State Budgets

Michigan State of the State: A Comeback Story

Governor Snyder urges lawmakers to maintain fiscal responsibility and keep future generations in mind

Fortune is changing in the state of Michigan following decades of extreme economic adversity, from the rapid downturn in the auto industry to the downward population spiral in Detroit. Governor Rick Snyder delivered his last State of the State address in an optimistic tone, referencing a recent article from the Wall Street Journal, “The Michigan Comeback Story.” The article analyzes how several substantive policy changes embraced by the governor have sparked dramatic economic improvement in the state. Economic performance over the prior decade ranked dead last, according to Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index. Michigan’s economic outlook has improved to 20th, from a low of 34 before Governor Synder’s tenure in office. He noted how far the state has come, stating that “fixing Michigan was not good enough, we needed to reinvent things.” Enacting right-to-work and killing the hated Michigan Business Tax were game changers for Michigan’s economic outlook.

Snyder celebrated the state’s largest private sector job growth in the Great Lakes region, reminding all that “we as a government don’t create the jobs, we create the environment for success.” Top industries such as manufacturing, auto, tourism and agriculture have created over 540,000 jobs during Snyder’s tenure. Going hand-in-hand with job growth, the state’s per capita income grew 28 percent over the last seven years alone, translating to an additional $10,000 per Michigander. The unemployment rate is below five percent—nearly the lowest in more than a decade—while the most recently available GDP growth of 3.5 percent exceeds the national average. Snyder proudly states “last year for the first time since the turn of the century, more people came into Michigan than left Michigan.”

Michigan’s public sector pension reform—a product of much work on the part of the governor and the legislature—proved one of the biggest success stories across the states in 2017. Beginning this month, “new public school teachers and staff will automatically be enrolled in a 401(k)-style retirement plan unless they instead choose a revised hybrid pension.” ALEC analyzed additional enacted changes in this reform package, which include assuming a more modest rate of return, raising the retirement age in certain instances and requiring the school system and employees to share the costs of future unfunded liabilities equally. During his address, Snyder applauded the changes and declared “we’ve reduced our long-term debt…by over $20 billion and we put a payment plan in place to say we can move forward to make sure these retirees get the benefits they deserve and at the same time not leave future generations in debt because of past decisions.” With the 6th worst funding ratio in the country and over $168 billion in total unfunded liabilities, ALEC commends Michigan lawmakers for creating a more sustainable path forward for public pensions.

Snyder’s address contained many fiscally sound proposals, but some components were troubling. For example, in the coming weeks, he will “be proposing the largest increase in the basic per-pupil student foundation allowance in the last 15 years.” The Mackinac Center in Michigan expressed concern over this; their research indicates that increased spending has not resulted in statistically significant academic performance improvement.

Overall, Governor Snyder acknowledged the long-lasting impact of today’s decisions: “It’s not just thinking about us today, but our children in future generations.” The Wolverine State should continue to protect hardworking taxpayers, ensure efficient and sustainable spending, and allow private enterprise and the free market to thrive. In so doing, the Michigan comeback story will continue to unfold for years to come.

In Depth: State Budgets

Smart budgeting is vital to a state’s financial health. The ALEC State Budget Reform Toolkit offers more than 20 policy ideas for addressing today’s shortfalls in a forthright manner, without resorting to budget gimmicks or damaging tax increases. One way to stabilize budgets over time is to embrace…

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