The Detroit News
Jan. 13, 2024
Without a doubt the best idea presented at the Detroit Regional Chamber’s policy conference was John Rakolta’s proposal for how to pay for enacting the ambitious goals presented by the Growing Michigan Together Council.
Rakolta co-chaired the council, which was appointed by Gov. Gretchen Whitmer to address Michigan’s relentless erosion of jobs and residents. The blueprint the 28-member committee produced focuses on improving business attraction, developing a more highly educated populace and fixing the state’s infrastructure.
The effort is criticized by conservatives as a route to massive spending and tax hikes. It certainly has that potential.
Rakolta, chair of the Walbridge construction company, advised a different path: zero-based budgeting, a remarkably responsible spending approach that demands the government start every year with a baseline of zero spending and then justify every dollar it adds. Some states, notably Georgia, practice it, as do some companies.
Michigan should join them. The current approach of simply adding to current appropriations whenever the state adds a new program leads to unchecked spending that not only keeps taxes high but slows progress.
The state can’t afford to pursue new initiatives, such as those outlined by the growth council, because it is still funding past programs that may be ineffective or wasteful.
Starting at zero and adding back dollars as they are justified forces a setting of priorities, as well as an evaluation of the efficiency of existing programs.
Economist Patrick Anderson of Anderson Economic Group in East Lansing says a version of zero-based budgeting was practiced during the administration of Gov. John Engler.
“The discipline imposed by Gov. Engler forced every department to make the case for spending and identify how it actually helped people, rather than just spending another 5% more than they did the year before,” says Anderson, who was deputy budget director during Engler’s first term. The process encourages cost-cutting. Tracking spending to determine its return on investment encourages managers to find ways to cut costs. It also discourages the automatic spending of surplus dollars simply because they materialize. Zero-based budgeting is urgently needed this year because the huge influx of federal COVID dollars has so swelled spending. The governor and lawmakers had a $9 billion surplus to work with, and used it to expand the size of state government. Policymakers must start from scratch to bring spending back to a sustainable level now that the federal dollars are gone. The temptation will be to use the additional $420 million budget estimators project for next year to keep spending levels excessively high. “It’s the discipline that matters, not the concept.,” Anderson says. “If the governor is willing to tell favored constituencies that they can’t have the taxpayer money they want, you can prioritize money for the serious needs. If the governor isn’t willing to do that — or the money is flowing in so fast that nobody feels the need to do so — then you can spend yourself into a situation where the next economic downturn will be a crisis.”
Funding the growth council’s plan by raising spending and taxes will work against its goals. Residents and businesses flee from high taxes. Funding it by resetting spending and taxing priorities will allow Michigan to have the nice things it wants for the future without overburdening its current residents.