Michigan’s Comeback Plan A Balanced Approach

The Current Problem Since 2001, Michigan has experienced cumulative projected deficits in excess of $10 billion--exhausting nearly $6 billion in fiscal reserves. Today: $1.78 billion deficit Nearly $2.5 billion w/o federal stimulus dollars Tax structure based upon a 1960’s economy An unbalanced approach to the state budget continues disinvestment in infrastructure needed for the 21st Century economy, including public safety, transportation, and education.

Median Income Declines Below National Average Source: House Fiscal Agency Presentation, 11/2009 *2009 and 2010 are projected estimates

Share of Family Income Paid in Taxes % of Income Source: Institute on Taxation and Economic Policy, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, 3rd edition, 11/ % 9.9% 9.8% 9.6% 8.9% 8.0% 6.4%

GF/GP Revenue by Tax Source--FY ($7.7 bil) Sources: House Fiscal Agency

Tax Policy Impacts Available Resources Source: House Fiscal Agency

A Decade of Decline Police and fire funding reduced by nearly $3 billion Higher education funding reduced by 17.8% per student Early-childhood programs reduced by 32% Environmental protections reduced by nearly 60% State workforce reduced by 11,000 employees Concessions by public employees has saved the state $3.7 billion Roads and infrastructure continue to decline Unemployment benefits frozen and retraining programs cut

State Government is Smaller FYGovernor # State Employees 1973Milliken52, Milliken64, Blanchard64, Engler61, Granholm50,799 % Change % % Change % Source: Department of Civil Service State Workforce Reports Chart Prepared by Michigan League for Human Services

MI Expenditure Growth Lowest Among States GF Growth Total Expenditure Growth Rank Rank Illinois18%4223%45 Indiana20%4028%41 Michigan-7%5012%50 Ohio12%4626%44 Wisconsin18%4322%47 Missouri3%4926%42 U.S. Average33%--40%-- Source: NASBO State Expenditure Surveys 2001 and 2007

Support to Communities and Services Falling Fast GF/GP Appropriations Source: House Fiscal Agency Presentation, 11/16/09

The Comeback Plan A Balanced Approach

Audit Government Contracts Private contracts account for nearly $15 billion--twice the GF/GP budget--or 35% of the total state budget Currently, no process exists for annual review for efficiency and accountability. Legislators have a responsibility to demand that taxpayers are receiving the most value for their dollar.

Close Tax Loopholes and Giveaways Only 45% of potential revenue was collected in 2008 Tax credits accounted for $35.8 billion in five times the state’s general fund Close credits not creating and retaining jobs; provide for annual audits Limit future credits and ‘pay as you go’ Total 2008 Potential Tax Revenues = $57.9 billion Sources: Michigan Department of Treasury Executive Budget Appendix on Tax Credits, Deductions and Exemptions FY FY2008 and Department of Management and Budget Comprehensive Annual Financial Reports. Calculations by Michigan League for Human Services

Rising Cost of Loopholes

Are They Working? Sources: U.S. Bureau of Labor Statistics and University of Michigan RSQE September 2009 Forecast *Average Annual Job Growth **Projected RSQE Forecast ThousandsThousands

Expand Sales Tax to Services Current sales tax based off a ‘goods- based’ economy Michigan taxes only 26 of 164 identified services, ranking it 38th in the country. Expansion would generate up to $1.65 billion with future growth Sources: Federation of Tax Administrators and US Census Bureau Chart Prepared by Michigan League for Human Services Tax Structure Misses Growing Sector of Economy: % of Potential Sales Tax Revenue

Implement a Graduated Income Tax Current flat tax: 4.35%--rate falls each year until it reaches 3.9% in 2015 Seven states, including Michigan, have a flat tax Percentage represents a greater share of disposable income for low- and middle-income workers Income growth has been concentrated among top wage earners 90% of tax filers would see a tax cut, while generating $600 million in new revenue

Income in Richest Households Grew 5Xs Faster Source: Pulling Apart: A State-by-State Analysis of Income Trends, by the Center on Budget and Policy Priorities and the Economic Policy Institute. Chart prepared by Michigan League for Human Services

Public Support for a Balanced Approach

Impact of Budget Cuts

Support for a Balanced Approach

Accountability and Transparency Sources: Progress Michigan/ABMF Poll, July 2009

Accountability and Transparency

Fairness in Taxes

Partner Organizations AFL-CIO America Federation of Teachers Michigan The Arc Michigan Citizens for Better Care Clean Water Action Common Cause Global Behavior Education Michigan AFSCME Council 25 Michigan Association of Pupil Transportation Michigan Citizen Action Michigan Council on Crime and Delinquency Michigan Education Association Michigan Environmental Council Michigan League for Human Services Michigan Nurses Association Michigan Primary Care Association Michigan Professional Firefighters Association Michigan State Employees Association-AFSCME Local 5 Middle Cities Education Association National Association of Social Workers PHI of Michigan Planned Parenthood Pride at Work-Michigan Progress Michigan School Community Health Alliance Sierra Club Small and Rural Schools United Auto Workers Michigan CAP Unitarian Universalist Social Justice Network Van Buren Legislative Consortium

Campaign Contacts Campaign Director Cyndi Roper Campaign Spokesperson Lynn Jondahl Legislative Coordinator Patrick Schuh