SPECIAL REPORT: How candidates for governor would manage the public purse

By Susan J. Demas

All seven of the men vyinghttp://www.thecenterformichigan.net/special-report-how-candidates-for-governor-would-manage-the-public-purse/ to be Michigan’s 48th governor love to talk about jobs.

Whether it’s slashing business taxes, adopting Right to Work laws or personally wooing companies to the Great Lakes State, all candidates have big plans to foster new jobs and turn the economy around. As the state has floundered in a decade-long recession, that’s music to many voters’ ears.

However, the governor’s primary responsibility after being sworn on Jan. 1 is crafting a state budget plan. That means making tough choices about funding for K-12 schools, the courts, local governments, state police, universities, welfare, Medicaid, prisons, food assistance, agriculture, natural resources and other budget areas.

But budget choices become even tougher with a projected deficit of more than $2 billion for fiscal 2012 and little hope of a second stimulus from Washington. Putting that in perspective, the fiscal 2010 General Fund budget is about $8 billion and the School Aid Fund is about $12 billion.

Michigan still doesn’t have a fiscal 2011 budget, which must be enacted by Oct. 1. The governor, House and Senate all counted on an additional $500 billion in Medicaid match money, but that legislation died in June in the U.S. Senate.

Many states are struggling to balance their budgets during the current economic downturn. The difference for Michigan is that we’ve grappled with big deficits every year during our uniquely long economic downturn.

With this in mind, the Center for Michigan asked gubernatorial candidates to focus on how they would prioritize eight budget areas: Medicaid, human services/welfare, K-12 education, prechool, community colleges, public safety and corrections, universities and quality of life including cities, natural resources, mass transit and more.

The New Normal

The first words out of many candidates’ mouths – before they ranked their budget priorities — were some variation that Michigan is broke.

“My No. 1 priority is not having the state go bankrupt,” said Sen. Tom George (R-Kalamazoo). “Or rather, making sure that the state pays its checks on time. … There’s no new money. We’re probably looking at another round of cuts.”

Oakland County Sheriff Mike Bouchard went further, arguing Michigan is “already bankrupt” because of its unfunded pension liability.

House Speaker Andy Dillon (D-Redford Township) was the only candidate to advocate tax reform to wipe out the structural budget deficit and “protect our values” in the budget. He sees tax reform, like the Business Leaders for Michigan plan to extend the sales tax on services in exchange for eliminating the Michigan Business Tax (MBT) surcharge, as part of a comprehensive package that includes spending cuts and government reforms.

“That’s job one in the first six months,” Dillon said. “We can’t keep kicking the can down the road.”

Democratic Lansing Mayor Virg Bernero, who declined to share his budget priorities for this story, has not committed to tax reform or tax hikes as governor.

“I can’t say whether I’d do something to raise taxes at this point,” he said. “What I can say is as mayor, I haven’t raised taxes.”

Meanwhile, George and fellow GOP contenders U.S. Rep. Pete Hoekstra (R-Holland) and Attorney General Mike Cox stressed that tax increases are not an option, even to fund priorities in the budget.

“The days are over when state government could coast along, funding every program and every benefit under the sun,” Cox said. “Michigan job makers and families can’t afford business-as-usual in Lansing. … Balancing the budget means making the tough cuts Lansing has for too long avoided.”

The attorney general said his “first priority is to reinvigorate Michigan’s economy.”

“State government can and must provide critical services like education, public safety and infrastructure,” Cox said. “My plan will track down, identify and implement reforms and efficiencies to ensure tax dollars spent on these and other programs are spent effectively.”

Hoekstra said all eight areas are priorities, but “we can do things differently that will save taxpayer dollars and still maintain services,” including privatizing some functions. He also wants to root out fraud and government waste.

“We need to determine a new normal for the state taking into account factors such as new population and what taxpayers can afford,” the congressman said. “I will seek to reduce the size of government and cut costs.”

Republican businssman Rick Snyder said that he’ll change the entire approach to state finances with “Value for Money” budgeting. Rather than focusing on programs, he said he would concentrate on outcomes aided by input from citizens. As part of that, Snyder said he would examine whether nonprofits or private companies could achieve goals in areas like education better.

Picking Priorities

Several candidates – Cox, Hoekstra and Snyder – couldn’t whittle down the list for their top budget priorities.
“It’s not as simple as just picking one of them,” said Snyder, who’s running in the GOP primary. “All of them are important. We need to do an adequate job in all those categories.”

Education and public safety are at the top of the list for Dillon and Bouchard.

“Right now, things are so tough. We have to concentrate on the basics – education and public safety,” Dillon said.

Bouchard hearkened back to his time chairing the Senate Education Committee in the 1990s.

“Any time you talk to businesses … and business talk to us, they ask, ‘Would we be safe here? Would our business be safe here? And what are the schools like?’” said Bouchard. “So that’s tier I.”

Neither wanted to rank any educational area – pre-K, K-12, community colleges and state universities — higher than others.

“They’re part of a whole continuum of education,” Bouchard said. “I don’t really see them broken down into different components. They need to function and be affordable at all levels.”

Dillon envisions a K-14 system. Snyder goes even further and said Michigan has to adopt a P-20 model, from preschool to graduate school.

George rated Medicaid his No. 1 priority, but not because he believes it’s the most important or the state should be spending the most on it. He said he ranks education as more critical, as it’s the “ticket to our future,” but Medicaid spending has skyrocketed and programs need reform.

One area Snyder and Dillon said should have been on the Center’s priorities list was infrastructure. Snyder said that it’s a “travesty” that Michigan could lose $500 million in federal transportation matching funds starting this year. Dillon said he’s working on solutions so that Michigan can come up with the necessary $84 million in state matching funds this year, but the state needs long-term plans to shore up its infrastructure.
Here’s what gubernatorial candidates would do about each of the eight priorities:

K-12 Education

In his “Renewing the Michigan Dream” plan, Dillon said protecting education funding is his No. 1 priority. He wants to ensure that funding is stable.

Bernero wants to add all-day kindergarten, limit class size and provide “stable and appropriate” K-12 funding.

“Virg Bernero understands that education is fundamental to rebuilding Michigan,” his website says. “The disregard for education that we’ve seen from our current state lawmakers is unacceptable and will not be tolerated in a Bernero Administration.”

Cox said on his website that education money isn’t being spent effectively enough. To reform education, he backs merit pay for teachers, incentivizing schools that consolidate services, removing the cap on charter schools, a teacher health care plan pool, switching from pensions to a 401(k) system and adopting national student performance benchmarks.

Snyder said there’s too much focus on spending in K-12 and not enough on how kids are being educated. He wants schools to adopt merit pay – something made easier by new Race to the Top reforms enacted last year – and help struggling teachers. Snyder also wants to reduce administrative costs and consolidate schools.

Hoekstra has proposed an educational tax credit for students at public schools, private schools and home schools. This can be used for expenses parents incur for tuition, supplies and extracurricular activities. It can also be a tax write-off for donations to schools.

George said that he supports reforms to get more money into the classroom, citing the public school employee retirement reform enacted this year.

Public Safety/Corrections

Not surprisingly, Bouchard said that adequately funding police and prisons is critical for Michigan, noting that crime typically increases as the economy declines.

Cox agrees with this idea on his website. He would increase the number of police in communities by reducing Corrections costs and reforming the preliminary exam process in the courts.

Bernero wants a full audit of Corrections and he would push to reform sentence guidelines. He also would expand the state police crime lab, according to his website.

Dillon said he will prioritize funding for state police and local governments, which devote big chunks of their budgets to police and fire. He says Corrections reforms are important but said the savings are long-term.

This is No. 2 on George’s “hit list” and he’d like to see big reforms to the $2 billion Corrections budget. Michigan pays more in prisoner costs – about $40,000 per inmate annually – than other states. He also wants to reduce administrative overhead and privatize services, including food and transportation. He doesn’t see a need for sentence guideline reform.

Snyder supports funding the Michigan Prisoner ReEntry Initiative (MPRI), which assists former prisoners reintegrate into communities. He also supports alternative incarceration programs like drug and mental health courts and tethers that can reduce costs.

Hoekstra described public safety and Corrections as a “core function of government.” He supports privatizing some functions to reduce costs, but he pledged any changes will still “keep families safe.”

Preschool

Bouchard notes that the “vast majority” of brain development is in the early years, so preschool has to be part of Michigan’s “lifelong learning curve.”

“Having two parents in a loving home is the best environment,” he said, “but there have to be other ways to help kids, like preschool.”

Snyder said that lifelong learning starts here, so he would make this a priority under an integrated P-20 education system. He would like to see public-private partnerships in this area, noting he worked with the United Way’s Success by Six program while he was a Gateway executive in North Sioux City, S.D.

Bernero backs funding for 0-5 programs. Dillon supports pre-K and said he would spend more in this area after the state shores up its finances and addresses the structural deficit.

“In the short-term crunch, we need to fund what we have,” he said.

But George said this is at the “very bottom” of his priority list because of the tenuous budget situation.
“I understand the value of preschool,” he said. “But the brutal reality is that there’s no money for preschool.”
Medicaid. George, an anesthesiologist, supports incentivizing healthy behaviors like healthy eating and quitting smoking for the 1.6 million recipients. He’s also supported limiting populations, like dropping 19- and 20-year-olds from the rolls and eliminating services like mental health.

Bouchard said there’s a “tremendous amount of fraud and abuse,” citing a state recent audit of the Department of Community Health pegging the figure at $4 billion. Hoekstra also wants more spending accountability in light of the audit.

Cox has long backed the idea of a Medicaid inspector general to take on fraud, something Gov. Jennifer Granholm established this year.

Snyder said he wants Michigan to look at ways to improve health care overall, noting the expense of the uninsured clogging emergency rooms, which is far more expensive the preventive care.
Human Services/Welfare

Bouchard said there’s abuse and fraud in this area that also needs to be eliminated. He said more reforms are necessary.

“This needs to be a hand up, not a handout,” he said. “It can’t be a lifestyle. It has to be for those who truly need help.”

While George said these programs are important, he doesn’t see how “we find any new money” for them. He also supports time limits for welfare recipients.

Snyder said we “do need a safety net,” but there needs to be a “positive path for success” for recipients. He said that Michigan made a “significant error” in the 1990s by cutting our frontline mental health services, which he said has increased costs in corrections and emergency rooms.

State Universities

Cox said on his website that he would bring back funding to 2002 levels – an increase of $185 million. In exchange, he wants more transparency and benchmarking from universities.

George, who sits on the Senate Higher Education Appropriations Subcommittee, said that the state’s 15 public universities have already taken a beating in budgets for the last decade.

“That has to be taken into account,” he said.

The senator said he would try to “shield” the universities by adopting government reforms in the budget.
Snyder agreed, saying the long-term goal is to increase funding to “invest in our talent,” but there’s a short-term budget problem to solve. He said the Michigan’s “world-class universities are one of our biggest assets.” Snyder also would like to see more partnering between universities and businesses, which can help schools’ bottom line and help the state’s economy.

He doesn’t want to bring back the Michigan Promise (axed last year) in its current form. That scholarship went to all students who passed a merit exam, regardless of economic need. Snyder said the state needs a need-based scholarship.

Dillon would reinvent the Michigan Promise as a forgivable loan for students who stay in the state after graduation.

Community Colleges

Bouchard said this is a priority, as vocational training is important to Michigan’s economy. Community colleges provide a “bridge” for many students in their career path, he said.
Snyder said that Michigan can improve this area by making it easier to transfer community college credit to universities.

Quality of Life: Cities, Mass Transit, Natural Resources and More

Dillon said this area is important but falls under “new stuff,” and reiterated that for now, Michigan has to “focus on the basics.” But he does support the Michigan Economic Development Corp. (MEDC) focusing on Detroit, as a way to revitalize Michigan’s biggest city.

Snyder said this area is “critical to our success and people underestimate the value it plays.” But he said although he’d like to see more spending in some areas, it would be “hard to fit it in too quickly” in the current budget situation.

One key investment the state has to make is funding Pure Michigan, he said, citing studies that show there’s a 2:1 return on investment on tourism promotion. Art and culture is part of quality of life, Snyder said. This is another area for public-private partnerships, he said, like with Grand Rapids’ Art Prize.

“I don’t see the role of government as doing all the work,” he said. “It can provide the supporting infrastructure.”

Bernero backs increased public transportation and more walkable and bikeable cities. On his website, he said that protecting water resources is critical to state tourism.

Hoekstra said that Michigan can still protect its natural resources, but reduce costs by allowing the private sector to manage public parks.

Bouchard said that natural resources are key, as “We are the Great Lakes State.” But he sees the solution not in increased spending, but legislation like banning the sale of Asian carp, an invasive species.
“We don’t need to spend millions to study the issue,” Bouchard said. “We need to put a bounty on them. We need to be smart and be aggressive and we’ve been neither.”

George wants to maintain and improve quality of life in Michigan, but not with new spending. Under this umbrella, the former Senate History, Arts and Libraries Appropriations Subcommittee chair said that funding libraries is the most important, not least of all because people go there to find jobs. He’s proposed specialty license plates and heirloom birth certificates to give libraries more funding.

George also has proposed a Wayne County Redevelopment Authority, a regional land bank aimed at blotting out blight.

Cox supports consolidating green space in cities and creating incentives to repair foreclosed homes, according to his website. He also would continue to fund Pure Michigan ads and would offer free state park weekends for Michigan families.