State budget official paints gloomy picture

The state's weak economy and ineffective tax policies will lead to shortfalls estimated at $1.3 billion in the general fund and $415 million in pre-K-12 school funds, House Fiscal Agency Director Mitch Bean told about 20 people Monday at a town hall meeting at Kellogg Community College.

After losing 285,600 jobs in 2009, Michigan is expected to lose another 85,000 jobs this year, with the construction field faring the worst. Michigan's per capita income is now almost 15 percent below the national average, making it one of the lowest-earning states.

"At this point, we're not the state we were," Bean said. "We went from a high-income state to a low-income state."

The House Fiscal Agency provides nonpartisan assistance to the House Appropriations Committee and other representatives on legislative fiscal matters.

The economy is not solely to blame for Michigan's budget woes, Bean said. Michigan residents are gradually spending a smaller proportion of their incomes on taxable sales, while revenue from the gas tax also is declining.

Additionally, Bean said the state is giving more tax exemptions, credits and deductions than it is receiving in revenue. For example, seniors, a growing segment of the population, are eligible for exemptions that are costly to the state.

Bean said the shortfall also stems from increased spending on health care and corrections. Michigan is spending about 23 percent of its general fund on corrections, up from 2 percent in 1971. Meanwhile, about one in six Michigan residents are eligible for Medicaid, which funds about 42 percent of births and 70 percent of nursing home expenditures, he said.

Balancing the budget will require the state to bring in more revenue or cut the services it provides, but making those changes is difficult, Bean said.

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Source: The Battle Creek Enquirer, 5. 4.10