Friday, October 16, 2009

The Cliff

A new report from the Nelson A. Rockefeller Institute of Government highlights the funding cliff we’ve been hearing about. The Politics K-12 blog summarizes this report in an article: Stimulus Funding Cliff Is a Reality The Rockefeller report (full report can be found here, caution opens a .pdf file) reveals how difficult the challenge for our state is, and will be, in the future. Individual state statistics highlight Michigan’s plight. We are consistently leading the decline or are number 1 or 2 in states that have lost income, tax revenues, and jobs.

The data shows the depth and breath of the impact of this recession, and Michigan is far from alone. In the total measure of declining economic activity, Michigan leads the list having fallen 23.7 points from January 2007 compared to the US average of a 3.4 point decline (page 13).

An interesting anomaly is the increase in sales tax collections from 6/08 to 6/09; that component jumped 12.1% as personal income tax and corporate income tax fell 23.5% and 38.2% respectively (page 16).

Another chart shows Michigan’s change in Per-Capita tax revenue from the most recent 4 quarter peak to the 4 quarter total ending 6/09 (page 20). Here Michigan went from a peak of per capita tax revenue of $2,618 to $2,434, a drop of only 7.0% This suggests a “slow bleed” as opposed to the dramatic fall that a state like New York is experiencing. However, when coupled with the decline in economic activity the fall off is likely to accelerate behind unemployment growth. Not factored in is the continued fall in property tax revenues, a major source of school funding in Michigan. Taken together, it may be bad now but the worst is yet to come. In the ironically named Highlights section, the report shows "total state tax collections declined by $63 billion or 8.2 percent from the previous year. That loss is also a record, and is roughly twice the amount states gained during the year in fiscal relief from the federal stimulus package."

So, now more that ever we need leadership from Lansing in the form of structural change and reform. That cannot happen in isolation. The Governor has the power to pull all parties together and produce a collective vision for reform. This is were the charge must come from, but this is where the leadership is lacking.

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