Tuesday, July 21, 2020

Michigan's Wishing Well Budget Shortfall-What is our fiscal responsibility?

The state budget is a little like a big wishing well. We throw a penny in and wish for wonders. No one really knows where all the pennies go. Ever since I was a child I suspected some official came, scooped them out and hauled them off for safe keeping.  The wishes may have stayed but the pennies are long gone and spent. As a state we need to do do a better job of thinking of how to put our short term needs into a longer term strategy. We can tighten our belts but need to get to work to raise more revenue.

COVID decimated our state budgets. It was a pandemic we didn't expect and had little cushion to overcome. The shortfall may be caused by the acute crisis but it our inability to manage budgets properly in the long run that creates the biggest issues.

The pennies are gone but the wishes remain.

The Money

According the article, "Federal aid helps Michigan fill $2.2 billion hole, but Legislature faces another major shortfall" school officials are worried about the billions of dollars budget shortfall that will require $1 billion now and if I'm understanding correctly $1.1 billion next year (Eggert, 2020). That is a lot of 0's we have to make up for and I'm not sure where the money will come from.

What I like about the article is that it helps me think about the dangers the state faces in terms of education money and lack of resources to fund it. There are some Federal dollars coming into play and some movement of money from the "rainy day" fund but there isn't enough money to go around.

Updating Schools

Pressing on this budget shortfall is the natural rights of children to get the education they deserve. Yes...our education system has been in need of reform for a long time. The type of reform needed is up to the philosophical and political differences of the politicians. What I can say is no matter if we use the traditional school system, or free choice in school system, we should consider ensuring our curriculum and methods are aligned to the needs of the modern society.

ROI on education is important because we must train people to compete in the future.

The way in which public education and universities prepare our students is important for long-term competitiveness. If we are not laying the foundations in the beginning it will be harder to develop those skills later in life. This is one of the reasons why people from impoverished neighborhoods often don't have the same opportunities as people from wealthier school systems. Its sort of a fundamental right in modern society.

Short and Long Term Thinking

The budget and its current crisis is short term. It doesn't seem that way but over the years we can get out of it in the long run. The problem is that we always seem to run into budgeting issues and deficits. It is a modern practice in government to spend almost all of the money on non-essential projects that may not have much return for the people in the state. That is why government should ensure no corruption is present and decisions are being made in the best interest of the citizens.

We are left with only two real options. Yes we can move money around, take more debt, increase inflation through printing more money, and play musical money chairs but we are still left with only so much money (units of labor). Of course we can tighten our belts and do without some things by stripping all non-essential programs. That may not be the wisest choice either; although reevaluating how money is spent is important for long-term state returns.

We need more investment in the state. Utilizing programs like Pure Michigan to reach a global audience and finding new ways to draw in foreign investment, focus domestic investments, and improve the business prospects of the state are important long term considerations. We might need to rethink about what type of information is available about high potential budding community clusters that can increase wealth, the laws/regulations we have in place that may be hampering business, and the need to get multiple stakeholders on the same page. Change isn't easy, nor is long term thinking, yet we can overcome this COVID crisis together if we think about our, and our children's futures.

Lets make a make a wish together and keep the pennies in place.
Eggert, D. (July 20, 2020). Federal aid helps Michigan fill $2.2 billion hole, but Legislature faces another major shortfall. Crains Detroit Business.

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