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June 3, 2019

Letter from the President

Following the signing of a no-fault auto insurance reform deal on the porch of the Grand Hotel on Mackinac Island, spirits were certainly high. The occasion was marked with big smiles, hugs, and very gracious comments between the leaders. It was their first big win together.

Next up, the State budget and roads.

For the last eight years, the budget was basically done by the first week in June. It was just a matter of the mechanics of passing the bills and putting them on the Governor‘s desk before July when the pubclis school system’s fiscal year starts. This is important because schools have to know what to put in their budgets.

This year, the main negotiations behind the budgets are just getting underway. Most of the time and energy of the leaders has been spent on the insurance reform, but that changes this week.

An obvious conflict looms: What to do with the Governor’s gas tax proposal. The decision on that front will have a substantial impact on the budget as a whole. But it’s way bigger than that one issue. The government of the State of Michigan is a nearly $60 billion enterprise. The budget negotiation contains literally thousands of factors.

So as a small business owner, why should you care? It’s about stability.

When the Michigan government is in good fiscal health, it’s actions are more predictable and reliable. So here are a few higher level items I’ll be looking for in this year’s budget:

  1. Continuing to pay down the debt: In the last decade, through structural reforms and disciplined budgeting, Michigan is tens of billions less in debt than before. Will this continue?
  2. Saving for down times: When Michigan started this decade, the “rainy day” fund was empty. Today it has a billion dollars in it. During good economic times, the state should continue to set funds aside so that it can better manage through lower points in the economic cycle.
  3. Timeliness: While the budget won’t be completed on the same timeframe as before, it is important that it not drag out until September/October. Local governments and schools need to know what to put in their budgets. The state’s schedule impacts our local communities, and there is a benefit to removing this uncertainty from the equation.
  4. Structural Balance: While the Michigan constitution technically requires a balanced budget, governments operate on a “fund accounting” system. Think of it almost like a cash basis accounting system. There are many ways that the State can deficit spend in this system. In fact, for at least a couple generations, it did. It will take a lot of discipline to continue the structural balance.

Michigan has built a strong reputation for predicable, timely, and structurally balanced budgets. It’s never easy, and divided government makes it even harder. But it is important and, given the recent bipartisan insurance reform, it seems more possible than ever.

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