Granholm lays out plans to reform Michigan government

In the first of of three major policy speeches coming in the next two weeks, Gov. Jennifer Granholm talked in stark terms about Michigan’s economy and laid out a bold, comprehensive plan for how to permanently fix the state’s budget problems that cause so much turmoil year after year.

Speaking before the Lansing Rotary Club in downtown Lansing, Granholm laid out the stark economic reality of the state:

Everyone in this room knows that over the last 10 years, Michigan has been hemorrhaging jobs. Some of the job loss is due to the impact of globalization on our economy. Some is because of unfair trade policies that disadvantage American businesses and workers. But much of it has come from the profound changes that reverberated throughout the auto industry. In 2008, skyrocketing oil prices and the collapse of the financial markets created a worldwide recession. Michigan’s manufacturing-based economy, already under tremendous financial pressure, reached the breaking point and snapped.

The unthinkable happened – General Motors and Chrysler declared bankruptcy, as did many of our key auto suppliers. Businesses closed because they couldn’t obtain credit. Home foreclosures soared while real estate values plummeted. Hundreds of thousands of workers lost their jobs and looked to government for assistance.

At the end of this year, Michigan will have lost one million jobs since the dawn of this century. Three out of four automotive jobs in our state are gone. Also gone is the old Michigan economy. It’s gone, and let’s be candid – it’s not coming back.

The governor laid out this analysis as the backdrop for why her plans to reform Michigan’s government were necessary to fix the state’s bleeding budget — estimated to have a hole of $1.8 billion for the 2010-2011 cycle.

Calling for a “sleeker” government, Granholm said, “Government cannot be all things to all people. We must focus on the things that matter most: job-creation, education and providing basic critical services to those most in need. Our challenge is to free up every possible resource, every possible dollar, to attract business investment, to foster job-creation and to provide our children and our workers with the education and the training they need. Our limited resources are further diminished by a state government that was designed in the 1960s. And that has to change.”

After launching into a blistering assault on lifetime healthcare benefits for lawmakers — which she called “indefensible” in the best of times, but “outrageous” in tough times — she called on the Republican majority in the state Senate to follow the Democratic majority in the state House and eliminate the benefit.

This was all preamble to calling for reforms for state workers.

She proposed “negative and positive” incentives to encourage some 7,000 state employees and 39,000 public school employees to retire. She also proposed shifting state employee health care coverage into a new plan which, she says, will save the state 21 percent of the costs associated with providing health care benefits to state workers and their families.

One union representing state workers has approved the new plan, which requires employees to pay 20 percent of the premiums for health care coverage. Another has tentatively approved the deal, but is waiting for ratification from members. She said she expects other bargaining units and state employees will also buy into the new deal, and wants to open it up for other public employees, such as public school employees.

During the speech, Granholm also called on the state to rethink its budgeting process. She said it’s time to move the state to a two year budget cycle, and force the legislature to approve a budget by July 1, months in advance of the beginning of the new fiscal year which starts Oct. 1.

The governor also argued that every two years, the legislature needs to revisit tax breaks, loopholes and incentives given out to lure businesses to the state.

“These tax breaks reduced state revenue by $36 billion for the 2010 fiscal year,” she said. “Long-term tax credits to attract jobs to Michigan are an important part of our economic diversification toolbox, and companies that rely on them will be able to continue to do so. But sound budgeting means we should treat tax expenditures like every other expenditure in the state budget. We need to periodically reauthorize or repeal them to make certain we’re getting the benefits – in job-creation and economic growth – that we expected.”

While Granholm is being labeled a lame duck by some political observers, she is proposing serious changes to Michigan. The question is: Is there a so-called ‘Grand Bargain’ in the offing with the GOP?

Here is the full text of Granholm’s speech:

2010 Reforms Lansing Rotary 1-29-10