Sunday, September 21, 2008

Editorial

Renaissance offers good plan for reshaping state spending

The Detroit News

Detroit Renaissance handed Gov. Jennifer Granholm and state lawmakers a remarkably painless, common sense plan last week for heading off a fiscal disaster in Michigan. It should be received in Lansing in the spirit in which it was delivered -- not as a criticism of anyone's performance or abilities, but as a blueprint for beginning serious bipartisan work on restructuring Michigan's budget.

Renaissance, the group of Metro Detroit business executives, is motivated by predictions that Michgan's budget deficit will balloon to $9.6 billion by 2017 if current spending policies continue. Deficits can be covered in two ways, by raising taxes or cutting spending. The business group is fearful that raising taxes again will make Michigan even more uncompetitive for jobs and investment.

So working with Public Sector Consultants, it sought savings that would cause the minimum of political divisions and the least amount of hardship for state residents and employees. The plan focuses on four areas: prisons, Medicaid, teacher benefits and public employee pensions.

There's nothing radical in the budget cuts Renaissance recommends. And there's certainly no reason they shouldn't be adopted.

• On Corrections, the plan dovetails with discussions already underway in Lansing to change sentencing guidelines and reduce the prison population. It notes that if Michigan reduced prisoner stays to the Great Lakes average, it would save $403 million. The state locks up more than 11,000 nonviolent offenders, or 23 percent of the prison population, at a cost of $340 million. Surely some inmates could be released into alternative programs.

Click here to see the full Renaissance recommendations.

The state also routinely keeps prisoners locked up well beyond their earliest release date. Letting all inmates go when they've served their minimum sentence would save $459 million. Any combination of those solutions would cut sharply into the state's $2 billion prison obligation. Renaissance also suggests cutting operating costs through outsourcing and other efficiencies.

• The plan does not recommend drastically trimming welfare benefits or cutting recipients off Medicaid, which serves roughly 20 percent of Michigan residents. It does suggest a series of measures to encourage more efficiencies in the $8 billion program and a strong emphasis on preventive care.

• Expanding costs of teacher retirement benefits are consuming 42 percent of all new spending on education. The report recommends raising the minimum retirement age to 57 from 55 and requiring a greater monthly contribution from teachers toward the pension plan. It also strongly suggests moving all new hires and as many current teachers as possible into a 401(k)-style plan and away from guaranteed pensions.

• Michgan requires public employees to pay just 5 percent of the cost of their health insurance benefits, compared to a national average of 19 percent. Raising the contribution of state employees to the national average would save between $88 billion and $219 billion. The report also recommends higher co-pays.

None of the measures are harsh. They shouldn't be difficult for policymakers to swallow. But they are necessary. Michigan can not pretend any longer that it can avoid change.

Taking reasonable steps now to fix the structural flaws in state government spending will avoid a fiscal collapse later.

Renaissance has made a modest proposal. Ultimately, much more will need to be done. But this plan at least would get Michigan moving in the right direction.