February 13, 2009 at 1:00 am

Editorial: State budget makes good start on spending control

Gov. Jennifer Granholm's proposed budget moves state spending in the right direction -- but it's hardly transformational. One-time revenues and fee hikes as well as layoffs and wage concessions are used to balance the budget.

The plan, presented to state lawmakers Thursday, contains spending cuts amounting to $670 million. The state's discretionary checkbook, the General Fund, has a proposed total of $8.9 billion, down 7 percent from the current total of about $9.6 billion. This amount is less than the General Fund's 2003 total.

Still, while Granholm promised she would not use federal stimulus funding to expand government, she is budgeting $500 million in the stimulus revenues for Medicaid, the joint state-federal medical insurance program for the poor, which frees up money to be used elsewhere. She said state taxes would grow in the 2011 budget year to cover the one-time use of federal money.

This continues a pattern in which state government under both Granholm and her predecessor, John Engler, have used one-time revenues amounting to more than $8 billion to balance the state budget since 2000.

In addition, the governor's budget calls for reducing state revenue sharing to local governments by $467 million, which follows the current year's reduction of $537 million. This will increase pressure on local government budgets, which in turn could result in local tax increase requests.

And while she promised no general tax hikes in this budget, it includes a variety of fees and so-called tax-loophole closings adding up to $230 million, which are simply another form of tax increases.

But to her credit, the governor's budget inflicts pain on state government with layoffs of 1,500 employees and total wage concessions of $50 million built into the budget, with about $28 million in pay cuts coming from the General Fund.

The governor continues to try to get a handle on state Corrections Department spending, which has become the largest growth area in the General Fund, proposing the closing of some prisons and plans to accelerate reviews of inmates who are eligible for parole. Michigan's ratio of state prison inmates to its total state population exceeds that of its Midwestern neighbors. Both alternative sentences and effective prisoner re-entry programs are needed. The budget wisely beefs up spending to help ex-prisoners become self-sufficient after their release.

Granholm should get some help from state lawmakers on dealing with prison spending.

It's easy to quibble about this or that spending item; Republicans may object to the elimination of a State Police crime lab in the Upper Peninsula, and Democrats may balk at cuts in state health department spending. But objections should be accompanied by suggestions for other savings.

As the governor's budget notes, the unemployment rate this year is expected to be 10.9 percent and reach 11.2 percent in the 2010 budget year. This state lost 625,000 jobs between June 2000 and last December, but one quarter of those jobs disappeared last year alone. Residents' personal income has declined in nominal as well as inflation-adjusted dollars for the first time since 1958.

Michigan residents simply have more expensive government than they can afford. This budget at least begins to deal with the problem.