To provide for improved fiscal responsibility by the Executive and Legislative branches of state government, the Michigan Chamber supports amending the Michigan Constitution to:

• Require that state government operate on an October 1-September 30 fiscal year.   
• Require the Governor to submit a budget for the next fiscal year to the Legislature not later than the second Wednesday in February of each year. 
• Require that at least two members of the state revenue estimating conference be well-qualified and experienced economists from the private sector. These independent members would be appointed by the Governor with advice and consent of the Senate.    
• Limit total state spending to 96% of estimated revenue for each fiscal year, plus any surplus or less any deficit from the preceding fiscal year.
• Require any revenue above the 96% spending limit to be automatically deposited in the State’s Countercyclical Budget and Economic Stabilization (commonly referred to as the BSF or “rainy day fund”).
• Require a 2/3’s vote of both the House and Senate to transfer or appropriate any money from the BSF.
• Require enactment of all appropriations bills for the next fiscal year on or before June 30. If this deadline is not met, the legislature shall immediately impose a call of the House and Senate that includes the Governor and Lt. Governor.  Lawmakers and these state officers shall not be allowed to leave the Capitol, conduct any other business, or be paid any salary unless and until all appropriations bills have been enacted. 

Background
In recent years, the legislature and administration have found it increasingly difficult to control spending, restructure government and balance the state budget in a timely or effective manner. Measures used to balanced recent budgets have included payment delays to colleges and universities, securitization of tobacco settlement monies, borrowing from the Higher Education Loan Authority, and use of restricted fund balances. There is growing political pressure from various spending lobbies on the Governor and legislative leaders to raise taxes.

Over that past several months the State House and Michigan Senate have not moved forward on either significant spending reductions or revenue increases. There has been a lot of rhetoric, but little progress on government restructuring. 

To balance the state budget, the Michigan Chamber has supported legislative and/or executive action to achieve $500 million to $1 billion savings through reduced state spending and meaningful cost-cutting reform measures. Based on current Board policy and the Chamber’s 2007-08 Legislative Priorities, here is a summary of the cost-saving reform measures advocated by Chamber staff:

• A moratorium on new or expanded state government programs.
• Reducing 2008 spending targets to 2007 levels.
• Changes in corrections policy to bring Michigan prison costs more in line with other states (estimated savings of $200-350 million).
• Changes in eligibility and work requirements for welfare to bring Michigan costs more in line with other states (estimated saving of $30 million).
• Medicaid reform (estimated savings of $60 million).
• Public school employee healthcare reform (estimated savings of $157 million).
• Public school employee pension reform (estimated savings of $60 million).
• Suspend Michigan’s “prevailing wage” law on all government projects when the state unemployment rate is more than the national average (estimated savings of $150 million).
• Consolidate certain state departments (estimated savings of  $3 million).
• Repeal or revise PA 312, which mandates binding arbitration of police and fire labor agreements.
• Require a common school calendar by intermediate school district (ISD).
• Require local school districts to seek open, competitive bids for non-instructional activities such as transportation, janitorial and food services.

Michigan Chamber members and staff have made a concerted effort to play a constructive role in the on-going debate over how to balance the state budget. Chamber staff has consistently encouraged legislative leaders in the House and Senate to first, reduce spending; second, restructure state and local government through action on a series of cost-saving reform measures. Third, and only as a last resort, if real progress is made on reforms and reduced spending, we have acknowledged that a temporary increase in the personal income tax (sunset on a date certain) might be acceptable as part of a comprehensive solution to balance the state budget. 

We have also consistently informed lawmakers and the administration that three tax increases (a graduated income tax; inheritance or estate tax; and piece-meal expansion of the sales tax to services) are damaging to Michigan’s economic competitiveness and unacceptable to many in the business community. In the spirit of cooperation, Michigan Chamber staff have consulted with and coordinated with other business organizations to develop this common message. 

What is clearly needed at this time is a mix of short-term, mid-range, and long-term solutions to the state’s fiscal problems. Chamber staff developed this policy proposal to provide a status report for the Board and to seek further policy guidance as the deadline for action on the 2007-08 state budget approaches. The proposed amendment to the State Constitution is patterned after, but not identical to Senate Joint Resolution E (SJR E), introduced on June 27, 2007 by State Senator John Pappageorge and 25 co-sponsors from both sides of the aisle. The modifications to SJR E recommended here were suggested in an analysis of SJR E conducted for the Michigan Chamber by the Anderson Economic Group and are recommended by Chamber staff to strengthen and improve on SJR E, as introduced.