Analysis: Michigan makes huge strides in 2011

By Phil Power/Center for Michigan and Doug Rothwell/Business Leaders for Michigan

Michigan has much to be thankful for as this year comes to a close: Better managed state and local government, a brighter economic outlook and more efficient delivery of public services. Our state's turnaround has begun, but in many ways the hardest work still lies ahead.

A year ago, our two organizations held a summit, "Common Sense Reforms for a New Michigan" invLansing. We drew nearly 400 people, including newly elected Gov. Rick Snyder and many legislative leaders for a discussion of structural changes we felt were needed to turn around Michigan and put us firmly on the path to prosperity.

The summit resulted in recommendations to improve state and local government efficiency, business climate and quality of life in our state.  We also pledged to report on progress one year later -- hence this column. There is much progress to report.

For the first time in nearly a decade, Michigan has adopted (on time) a structurally balanced budget that doesn't depend on accounting gimmicks or one-time fixes and begins to pay down the state's unfunded debt.  This budgetary discipline and improved financial condition have resulted in improved reports from several bond rating agencies.

Local government and school employees are now required to contribute 20 percent of the cost of their health-care benefits, a level that more closely matches what most private sector employees pay. It is our hope that the state employee unions follow suit and ratify these changes. The Legislature also adopted a series of reforms that make it easier for local government units to share services, thus reducing costs for local taxpayers.  Incentives are now in place for both schools and local governments to adopt best management practices, and a "dashboard" showing the metrics of progress is in place.

A new, simplified corporate income tax that ends double taxation on entrepreneurs and small businesses has replaced the complicated and (some say) job-killing Michigan Business Tax, which itself replaced the widely disparaged Single Business Tax. Previously saddled with nearly the worst business tax burden of any state, Michigan now has a tax climate about average among the states.

At the same time, state government is now looking at burdensome and complex regulations to see which can be repealed or fixed. And state economic development policy is less tilted toward government "picking the winners" for support and more dependent on the workings of the free market.

In what might be the single most important trend in 2011, the political and legislative gridlock that had bedeviled Michigan for nearly a decade was broken, replaced by high legislative output and a spirit of collaboration between Gov. Snyder and the Republican-controlled Legislature. One-party control tends to grease the skids for legislative work, though. It is our hope that Snyder, legislators and others can create a culture of bipartisanship that Michigan needs in the long term.

And there is much more yet to be done.

As our state gradually emerges from a period of economic decline, it's important to develop clear spending priorities.  As of now, too much of our limited resources are consumed by spending on prisons and rising health care costs.  And at the same time, we see deterioration in areas that are crucial toMichigan's future competitiveness, especially state support for our universities and our roads, bridges and parks.  We hope that as our economy comes back and state revenues rise, we attach far-seeing priorities on using resources to jump start our distinctive, durable, strategic competitive assets: higher education, infrastructure, cities/communities and natural resources/environment.