1 Billion in Michigan Budget Reforms

I recently submitted 35 major policy reform ideas via letter to several state lawmakers after a public call for them. The ones I submitted total $2.1 billion and mostly involve resources from the state General Fund or those that could be redirected there or elsewhere if necessary. The following edited text is taken from my original letter.

It is worth mentioning that the Mackinac Center is not the only institution with reform ideas. For example, two items on our list match those from the state house reform package from last spring and the Citizens Alliance on Prisons & Public Spending, respectively. We also collected several good ideas from other policy analysts in and outside of Lansing.

In addition, two different state-sponsored groups put together laundry lists of potential budget reforms worth $1.5 billion in gross savings and $2.98 billion in General Fund reductions, respectively. Those two groups, Michigan Legislative Commission on Government Efficiency and the State Budget Office, published their lists in 2009 and 2010.

The Commission was created in 2007 and was designed to “provide an objective analysis of Michigan’s government operations and offer recommendations to reduce government expenditures.” It is titled “Charting A Way Forward: A Path Towards Fiscal Stability for the State of Michigan,” and contains 53 specific recommendations.

The document, produced by the state budget office, contains 181 ideas for reductions in general fund spending of nearly $3 billion. This list was once referred to as the “Mystery Document” by Gongwer News Service for its lack of pagination. That is, for a time, few knew who authored it.

Several big ideas in this document — such as devolving state police road patrols to county sheriff’s deputies and privatizing the University of Michigan — were advanced by Mackinac Center analysts years earlier. It would be a shame if the ideas outlined in 2009 and 2010 were overlooked by lawmakers.

Most of the figures below involve General Fund dollars — the areas over which lawmakers have the most control — and are taken from the fiscal 2015 enacted budget unless otherwise specified.

  1. Adopt the package of reforms passed by the House in May: $462 million.
  2. This series of reforms was considered last spring and remains a potent set of ideas, including greater competitive bidding in an attempt to maximize existing and save other money.

  3. Eliminate statutory revenue sharing: $419.2 million.
  4. This money could be cut as official revenue sharing and returned immediately to the communities from which it was taken but earmarked for more specific and pressing needs.

    Mackinac Center experts first recommended cutting statutory revenue sharing in 2003.

  5. Eliminate the Michigan Economic Development Corp.: $300 million.
  6. The MEDC is Michigan’s corporate welfare department. It does little to create net new jobs and evidence shows such departments may actually contribute to slower economic growth rates. The savings estimate is based in part on fiscal year 2014 data.

    This entry is one of (arguably) 13 state budget appropriations that comprise Michigan’s industrial-corporate welfare complex and which are listed here.

    Mackinac Center analysts first recommended eliminating the Michigan Jobs Commission in 1996 and maintained that view when it morphed into the MEDC.

    These first three items alone total nearly $1.2 billion worth of reform ideas.

  7. End the state subsidy for the University of Michigan Ann Arbor: $279.2 million.
  8. We first recommended eliminating the subsidy for the University of Michigan-Ann Arbor in 2004.

  9. Repeal Prevailing Wage law: $250 million.
  10. Mandating higher than market wages on government construction projects is an archaic and expensive practice and one that unnecessarily increases the cost of government construction projects. Our 2007 estimate of possible savings listed here is a deeply conservative one.

    A more recent study, by the Anderson Economic Group of Lansing, suggests that repealing Prevailing Wage would save public schools and universities alone some $224 million a year.

    Mackinac Center analysts first recommended repealing Michigan’s prevailing wage law in 1989.

  11. Adopt “presumptive parole” for prisoners who have served their minimum sentences. $162 million.
  12. Lansing-based nonprofit Citizens Alliance on Prisons & Public Spending has long argued that the state spends too much on housing men and women who have met requirements for release. Parole boards may have too much discretion in rejecting parole candidates.

    They estimate that releasing the most deserving inmates (about 77 percent) on their earliest parole date may save state taxpayers $162 million annually, after subtracting out the costs of parole monitoring and parole appeals made by prisoners.

    Prison reform ideas have been percolating in this state for years. Indeed, in March 2011 several nonprofit groups and individuals attended a symposium in Lansing to talk about shaving Michigan’s [then] $2 billion prison budget by a whopping $500 million.

    These top five items alone total more than $1.6 billion in reform ideas.

  13. End performance funding for universities: $74.6 million.
  14. The goals of this program are laudable, but we argue the money could be better spent elsewhere. Also, there is a superior way to persuade Michigan’s public universities to be more cost conscious and transparent.

  15. End rail operations and infrastructure (Amtrak subsidies): $40.7 million.
  16. This line item purchases Amtrak services for three routes, the Blue Water, Pere Marquette and Wolverine lines. The money for subsidizing the Amtrak lines comes from the “Comprehensive Transportation Fund” and could be redirected in a limited fashion. My colleague, Michael Farren, has estimated that the state subsidized Amtrak operations to the tune of $98.11 per roundtrip passenger in 2014.

    The total fiscal year 2015 appropriation for rail operations and infrastructure is actually $57.0 million. With the help of the state’s House Fiscal Agency, the Center teased out subsidies to Amtrak operations for this entry, but there is no reason the Legislature should not explore trying to capture whatever remains of CTF dollars for a higher valued, transportation-specific use.

    Mackinac Center analysts first recommended eliminating Amtrak subsidies in 1996.

  17. End Michigan State University “AgBioResearch” funding: $32 million.
  18. This line item conducts research relating to the agriculture industry that would best be left to its primary beneficiaries — the agriculture industry.

    The Mackinac Center recommended eliminating this appropriation in 1996.

  19. End Michigan State University Extension: $27.6 million.
  20. The second supports 4-H programs and conducts other educational work — such as teaching people how to preserve foods using freeze drying techniques. This line has also included money to help finance research for Michigan’s agriculture industry, such as investigating whether or not China is a good export market for blueberries.

    In 2001 Project GREENE (funded through this line item) bragged about its research into growing the perfect poinsettia. This money would be better spent elsewhere.

    Mackinac Center analysts recommended eliminating this line item in 1996.

  21. End the state subsidy for the University of Michigan-Dearborn: $22.5 million.
  22. End the state subsidy for the University of Michigan-Flint: $19.9 million.
  23. End target industries/economic redevelopment: $18.8 million.
  24. Another in a long line of corporate welfare-style programs, this line item funds “economic development” road projects in seven industries, according to the House Fiscal Agency: “agriculture and food processing, tourism, forestry, high technology research mining, manufacturing and office centers not less than 50,000 square feet.”

    The Michigan Department of Transportation works in concert with the MEDC on such projects. The 2015 appropriation above represents a nearly 134 percent increase over fiscal 2014 funding. These restricted revenues could be redirected on limited basis, such as to other, more pressing transportation needs.

    The Mackinac Center first recommended eliminating this line item in 2003.

  25. End certain one-time appropriations: $10.1 million.
  26. The 2015 budget includes one-time appropriations for corporate and industry welfare such as the “Food and agriculture industry growth initiative” (in addition to the growth initiative line item above) for $2 million; the “Muskegon farmers market” for $200,000; and the “Ottawa County agriculture incubator” for $500,000. “Regional Prosperity Grants” garners an additional $1 million.[1]

    The 2015 budget also includes one-time appropriations for the “Senior Olympics” for $100,000; Office of Urban Initiatives for $5 million; and an undefined “special projects” for $1.25 million. We found the subsidy for the Senior Olympics on page 19 of the state budget, under the heading titled “Michigan Department of You Can’t Be Serious!”[2]

    There are other “one-time” appropriations that deserve the readers’ attention, too, such as with the Michigan International Speedway, mentioned further below and still others we have excluded from this letter.

  27. Eliminate performance funding for community colleges: $8.9 million.
  28. End Mental Health Services for Special Populations: $8.8 million.
  29. This line item targets interest groups by cultural or other background: Chinese and other Asian Americans, Hispanics, Jews and Vietnam veterans. Money flows to representative institutions such as the Jewish Federation and “Hispanic/Latino” commission, according to the nonpartisan House Fiscal Agency.

    Mackinac Center analysts first recommended eliminating items such as this in 2003, though they were funded by line items such as “multicultural services.”

  30. End Renaissance Zone reimbursement to community colleges: $3.5 million.
  31. The entire state should be one big renaissance zone. Research shows they don’t create net new jobs anyway. Basic jobs accounting shows at best 20 percent of promised Renaissance Zone jobs materialize. The state should end this program, but short of that it should stop reimbursing community colleges for lost Renaissance Zone-related property tax revenues.

    We were skeptical of the Renaissance Zone idea in 1996 and called for its elimination in 2002.

  32. Health and wellness initiative: $3.3 million.
  33. This line item funds a wide variety of programs aimed at preventing everything from cardiovascular problems and diabetes to promoting kidney health, according to the House Fiscal Agency. The figure listed above is the approximate 2015 General Fund share of the total $8.95 million appropriation.

  34. End multicultural integration services: $1.9 million.
  35. This line item specifically targets subsidies to Michigan’s Arab-Chaldean Council and Arab Community Center and Jewish Federation for “social services programs in Southeastern Michigan.” 

    Targeting specific favors for particular ethnic, religious or other groups over others is unfair. Why stop with these groups? Why not subsidies for Orthodox Greeks, Maronite and Opus Dei Catholics, Michigan Ghostbusters, Detroit Drunken Historical Society, Michigan Protectors or witches covens for that matter?

    Mackinac Center analysts recommended eliminating such special treatment in 2003, when the state maintained a line item titled “multicultural services.”

  36. Combine the House and Senate fiscal agencies: $1.8 million.
  37. Both agencies provide sound budgeting and economic analysis for their respective chambers. Neighboring states Ohio, Illinois and Wisconsin provide one legislative office to cover fiscal matters for two chambers. Michigan should too. If the fiscal agencies could shave 25 percent off the $7.2 million combined appropriation through consolidation, it would generate $1.8 million in savings.

  38.  End health care offset in MPSERS payments for community colleges: $1.7 million.
  39. This appropriation goes beyond the aid provided in the large appropriation community colleges receive each year and supplements retirement dollars for community college employees. These monies could be redirected elsewhere.

  40. End agriculture development: $1.6 million.
  41. This line item, as with others on our list, represents corporate welfare for the agriculture industry. The GF savings cited above are an estimate based on 2015 gross appropriations which had included federal dollars.

    We first recommended eliminating a similar line item in 1996 and this one specifically in 2003.

  42. End rural development value-added grants: $1.1 million.
  43. This is yet another entry in Michigan’s industrial-corporate welfare complex. The appropriation provides grants for rural “education and workforce development.” The state already operates an expensive workforce development regime. The Mackinac Center has recommended getting out of the workforce development business in the broader sense; we do so in the narrower sense with this line item too.

  44. End food and agriculture growth initiative: $1.0 million.
  45. This, too, is another industry and corporate welfare line item that falls outside of the state’s official jobs department. It provides grants to “foster agriculture industry-wide development” and increase “opportunities for food processing and other areas …”

    Every dollar taken from Michigan taxpayers is one they don’t have to advance their own personal development opportunities. This line item should be struck along with the rest of the state’s corporate welfare.

  46. End migrant labor housing program: $1.1 million.
  47. Migrants found and occupied their own housing without state government interference long before the state began inspecting and licensing such units in 1978. The figure above is an estimate of the 2015 General Fund portion of the gross appropriation.

    The Mackinac Center first recommended an end to this line item in March 2003.

  48. End local strategic value appropriation for community colleges: $877,100.
  49. These are revenues appropriated to community colleges for offering services in such things as “business industry partnerships” and “economic development,” such as maintaining “active partnerships with local or regional workforce and economic development agencies.” Redirecting this money to higher priorities might have the same or better impact lawmakers hoped to have with this line item. The figure above is based on the fiscal 2014 appropriation.

  50. End One-time Appropriation (Section 106) — Michigan International Motor Speedway: $831,900.
  51. MIS seems to receive a “one-time” subsidy each year to provide traffic control around the venue. This is another in Michigan’s vast array of corporate welfare subsidies which should be eliminated. An expense such as this should be shouldered entirely by the business enjoying its benefits.

    As an aside, the speedway also received up to $18.1 million in special tax credits from the state between 2010 and 2012.

  52. End Substance Abuse Grant to Salvation Army Harbor Lights: $713,292.
  53. This program takes resources from families and filters it through an expensive bureaucracy in the hope it might help select individuals and institutions. The figure above is the General Fund portion of the appropriation for fiscal 2014.

  54. End association dues payments: $437,100.
  55. This appropriation, found in the “Legislature” portion of the budget, pays membership dues to national organizations such as the National Conference of State Legislators. If lawmakers want to be associated with such groups, they should do so from their own pocket and not from a separate fund.

  56. End County Fair Capital Grant Program: $320,000.
  57. This item provides grants for capital improvements to county fairgrounds. County fairs should pay for their own improvements or privatize the event. It has been done before. Both state of Michigan fairs have been privatized.

  58. End Hispanic/Latino commission: $255,600.
  59. This item funds one full-time equivalent state employee position and the work of the commission itself, which is designed to — according to a House Fiscal Agency document — “promote the diverse interests of Hispanics in Michigan.”

    People and groups (private associations, for example) are quite capable of self-promotion sans government. This and similar line-items are particularly insulting as they confiscate precious revenues from people they’re intended to help.

  60. End Morris Hood Jr. educator program, $148,600.
  61. This line item attempts to increase the number of minority students that enroll in and complete K-12 teacher programs in education. The program specifically targets African Americans, Native Americans and Latinos.

    The Mackinac Center recommended ending this program in 2003.

    It is worth noting here that the program appears to be totally ineffectual. According to the Center for Educational Performance and Information, the percentage of minority teachers in Michigan dropped from 10.2 percent to 8.9 percent of all teachers between 2007 and 2013. This occurred while the percentage of minority students increased from 28.8 percent to 31.7 percent during the same timeframe.

    As an aside, state lawmakers and/or the recipients of their appropriations should not immortalize active or retired colleagues and benefactors at taxpayer expense.

    That goes for Morris Hood Jr., Glen Steil Sr., Dominic Jacobetti and perhaps others.

  62. End the Michigan and Asian Pacific American affairs commission: $110,800.
  63. This line item is designed to support work that “Studies the status of, serves the needs of, recognizes the accomplishments of, devises methods to overcome discrimination against, ensures equal access to state services for, initiates programs for the betterment of, and promotes public awareness of Asian Pacific Americans.”

    The same arguments listed above against the Hispanic/Latino Commission apply to the Asian Pacific American Affairs Commission.

  64. End statistical reporting service: $73,268.
  65. This item compiles statistics on such things as commodity prices. The industry should provide its own statistical services. The figure above General Fund savings estimate for fiscal 2015 is based on 2014 appropriations.

    The Mackinac Center first recommended eliminating the line item for agricultural statistics in 1996.

  66. End indemnification — livestock depredation: $50,000.
  67. This line item compensates farmers for livestock killed by predatory animals. Livestock losses are a cost of doing business. Indemnification of losses by taxpayers is not available to makers of silk-screened T-shirts, office furniture or steel castings and countless other businesses. So it should be with the livestock trade.

All of this being said, this is not the first time Mackinac Center analysts have put together lists for proposed cuts and other reforms. Indeed, we have written three full state “civil society” budget studies from which you can still find valid ideas, in 1996, 2003 and 2004, plus some subsequent smaller works and reform ideas worth review by Lansing lawmakers.




Michael D. LaFaive is director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

[1] Several items in this letter and the language used to describe them were taken from recent, budget-related Viewpoint commentaries.

[2] I am just kidding about the heading, but you can find that line item on page 19.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.