Moving Michigan Forward: Continuing Our Comeback. Presented by: John E. Nixon, CPA State Budget Director, Michigan

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1 Moving Michigan Forward: Continuing Our Comeback Presented by: John E. Nixon, CPA State Budget Director, Michigan Michigan Municipal League April 10, 2013

2 Where We Started Perpetual $1.5B deficit Uncapped liabilities Job killing tax system $2M in savings account depleted rainy day fund Several accounting gimmicks 2

3 What We ve Done Overcame perpetual $1.5B deficit Started accounting for one-time versus ongoing money Implemented multi-year budgeting Addressed long-term liabilities Eliminated job killing tax system Invested in rainy day fund Linked policy decisions to funding (capital outlay reform) School bond loan fund reforms Retirement reforms Michigan Public School Employees Retirement System Michigan State Employee Retirement System 3

4 Accomplishments Year 3: Looking forward Maintain structural balance Protect education and stabilize state agency budgets Invest in critical infrastructure, economic development and public safety needs Meet the needs of the most vulnerable among us by investing in important safety net programs Save for the future 4

5 Turning the Corner Growing more jobs Personal income is increasing Home sales and prices are increasing Our population is growing again 5

6 Michigan s Economic Turnaround GDP growth 6th best in nation in 2011; ranked 50th in 2008 and was second consecutive year of job expansion after 10 straight years of declines Payroll employment growth rate was 5th strongest among the states in 2011; 46th in 2009 Per capita income growth 7th best in nation in 2011; ranked 42nd in 2008 Housing starts increased 22 percent in 2012 and were up 66 percent from the 2009 level State motor vehicle production increased 17 percent in 2012; production was almost double 2009 production The State is much stronger than it was in last decade 6

7 Michigan s Employment Expected to Increase in Michigan Wage and Salary Employment Year-Over-Year Change (In Thousands) Consensus Forecast 7 Note: U.S. Bureau of Labor Statistics estimates are 1/11/13 Consensus Forecast. 1/25/13.

8 Michigan s Unemployment Rate Improving Faster Than the U.S. Rate 15% 12% 2015 Michigan 7.6% 9% 6% 3% 2015 United States 7.1% 0% Source: U.S. Bureau of Labor Statistics , 1/11/13 Consensus Forecast. 1/25/13 Consensus Forecast 8

9 Michigan Personal Income Continuing Growth in % 2.5% 1.0% 3.7% 1.6% 2.0% 2.8% 2.8% 2.0% 3.1% 3.4% 2.6% 4.3% 4.4% -6.3% Michigan Personal Income Year-Over-Year Change Consensus Forecast Note: U.S. Bureau of Economic Analysis estimates are 1/11/13 Consensus Forecast. 1/25/13. 9

10 Michigan Housing Starts are Rebounding 60,000 50,000 40,000 30,000 20,000 10, Sources: U.S. Bureau of the Census & Treasury Forecast 1/11/13 Treasury Forecast 10

11 People are Taking Note April 2, 2013: Fitch Ratings upgraded Michigan s general obligation credit rating to AA Standard and Poor s upgraded Michigan s credit outlook to positive Moody s upgrades Michigan s bond rating from stable to positive Fitch said the upgrade reflects the state s solid economic and fiscal recovery over the last two years. 11

12 Total FY 2014 Budget Recommendation Health and Human Services Health and Human Services $22.6 Billion Public Safety Education $15.3 Billion Environment Jobs $6.1 Billion Government Services Public Safety $3.1 Billion Government Services Environment Budget Stabilization / Health Savings Fund $2.7 Billion $922 Million $178 Million Education Jobs Budget Stabilization/ Health Savings Fund FY 2014 Total $50.9 Billion Total Gross: $50.9 Billion 12

13 Total New GF/SAF Investments in FY 2014 Budget Budget Stabilization/ Health Savings Fund $178M 30% Jobs $84.5M 14% Health and Human Services $27M 5% Public Safety $52.6M 9% Environment $14.9M 2% Government Services $51.4M 9% Education $187.7M 31% Total: $596.1 Million 13

14 Key Policy Investments Infrastructure Jobs Public safety Long-term savings 14

15 Driving the Economy Forward Invest $1.2B more per year in our road infrastructure Four layers to a common sense outcome Make regular payments to avoid huge bill Save on vehicle repair costs Grow the economy by creating jobs Save nearly 100 lives per year Roads, bridges, public transit, rail, harbors 15

16 Investing in Our Roads $25B Gap Source: OEI, RMF 07/27/12 16

17 Supporting Job Creation $10M for a new skilled trades program $20M to assist banks in extending capital to underserved communities $3M for a new food and agriculture growth initiative $4M increase for Pure Michigan 17

18 Making Michigan Safer Increase strength of Michigan State Police ranks Trained 78 troopers in FY 2012 Anticipate training 152 troopers during FY 2013 $15.2M to train 107 troopers in FY 2014 $2M for mental health courts $3M for treatment courts $9.5M for blight elimination and $4M for Good Neighbor property maintenance 18

19 Long-term Savings One-time, surplus funds Important for Michigan s ratings Rainy Day Fund Michigan Health Savings Fund Disaster and Emergency Contingency Fund 19

20 History of the BSF $1,400 The Budget Stabilization Fund (BSF) peaked at $1.3 billion in FY 2000, but was quickly depleted. Michigan has started to rebuild the BSF balance in FY 2012 and projects that the $1,264.4 balance will be approximately $580 million by the end of FY $1,200 $1,000 $994.2 Millions $800 $600 $505.1 $580.1 $400 $365.1 $200 $0 $145.2 $81.3 $0.0 $2.0 $2.0 $2.1 $2.2 $2.2 $2.2 $ Projected Projected Fiscal Year 20

21 Other Items of Interest Constitutional Revenue Sharing EVIP Regional Prosperity Initiative Competitive Grant Assistance Program IT Innovation Fund MiDeal eprocurement 21

22 Constitutional Revenue Sharing FY 2014 payment up 4.1 percent over prior year 11 percent growth in payments for cities and villages since FY 2010 Cities and villages receive $382.5M, or 52 percent, of FY 2014 payments 22

23 Economic Vitality Incentive Program Provides incentive payments to eligible participants 93 percent of eligible participants are cities and villages (452); 7 percent for townships 98 percent of funding, or $220M, earmarked for cities and villages; 2 percent for townships 23

24 Regional Prosperity Initiative New FY14 investment of $5M Voluntary competitive grant program Program goals Regional reinvention Empower locals to drive economic prosperity Encourage regional collaboration Existing State-Designated Planning Regions and Metropolitan Planning Organizations are eligible to apply in the following three categories: Regional Prosperity Collaborative, $250,000 maximum grant Regional Prosperity Council, $375,000 maximum grant Regional Prosperity Board, $500,000 maximum grant 24

25 Competitive Grant Assistance Program Financial help to offset costs of combining local government operations; long-term financial benefits to local governments $45M state investment over three-year period 60 awards, totaling $14.9M, in FY 2012; examples: Grand Rapids, Flint and Lansing combined income tax processing and tax payment systems - $2.1M savings Macomb County, Clinton Township and Sterling Heights consolidated dispatch and communications operations - $15M savings Waterford Township and Pontiac consolidated fire services - $12M savings 25

26 ICT Innovation Fund Program that allows jurisdictions to partner on IT projects to make state and local government more productive Venture capital loans available to state agencies, local units of government, and nonprofits For instance: Eastern Upper Peninsula Intermediate School District Integrated Information Systems Five integrated management systems, a platform transferable to other school districts 26

27 MiDeal Allows local units of government to use state contracts to buy goods and services Membership is open to cities, townships, villages, counties, school districts, universities, community colleges and nonprofit hospitals Flexible, voluntary use program Currently, more than 1,000 members More than 300 contracts available Thousands of products and services Average savings of up to 25 percent or more Mitigates cost of procurement Eliminates administrative duplication 27

28 eprocurement DTMB Procurement will be moving from our current bid solicitation system, Bid4Michigan, to Buy4Michigan which is a robust eprocurement software system that provides Greater procurement efficiency Integration of best practices Cooperative purchasing Spend analytics Cost savings throughout the procurement process 28

29 eprocurement The State has purchased a perpetual, irrevocable, unlimited, enterprise-wide license for the system Our license includes all State of Michigan users, all prior Bid4Michigan system users and all MiDEAL member users interested in participating There is no limit on the number of users Additional Information is available at:

30 Thank you. 30