Michigan’s Comeback Plan

1. Michigan’s Comeback Plan • A Balanced Approach

2. The Current Problem • Since 2001, Michigan has experienced cumulative projected deficits in excess of $10 billion--exhausting nearly $6 billion in fiscal reserves. • Today: • $1.78 billion deficit • Nearly $2.5 billion w/o federal stimulus dollars • Tax structure based upon a 1960’s economy • An unbalanced approach to the state budget continues disinvestment in infrastructure needed for the 21st Century economy, including public safety, transportation, and education.

3. Median Income Declines Below National Average Source: House Fiscal Agency Presentation, 11/2009 *2009 and 2010 are projected estimates

4. Share of Family Income Paid in Taxes 9.9% 9.6% 8.9% 9.8% 8.9% 8.0% 6.4% % of Income Source: Institute on Taxation and Economic Policy, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States, 3rd edition, 11/2009

5. GF/GP Revenue by Tax Source--FY 09-10 ($7.7 bil) Sources: House Fiscal Agency

6. Tax Policy Impacts Available Resources Source: House Fiscal Agency

7. A Decade of Decline • Police and fire funding reduced by nearly $3 billion • Higher education funding reduced by 17.8% per student • Early-childhood programs reduced by 32% • Environmental protections reduced by nearly 60% • State workforce reduced by 11,000 employees • Concessions by public employees has saved the state $3.7 billion • Roads and infrastructure continue to decline • Unemployment benefits frozen and retraining programs cut

8. State Government is Smaller Source: Department of Civil Service State Workforce Reports Chart Prepared by Michigan League for Human Services

9. MI Expenditure Growth Lowest Among States Source: NASBO State Expenditure Surveys 2001 and 2007

10. Support to Communities and Services Falling Fast GF/GP Appropriations Source: House Fiscal Agency Presentation, 11/16/09

11. The Comeback Plan A Balanced Approach

12. Audit Government Contracts • Private contracts account for nearly $15 billion--twice the GF/GP budget--or 35% of the total state budget • Currently, no process exists for annual review for efficiency and accountability. • Legislators have a responsibility to demand that taxpayers are receiving the most value for their dollar.

13. Close Tax Loopholes and Giveaways Total 2008 Potential Tax Revenues = $57.9 billion • Only 45% of potential revenue was collected in 2008 • Tax credits accounted for $35.8 billion in 2009--five times the state’s general fund • Close credits not creating and retaining jobs; provide for annual audits • Limit future credits and ‘pay as you go’ Sources: Michigan Department of Treasury Executive Budget Appendix on Tax Credits, Deductions and Exemptions FY2005 - FY2008 and Department of Management and Budget Comprehensive Annual Financial Reports. Calculations by Michigan League for Human Services

14. Rising Cost of Loopholes

15. Are They Working? Thousands Sources: U.S. Bureau of Labor Statistics and University of Michigan RSQE September 2009 Forecast *Average Annual Job Growth 91-00 **Projected RSQE Forecast

16. Expand Sales Tax to Services Tax Structure Misses Growing Sector of Economy: % of Potential Sales Tax Revenue • Current sales tax based off a ‘goods-based’ economy • Michigan taxes only 26 of 164 identified services, ranking it 38th in the country. • Expansion would generate up to $1.65 billion with future growth Sources: Federation of Tax Administrators and US Census Bureau Chart Prepared by Michigan League for Human Services

17. Implement a Graduated Income Tax • Current flat tax: 4.35%--rate falls each year until it reaches 3.9% in 2015 • Seven states, including Michigan, have a flat tax • Percentage represents a greater share of disposable income for low- and middle-income workers • Income growth has been concentrated among top wage earners • 90% of tax filers would see a tax cut, while generating $600 million in new revenue

18. Income in Richest Households Grew 5Xs Faster Source: Pulling Apart: A State-by-State Analysis of Income Trends, by the Center on Budget and Policy Priorities and the Economic Policy Institute. Chart prepared by Michigan League for Human Services

19. Public Support for a Balanced Approach

20. Impact of Budget Cuts

21. Support for a Balanced Approach

22. Accountability and Transparency Sources: Progress Michigan/ABMF Poll, July 2009

23. Accountability and Transparency

24. Fairness in Taxes

25. Fairness in Taxes

26. Partner Organizations AFL-CIO America Federation of Teachers Michigan The Arc Michigan Citizens for Better Care Clean Water Action Common Cause Global Behavior Education Michigan AFSCME Council 25 Michigan Association of Pupil Transportation Michigan Citizen Action Michigan Council on Crime and Delinquency Michigan Education Association Michigan Environmental Council Michigan League for Human Services Michigan Nurses Association Michigan Primary Care Association Michigan Professional Firefighters Association Michigan State Employees Association-AFSCME Local 5 Middle Cities Education Association National Association of Social Workers PHI of Michigan Planned Parenthood Pride at Work-Michigan Progress Michigan School Community Health Alliance Sierra Club Small and Rural Schools United Auto Workers Michigan CAP Unitarian Universalist Social Justice Network Van Buren Legislative Consortium

27. Campaign Contacts www.abettermichiganfuture.org Campaign Director Cyndi Roper cyndi@abettermichiganfuture.org 517.490.1394 Campaign Spokesperson Lynn Jondahl 517.402.7090 Legislative Coordinator Patrick Schuh pschuh@infoservicesgroup.net 517.214.4288