As Gov. Rick Snyder and the Michigan Legislature return from their holiday break, they will be refining their agendas for 2014 and, as always, at the top of the list are expected to be strategies for growing the state’s economy.
Based on their recent track records, we can expect a continued focus on “competitiveness,” narrowly defined as reductions in state and local taxes. What should be on the list, but often excluded, are investments in the services and infrastructure needed to create jobs and fuel economic growth such as effective public schools, public transportation and public safety, as well as tax reforms that ensure that the state can generate sufficient funding to pursue its economic-development goals.
While there has been some recent good news, with projections of growth in personal income and more than $1 billion in revenues above earlier projections, it is clear that the recession continues unabated for many Michigan residents, families and children. The state’s game plan for economic recovery has included only certain players, and has disproportionately benefited businesses and the wealthiest state residents.
For many Michiganians, the last decade was a rough one by many measures. The state suffered double-digit unemployment rates, and even now, during a period of recovery from the national Great Recession, ranks third in the country in unemployment, with nearly 425,000 unable to find jobs.
Even worse, the state’s children have suffered. According to recent Kids Count data, more than one in every three young Michigan children ages 0-5 lives with a family whose income is so low that they need federal food assistance, an increase of more than 50% since 2005. And child poverty has been spiking, with 560,000 children, or one of every four, now poor – enough to fill the Michigan State University stadium almost eight times.
Michigan’s recent economic development strategies have resulted in a tale of two states, one which cannot end with economic growth and prosperity for all. In one, residents are moving forward because they can afford to take advantage of the highest quality child care and preschool programs, attend top-notch public schools and institutions of higher learning and find affordable healthcare, mental health and other services.
In the other, residents, and especially children, are being left behind in the face of public policies that have disproportionately increased their taxes, created public schools with large deficits and larger classrooms, and reduced access to the basic assistance needed to ensure shelter and access to food.
A recent report and video by the Michigan League for Public Policy outlines 10 steps Michigan must take to include all of its residents in the economic recovery. It is an agenda for long-term economic prosperity that includes investments in education from early childhood through higher education, access to the health and mental health services needed for a healthy workforce, basic income security for those who cannot work or find jobs and support for the community services businesses and consumers rely on.
The report also calls for reforms that modernize Michigan’s tax system, including those that ensure that businesses are paying their share of taxes, expand the sales tax to selected services and Internet sales to reflect the way people currently spend their money, and scrutinize tax breaks to ensure that they contribute to economic growth.
Sadly, while the automobile industry and the national recession were driving the state’s economic decline over the last decade, policymakers exacerbated Michigan’s fiscal problems through the tenacious and misguided pursuit of tax and related budget cuts as the prescription for the state’s ills. The sales pitch for business tax cuts, including the 83% reduction adopted in 2011, was that they would increase the state’s competitiveness and create jobs—a belief not supported by the evidence.
In fact, higher taxes are often associated with better state economic performance when they finance the engines of the economy, including effective schools, community colleges and universities; the roads and bridges needed to conduct commerce; police and firefighters; and the libraries, parks and other community services needed to attract and retain a well-trained and educated workforce.
Michigan cannot afford to lock in the damage to public services that occurred over the last decade, accepting growing school deficits and city bankruptcies, reduced public safety, and crumbling roads and bridges as the “new normal.” The governor and lawmakers have an opportunity this year to change course by dedicating a portion of the $1 billion in unexpected revenues to the 10-step plan that research shows will grow the economy for the benefit of all residents, and create long-term prosperity.
Pat Sorenson is a senior policy analyst at the Michigan League for Public Policy. A longtime child and family advocate, Sorenson holds a law degree and a master’s in social work.