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Clouds form on the horizon for Michigan's finances

Aug 2, 2017

On the surface, yesterday was a pretty good day for Michigan. The state announced that the cities of Pontiac and Lincoln Park were both being released from receivership.

The treasurer’s office said both of these aging cities had made considerable strides toward getting their acts and their finances in order. I think that is true, but I also think the state would like to get them off the books. Ever since the mess in Flint, the whole idea of having the state take over and run cities has lost a lot of appeal.

There were two other encouraging developments: A federal appeals court in Washington, D.C reaffirmed an earlier court ruling putting gray wolves back on the endangered species list. Michigan voters have shown they clearly don’t want wolf hunting in this state.

The governor and the legislature tried hard to thwart the public will by taking away their right to ban killing wolves, but fortunately federal law always trumps state law.

The other sort of good news is that a long-delayed report on how to keep Asian carp out of the Great Lakes will be released next week, thanks to congressional pressure.

My strong hunch is that it will call on both government and business to do things they don’t want to do and spend money they don’t want to spend, which is why the Trump administration tried to block it. But we’ll see.

Yesterday was also not without its nuttiness. The state Unemployment Insurance Agency, which has about as much credibility as the Flat Earth Society these days, went back to the Michigan Court of Appeals to fight a unanimous ruling that the agency couldn’t make a beneficiary pay back $158. Don’t ask how much we’ve already spent fighting over this case.

But what really caught my attention was this: The Citizens’ Research Council of Michigan is a vastly respected, non-partisan agency that has been around for a century. And yesterday it released a study euphemistically called “Challenges Ahead in Balancing the State Budget.” I would have called it, “We are living on the side of the mountain, and the avalanche is about to start.”

The problem is this: Most of the spending lawmakers have control over is in what’s called the general fund, which is about $10 billion. That may sound like a lot, but it’s not, since it funds everything from higher education to prisons. And things are about to get a lot harder.

This governor and earlier legislators have treated the general fund like an infinite Santa Claus, passing legislation that promises to fund programs years in the future. That was easy for them to do. They knew that thanks to term limits, they wouldn’t be around when the bills came due. But now, according to Craig Thiel, the CRC's research director, the chickens are coming home with a vengeance. “Michigan will have some tough choices in balancing future state budgets,” he said. Tax credits and promises to use the general fund for fixing roads are about to blow a $2 billion annual hole in that fund.

How they fix that, nobody knows. But do something they must, because the state can’t legally run a deficit. There really is no such thing as a free lunch, as we are all about to find out.

Jack Lessenberry is Michigan Radio’s Senior Political Analyst. Views expressed in his essays are his own and do not necessarily reflect those of Michigan Radio, its management or the station licensee, The University of Michigan.