Ned Staebler is president of TechTown Detroit and vice president for economic development at Wayne State University
When Gov. Gretchen Whitmer unveiled her first state budget last month, with its 45-cent gas tax and $507 million increase for schools, you could practically hear the collective groan from Houghton on down to New Buffalo. But here’s the thing: Everyone across this state wants roads that aren’t a laughing stock, clean water to drink, safe parks to play in and trained firefighters to protect our homes. But it seems nobody wants to pay for them.
I’ll let you in on a little secret: Everything costs money. If you hear someone talking about “free” healthcare or “free” college tuition, they don’t really mean “free.” They mean it’s “free” to the end user, but the cost is paid for by someone else. Now, we can debate the merits of “free” healthcare or college until the cows come home, but that’s not my point. My point is that it is undeniable that nothing in life is truly free. That’s just how the world works.
In Michigan, we have spent the better part of the past three decades disinvesting in our public goods, and the results are exactly as expected. We spend less per capita on our roads than almost any other state in the nation, and not surprisingly, they’re among the worst in the nation garnering an embarrassing D+ grade on our last report card from the American Society of Civil Engineers.
Since Proposal A passed in 1994, Michigan has seen the slowest growth in K-12 education funding growth, with real (adjusted for inflation) spending in 2015 being 18 percent lower than it was in 1995. Only one other state (West Virginia) saw a decrease over that time with the top states increasing their investments by 60-80 percent.
You won’t be surprised that our students’ scores plummeted similarly, ranking dead last for school performance growth on the NAEP test since 2003 when Michigan began participating.
I could go on to talk about our water systems (but you know that story too well), our mental health care, our municipal finances, or our environmental protections, but you get the point. Besides, what can we do about it? We already pay way more than we used to in taxes, right? Nope. Not even close.
In 1978, voters decided as part of the Headlee Amendment to cap state revenues at 9.5 percent of the total personal income of Michigan residents. Why did we choose 9.5 percent and not 10 percent or 12 percent or 7 percent? Because that’s where it was that year. In an arbitrary and shortsighted moment, we decided that regardless of future needs or crises, we wouldn’t spend more than 9.5 percent of our income on state government. We could debate that forever, but here’s the rub: We don’t even spend close to that much anymore, and we haven’t since 2000.
Because of Headlee, the state budget director annually reports how much more we’d be spending if we still paid 9.5 percent of our income in state taxes. For fiscal year 2017, the last report on the Budget Office’s website, that amount is $9.2 billion – extra money that could be invested in schools, bridges, police and firefighters, transit, clean drinking water and more.
The governor is now proposing new taxes for the $2.5 billion that experts say are needed to “fix the damn roads.” A study from Michigan State University suggested that it would take approximately $3.5 billion annually to implement the recommendations from the most recent adequacy study by the nonpartisan School Finance Research Collaborative to fix the damn schools.
The state has reduced the revenue it shares with local cities, counties, and municipalities by approximately $550 million per year compared to 2002, resulting in reduced services like waste collection and snow removal, fewer police and firefighters, and public amenities like parks, community pools, and recreation centers falling into disrepair or being shuttered altogether.
So, that means we could invest $6.55 billion more per year and have smooth roads, competitive schools, and healthy cities and still be paying more than $2.5 billion less per year than we did in 2000. That’s a big chunk of change to start replacing old water pipes, putting in mass transit, building affordable housing or making myriad other investments.
The data is incredibly clear. Compared to 20 or 30 years ago, Michigan is now a relatively low-tax state with a state and local tax burden lower than even Arkansas, Kansas, Indiana and Kentucky, and we have the infrastructure to prove it. It’s no surprise that states like Minnesota, Massachusetts, Maryland, and even Ohio, willing to tax themselves more to make long-term investments, are eating our lunch in the global war for talent. We can argue about the most equitable and efficient ways to raise the funds we need to compete, but there is no debate about the fact that we need new revenue.
We need to stop operating from a self-imposed mindset of scarcity. If we want our economy to be stronger, our communities to be healthier, and our state to be more competitive, it is entirely in our power to do so. But there is no such thing as a free lunch. If we want it, we have to pay for it.