Putting an End To Crisis Management A Michigan Snapshot

1
Putting an End To Crisis ManagementA Michigan
Snapshot

• John E. Nixon, CPA
• State of Michigan Budget Director
• GOVERNING Outlook Conference
• Panel New Administrations and Priorities
• January 31, 2011

2
My focus today Michigans Game Plan

• Inside look at Michigans economic and budgetary
  climate
• Our forward-thinking strategy
• Partnering for success

The challenges facing the Great Lakes state are
great
3
An inside look at Michigans weaknesses
1.8 Billion Michigans estimated budget hole
for Fiscal Year 2011. This marks the states
9th consecutive year of budget reductions.
4
States rainy day fund dries up
An inside look at Michigans weaknesses

• The rule of thumb for a budget reserve balance is
  to maintain a fund equal to at least 5 of
  expenditures.

Budget Stabilization FundFiscal Year End Balance
(in Millions)
Source State Budget Office, OFM - LM, 10/13/2010
5
States unemployment rate 47th in the nation
An inside look at Michigans weaknesses
6
General Fund revenues down substantially
An inside look at Michigans weaknesses
(Millions)
May 2010 Estimates
6
Note Totals exclude transfers and savings from
adjusting statutory revenue sharing payments to
local governments.
Source Office of Revenue and Tax Analysis,
Dept. of Treasury, 10/21/10
7
Programs outgrow sustainability
An inside look at Michigans weaknesses

• Michigan Medicaid caseload at record level
• Up almost 828,000 since 2000
• Number of full time state caseworkers remained
  relatively flat from 2001 to 2010 (329 to 366
  employees)

October 1998 through November 2010
7
Source OHHS, MA Team 1/10/11
8
But Michigan has some things in its favor, too
9
Expenditure growth lowest among states
An inside look at Michigans strengths
Source Office of Revenue and Tax Analysis,
Michigan Dept. of Treasury, 12/30/09 (Based on
NASBO State Expenditure Surveys 2001 and 2008)
10
Pension reform alters tax obligation for taxpayers
An inside look at Michigans strengths

• Pension eliminated for new hires (1997) 401(k)
  plan established

• Thirteen years later
• 21,000 active workers eligible for state pension
• 55,000 retirees receiving state pensions
• 29,000 employees (54) enrolled in 401(k) plan

11
Consolidated IT environment Enables efficiencies
and self-service
An inside look at Michigans strengths

• 357 online services
• 70 email systems to 2
• 37 data centers to 3
• 64 percent reduction in contractors
• Security controls implemented
• 10,928,702 Web browser based attacks blocked
  (2010)

Michigan earns A in 2010 Digital States Survey
12
Michigans forward-thinking strategy
Michigans plan to move forward
The can has been kicked far enough.
13
The Challenge for MichiganStructural Balance
Michigans Plan

• Michigan must get back to its core principles.
• Address structural deficiencies
• Address long-term liabilities
• Right-size government programs

14
Our plan is to put an end to crisis management
Michigans Plan

• Two-year budgets
• Long-term plan
• Performance metrics to assure value for money
• Additional accountability thru transparency

Goal Get back to a AAA credit rating.
15
Government cannot do this alone.

• Government needs
• Innovators
• Business-minded thinkers
• Collaborators

This is your call to action
16
Partner with government

• The business community is the key to moving
  states forward
• Come to the table!
• Offer ideas
• Provide solutions
• Share data
• Bring best practices
• Collaborate
• And help advance initiatives

17
Questions
John E. Nixon, CPA State of Michigan Budget
Director StateBudgetOffice_at_michigan.gov (517)
373-4978