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Putting an End To Crisis ManagementA Michigan Snapshot
John E. Nixon, CPA
State of Michigan Budget Director
GOVERNING Outlook Conference
Panel: New Administrations and Priorities
January 31, 2011
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My focus today: Michigan’s Game Plan
• Inside look at Michigan’s
economic and budgetary climate
• Our forward-thinking strategy
• Partnering for success
The challenges facing the Great Lakes state are great…
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$1.8 Billion Michigan’s estimated budget hole for Fiscal Year 2011. This marks the state’s 9th consecutive year of budget reductions.
An inside look at Michigan’s weaknesses
State’s rainy day fund dries up
The rule of thumb for a budget reserve balance is to maintain a fund equal to at least 5% of expenditures.
An inside look at Michigan’s weaknesses
4Source: State Budget Office, OFM - LM, 10/13/2010
Budget Stabilization FundFiscal Year End Balance (in Millions)
State’s unemployment rate 47th in the nation
An inside look at Michigan’s weaknesses
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Michigan 11.7%
United States 9.4%
Source: Bureau of Labor Statistics - January 2010Source: U.S. Dept. of Labor December - 2010
Perc
ent
General Fund revenues down substantially
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$8,533$8,844
$9,503$9,788
$8,990$8,427
$7,959 $8,042$8,309 $8,266 $8,319
$9,359
$7,366
$6,655$7,097
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011May 2010Estimates
Note: Totals exclude transfers and savings from adjusting statutory revenue sharing payments to local governments.
(Mill
ions
)
Source: Office of Revenue and Tax Analysis, Dept. of Treasury, 10/21/10
An inside look at Michigan’s weaknesses
Programs outgrow sustainability
An inside look at Michigan’s weaknesses
Source: OHHS, MA Team 1/10/117
• Michigan Medicaid caseload at record level – Up almost 828,000 since 2000– Number of full time state caseworkers remained relatively
flat from 2001 to 2010 (329 to 366 employees)
October 1998 through November 2010
But Michigan has some
things in its favor, too
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Expenditure growth lowest among states
Total Expnd. Total Expnd.GF Growth GF-Growth Growth Growth
2001 to 2008 Rank 2001 to 2008 Rank
Illinois 26% 44 25% 48
Indiana 27% 42 36% 40
Michigan 0% 50 16% 50
Ohio 22% 46 34% 41
Wisconsin 22% 45 29% 46
Missouri 7% 49 27% 47
U.S. Avg. 41% 47%
Source: Office of Revenue and Tax Analysis, Michigan Dept. of Treasury, 12/30/09 (Based on NASBO State Expenditure Surveys 2001 and 2008) 9
An inside look at Michigan’s strengths
Pension reform alters tax obligation for taxpayers
Thirteen years later…
21,000 active workers eligible for state pension
55,000 retirees receiving state pensions
29,000+ employees (54%) enrolled
in 401(k) plan
An inside look at Michigan’s strengths
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Consolidated IT environment Enables efficiencies and self-service • 357 online services• 70 email systems to 2• 37 data centers to 3 • 64 percent reduction
in contractors• Security controls implemented
– 10,928,702 Web browser based attacks blocked (2010)
An inside look at Michigan’s strengths
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Michigan earns “A” in 2010 Digital States Survey
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Michigan’s plan
to move forward
Michigan’s forward-thinking strategy
“The can has been kicked far enough.”
The Challenge for Michigan:Structural BalanceMichigan must get back to its core principles.
•Address structural deficiencies
•Address long-term liabilities
•Right-size government programs
Michigan’s Plan
Revenue Expenditures
Our plan is to put an end to crisis management• Two-year budgets
• Long-term plan
• Performance metrics to assure value for money
• Additional accountability thru transparency
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Goal: Get back to a AAA credit rating.
Michigan’s Plan
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Government needs:•Innovators•Business-minded thinkers•Collaborators
Government cannot do this alone.
This is your call to action…
Partner with governmentThe business community is the key to moving states forward
•Come to the table!– Offer ideas– Provide solutions– Share data– Bring best practices– Collaborate– And help advance initiatives
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