Michigan Turnaround Plan

 

Right-sizing & Enacting Structural Budget Reforms

Where We Are

  • Budget right-sizing is needed in the short-term because most structural reforms have long-term payoffs

  • Like most organizations, labor & benefits are the state's largest cost-driver; Average total compensation for state employees was almost $17,000 more than the private sector average in Michigan in 2007
    [Source: BEA Regional Economic Information System]

  • State employees pay 5% to 10% of their health premium costs, compared to 17.8% national average for state workers
    [Source: National Council of State Legislators]

  • The state employed over 52,769 workers as of March 2009; The state classified payroll was $4.73B as of FY 2007-08
    [Source: Michigan Civil Service Commission]

Where We Need to Go

  • Reduce state employee compensation to the average compensation of state workers in the US or the average of MI private sector workers (Potential savings: $287 - $1,383M as of FY 2007-08)*

  • Reduce the state workforce by 5-10% (Potential savings: $236 - $473M as of FY 2007-08)*

  • Adjust state employee premium contributions to the national public sector average (Potential savings: $74M)*

    *Estimates: Anderson Economic Group (see source notes)

Where We Are

  • Michigan is a relatively smaller economy today than it was in past decades and cannot support the same level of state spending it once did

  • Michigan has 1,800 units of local government and over 500 local school districts

  • Michigan has many programs and services that exceed or duplicate federal standards

  • Michigan's incarceration rate is 489 per 100,000 residents; 45% higher than the Great Lakes average of 338. Our prisoners stay on average 44.4 months, 48% higher than the Great Lakes average of 30 months.
    [Source: CRC, cited by Public Sector Consultants]

Where We Need to Go

  • Encourage & enable local government service sharing (Minimum estimated savings: $250M) [source: Center for Michigan]

  • Encourage & enable local school district service sharing (Minimum estimated savings: $300M) [source: Center for Michigan]

  • Enact corrections management and sentencing reforms (Estimated savings: $400M) [AEG Estimate; see source notes]

  • Eliminate optional services that exceed federal standards (e.g. optional Medicaid services)

  • Eliminate duplicate state programs (e.g. MIOSHA vs. OSHA)

  • Eliminate biding arbitration for municipal police & fire workers

  • Transition teachers to a defined contribution retirement system