Ten years ago, there was hardly an institution that came out of the Great Recession unscathed. It was an economic downturn that took its toll on just about everyone, everywhere. But if there was a state that was hit particularly hard, there’s no question it was Michigan.
Getting to economic stability took a decade of hard work, tough choices, and classic Michigan grit. In ten years’ time, we have done a tremendous job of not only building back our economy but also strengthening the footing of the financial foundation it rests upon.
The hard work paid off. With historic levels of funding set aside for rainy days in our Budget Stabilization Fund, we are well-prepared to weather the effects of the COVID-19 storm.
However, the work is far from finished. That is why Business Leaders for Michigan has developed a Road to Top Ten plan, so we can continue to make economic progress during the tough days that are now upon us.
Separate from the impact of COVID-19, Michigan’s economy and long-term prospects are still hampered by severe and rapidly looming pension and other post-employment benefit (OPEB) liabilities at the local level. Compounding that issue is its scope. With far more local units of government than most states—each with its own burdensome overhead costs—Michigan is home to hundreds of local municipalities facing down crippling financial liabilities.
There is a way forward though, and even better, the path is already a familiar one for Michiganders. Improving our state’s financial stability requires a renewed commitment to the sort of fiscal best practices that have already brought us this far. Continuing to emphasize, identify and implement sound financial management routines like multi-year budgeting and long-term strategic planning will go a long way towards producing a greater number of citizen-friendly balance sheets in municipalities across the state.
In conjunction with that effort, we must continue to be diligent in our work to pay down and manage our state’s unfunded liability, and thankfully there are ways to make progress on this front beyond simplistic and draconian belt-tightening and penny-pinching. For example, aggressively shifting local government and school system retirees 65 and older to Medicare and early retirees to health care exchanges with stipends will provide local municipalities and public entities with much needed financial relief while still preserving the commitment to providing countless Michigan retirees with the health care benefits they have been promised and have undoubtedly earned.
Taking steps to responsibly reduce state and local corrections costs is another avenue benefiting all parties involved. By adopting evidenced based practices that reduce recidivism and lengths of stay such as treatment courts, medical parole and vocational training, local municipalities can reduce costs while also providing the incarcerated with a better chance at successful rehabilitation.
There are a variety of actionable ways for state and local governments to improve their balance sheets without doing a disservice to their residents by cutting shared services. The key now is identifying and aggressively pursuing those kinds of projects.
Business Leaders for Michigan recommend that local governments continue pursue opportunities to share costs and hedge against future economic downturns. Best practices in these areas are well established and include:
- Precluding new hires from receiving defined benefit retirement and retiree health care plans and instead transition to a defined contribution model.
- Enhance the certification and professional development requirements for local government finance staff with state support being made available training.
- Encourage and expand local government service sharing.
Remaining committed to these sorts of policies and practices will help to ensure our state not only maintains but also improves its overall fiscal health.
There is no question that we have come a long way in the past decade. Michigan’s financial position today is undoubtedly better than it was ten years ago, and the work it took to get to this point deserves a great deal of praise and recognition. Michiganders everywhere should be proud of the progress we’ve made in improving our collective fiscal health and should rest easy knowing we are better positioned to sustain our state’s continued growth during the economic downturns that are likely to continue as we battle COVID-19.
However, our work is unfinished, and that’s not how we leave things here in Michigan. The roadmap to sustained and superior financial stability is clear. All that’s left to do now is bear down and do the work.