top of page
Brendan Walsh

The Old Normal of State Tax Revenue

The headlines this week regarding the potential failure of Silicon Valley Bank invoked unpleasant memories among those scarred by Michigan's harrowing years from 2008 to 2013. Bank failures globally and nationally sent shock waves and General Motor's bankruptcy set the car industry on its ear. Michigan's state budgets were slashed mid-year for the first and only time. Those of us serving on school boards at the time will never forget those days.


While doing some research for an upcoming project, I came upon some Michigan Senate Fiscal Agency reports that reminded me of those dark days. More than that, the data tells us that we have never recovered. And amid talk of inflation these days, we are reminded of its unwelcome effect.


For the uninitiated, the State of Michigan operates from two budgets - the General Fund (GF / GP) and the School Aid Fund (SAF). In simple terms, the SAF fund primarily K-12 public education. The GF / GP funds everything else (Health and Human Services, Corrections, Roads, etc.)


The chart below from the Senate Fiscal Agency offers a sobering reminder. The state's General Fund revenues are lower now than they were in 1968. If it had been a flat line since the LBJ days this would still be unpleasant, but at least manageable. Instead, the state became accustomed to a higher budget quality of life (think pensions especially). The crash of 2008 changed everything from that point onward.


The School Aid Fund wasn't around in 1968. Our point of reference begins with our now middle-aged friend, Proposal A (DOB 1994). As is often the case, the SAF takes a year or two to manifest the same effects that plague the older General Fund. But the theme is the same. Adjusted to 1995 dollar values, the SAF revenue is down 7.4% from its inception. Important to keep this in mind in these days when politicians will boast of "record spending on Education." In actuality, we have never spent less and costs continue to rise.


In coming posts, we will get into greater details that make this sad story a little worse as we now are paying more for things that we bought - or rather I should say financed - all those years ago.

Comments


bottom of page