When John Nixon signed on to become Gov. Rick Snyder’s budget director in 2011, Michigan had a “rainy day” fund of about $2 million, enough to cover the state’s bills for less than an hour.
His team avoided quick fixes and adopted fiscal discipline while plugging a $1.5 billion deficit. Three years later, the state’s finances had improved markedly and the rainy day fund approached $600 million. Nixon has since returned to Utah for an executive post at the University of Utah.
At a leadership conference in April put on by Business Leaders for Michigan, Nixon gave a presentation on the need for transparency and gimmick-avoidance in the state budget process. Afterward, Nixon spoke to Mike Wilkinson of Bridge Magazine about Michigan’s fiscal path forward.
On balancing the call for tax cuts with the financial cost of effective government
“I think you’ve got (to have a) holistic approach but also a realistic approach, right? You’ve got to fund the K-12 system, right? You want to have a competitive higher education system. You’ve got to run a corrections system, right? No one wants to run a corrections system but you have to have a safe area. You’ve got to invest in public safety and you’ve got to invest in your infrastructure.
“There are a lot of needs that you need to (fill) as a state government to provide for the citizens. But really the balance is: What kind of government can you provide with what the taxpayers are willing to pay? And you’ve got to make sure that you understand – and the taxpayers understand – that it costs money to run government.”
On covering essential services
Nixon quoted a former colleague as telling him, “‘We’ve done so much for so long with so little that now we’re experts at doing everything with nothing.’ Obviously, that’s not possible, but it’s kind of like you’ve just got to understand: You want to be tough on crime? You’ve got to be willing to lock people up. You’ve got to be willing to invest in public safety.”
On turning to tax hikes to solve every fiscal problem
“You can’t tax your way to prosperity. You can’t have an undue tax burden because if you do, people are going to leave your state and if people leave your state then overall there’s less taxes coming in. So it is a fine line. I think the best way to do it is to be very transparent about it. You’ve really got to let the public know, ‘This is what you’re buying, this is what your taxes are buying.’ And if we cut taxes, “This is what’s going to have to go.’ We can’t continue to provide the same level of services...with less money coming into the coffers.
“Government can’t be all things to all people. And you’ve got to decide what you’re good at and what you’re there to provide and need to provide. And you need to determine what the taxing ability is of the public because, if you don’t people, will leave and that’s going to create a problem for you.”
On “being realistic” about taxes
“I’m a pretty strong fiscal conservative, I don’t like taxes...just like a lot of people don’t like paying taxes. But at the end of the day you have to be realistic and understand that this is the cost of running a government. You can’t say we’re going to reduce the funding and keep the same level of services we have.”
“If you can cut taxes and have a level of government services that you need going in the future, either through a reduction of services or economic growth, then I think it’s good. If you can’t, you probably shouldn’t be doing it.”
Nixon noted that his budget team faced a similar quandary in 2011: Allow the state income tax to be cut, as scheduled, or keep the rate at 4.25 percent. Conservatives wanted Snyder to allow the income tax cut, but his team kept it at 4.25 percent. That, said Nixon, was a “sound fiscal move,” given that his administration was at that time lowering corporate and business taxes and increasing some taxes on individuals.
“I think that unless you can identify where those reductions are going to come from, I probably wouldn’t be doing it. If you’re willing to make the hard choices and cut the budget back; but if you’re not, it’s just going to … be right back to where you were seven years ago.”