It’s always hard to save money. We know that’s true for many people, and it’s true for Lansing, as well.
And, politics makes it even harder.
A recent report by the nonpartisan Citizens Research Council says Michigan is not ready for another recession. The report says lawmakers are short-changing the state’s savings-account, officially known as the Budget Stabilization Fund, but commonly referred to as the “rainy day” fund.
The fund exists to help avoid a drastic response, such as big spending cuts or tax hikes, to keep the budget balanced (keeping a balanced budget is law under the state constitution).
The “rainy day” fund was drained at the outset of the ‘Lost Decade.’ It took just a little more than a year to burn through more than a billion dollars. Then it sat nearly empty during the Great Recession.
The fund has been slowly growing in what is now the ninth year of an economic recovery. But, the Citizens Research Council says the fund is growing too slowly. It currently stands at about $700 million.
The CRC’s Craig Thiel says that $700 million won’t last long if a recession of any severity strikes. “It’s not if, it’s when the economy’s going to take a turn for the worse, and the budget’s going to take a hit when that happens.”
And we already know there are budget pressures looming, including more money going to roads, pension liabilities, and the largely unknown cost of business tax credits.
But that’s not the only reason it’s so hard for Lansing to save.
There are few political rewards for putting money in the “rainy day” fund. If there’s a windfall or a surplus, there are constituencies for spending that money on programs that make the folks back home happy. And constituencies calling to return that money in the form of tax cuts.
So, we have spending pressure and tax-cut pressure, but it’s hard to find many “savings hawks” in Lansing.
However, Governor Rick Snyder has tried to get more money into the “rainy day” fund. “Generally, I’ve been advocating for increasing the fund for a number of years,” Snyder told It’s Just Politics.
But, the Legislature has not been willing to put as much as he’d like into savings. Snyder would like to see the account reach between a billion and a billion and a half dollars. That would bring the fund close to the cap in state law on how much money can be kept in savings.
But even that’s too low, says the Citizens Research Council. They say it should be closer to two billion dollars if Michigan’s serious about saving for a rainy day.
But voters aren’t big on sacrifice, or deferred rewards. So neither is the Legislature.
