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Michigan's $300 Million Deficit

Michigan's $300 Million Deficit image Michigan's $300 Million Deficit image
Parent Issue
Day
17
Month
December
Year
1975
OCR Text

Pulling the State Budget Out of a Hat
by Jack Holt

The scene is unmistakably Kafkaesque.
Confronted with a gaping $300 million deficit in state government's budget, Gov. William G. Milliken and legislators are resorting to a series of accounting maneuvers that border on sheer gimmickry.
They have extended the fiscal year one month so that we now collect revenue from 13 months and consider it one year's income. They are considering a measure to extend it even further-from July 30 to September 30, which will result in a savings on paper of $90 million. In addition, they devised a new business tax and moved up collection dates for a one-time windfall of nearly $200 million.
Most of these schemes have been the brainchild of Milliken's budget director, Gerald H. Miller, a strapping six-footer known for his encyclopedie command of statistics. Miller has been the source of innumerable charts, graphs, projections and analyses. Most of them, however, cleverly conceal the fact that Michigan is in far worse trouble than anyone in Lansing is willing to admit.
Getting through the current fiscal year is not the big problem. Milliken and top lawmakers, who have been huddling together for weeks, have devised a plan to cut $125 million from state spending that. combined with several other paper savings and accounting gimmicks, will probably pull the state through this year. But no one is taking bets on next year- when the state clearly will have exhausted its repertoire of sleight-of-hand magic tricks.
The handwriting on the wall is clear: the legislature will reluctantly approve whopping tax increases next year and Milliken, even more reluctantly, wil! sign them into law. This is in the back of everyone's mind in Lansing, although few are willing to admit it. The result is bickering between Republicans and Democrats over which party is more sensitive to the people's needs, jockeying over who will be responsible for the inevitable, and posturing over which party is the more fiscally responsible.
Given the situation, perhaps the most startling characteristic of the current political scene in Lansing is the absence of any real sense of crisis.
Senators are still getting plush new carpets installed in their offices at a cost of thousands of dollars. Some are still taking their beloved secretaries on free-wheeling junkets to far-flung cities. (In some cases, they don't even bother to conceal the fact that they stayed in the same room.) They are still going to lavish parties thrown by lobbyists for the automakers, the utilities and other business interests. One recent bash was held after the Michigan-Michigan State game in a private banquet room of Tarpoff's in downtown Lansing. Attended by a dozen state senators and a list of other prominent state officials, it featured stuffed mushroom caps for appetizers and thick steaks as the main fare. Naturally, the bar was open for the full three hours or so of the party.
It also is difficult to glimpse any real sense of crisis watching the House or Senate in actions. Their calendars are loaded up with relatively inconsequential bills dealing with manhole covers, railroad right-of-ways, land conveyances, honorary resolutions, ad nauseum. Of course, there are other pressing issues of the day relating to workers' compensation, the state's environmental protection laws, political reform, and others. The most noticeable thing in this area is a distinct lack of any forthright and knowledgeable approach to the real issues. In short, legislative leaders and members of the Appropriations Committees are preoccupied enough with the fiscal woes that the full legislature is merely a showcase. It's not really where the action is.
The action, or lack thereof, has shifted to a series of closed-door meetings where Milliken, his aides,and lawyers of both political persuasions engage in collective hand-wringing. It is getting to be a common sight to see Senate Majority Leader William Fitzgerald and his GOP counterpart, Robert Davis, along with House Speaker Bobby Crim and Republican Leader Dennis Cawthorne flock into the Governor's Office for what have come to be known as "quadrant meetings." The meetings are closed-door, and the politicians often are tight-lipped when they emerge. One thing comes through, however: when you put four men in a room who all want to be Governor, there is going to be precious little cooperation.
The action also has shifted to the House and Senate Appropriations Committees, which are charged with accepting or rejecting the Governor's executive orders that he hands down to mandate spending reductions. It is here that one can observe the lobbyists at close range. With most areas of state spending in line for serious cuts, the lobbyists representing various state agencies, businesses, and interest groups are scrambling to avoid getting

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The handwriting on the wall is clear: the legislature will reluctantly approve whopping tax increases next year and Milliken, even more reluctantly, will sign them into law. This is in the back of everyone's mind in Lansing, although few are willing to admit it.

Pulling the State Budget Out of a Hat

continued from page 3

their piece of the pie sliced any thinner. Perhaps the most strident of all these voices have been those of university presidents who plead and cajole for more money, like paupers in Bombay.
Presidents and top officials of fifteen state universities recently obtained an audience with Milliken to bring home their concerns. Their message was clear: they Would lay off professors, cut back classes, turn down the heat. and generally cut to the bone if they didn't get their way.
Their pleadings have not been partĂ­cularly well received. Veteran legislators remember how the state has dramatically increased its aid to higher education in every year in recent memory. Yet at the first glimmer of cutbacks, university presidents are on their knees. "Why can't these guys get it through their heads that the days are long gone when their budgets are going to be considered so goddamn holy?" one lawmaker asked recently.
Compared with other areas of state spending. some would argue that universities are on easy-street. Welfare recipients, who had won a seven per cent increase in their payments to offset skyrocketing inflation, are expected to lose most of that increase through state cutbacks. (Milliken's first executive order, later rejected by legislators. would have cut welfare by $60 million.) Prison conditions have reached the breaking point, many legislators feel, yet the best prison officials and inmates alike can expect is a standstill budget. Mental health patients, nursing home residents, and other persons dependent on state services for their daily existence all face cutbacks that could force their quality of life back to levels reminiscent of the Great Depression.
At the same time that the state is cutting back on education and human services, its posture toward business has been improving. A bill creating a so-called Job Development Authority soon will become law. The name cleverly conceals the fact that the sole intent of the legislation is to set up a state agency to make $200 million worth of low-interest loans to industry interested in building plants or expanding existing facilities in Michigan. The new single business tax grants a 100 per cent capital investment write-off which provides auto companies, mining companies, utilities and other capital-intensive firms with huge tax breaks. All of this is being being done in the name of creating jobs. But it remains to be seen whether the money will line the pockets of corporations or of working people.
One basic lesson that can be drawn from the whole episode is that the state's traditionally cozy relationship with business may have backfired. The major reason for the state's fiscal crisis is a sharp fall-off in revenues brought about by the slump in the auto industry. But now that the auto industry is rebounding from its two-year sales slump- or so the industry would have us believe- the state still finds itself in the midst of the worst fiscal crisis in its history. Indeed, the going could get rougher.
A popular truism is that when the United States catches cold, Michigan catches pneumonĂ­a. The more accurate version of that would be: when industry goes out on a wild drunk, Michigan wakes up with the hangover.

Jack Holt is a free-lance writer based in Lansing who writes about state politics for this and other publications.