1. Putting an End To Crisis Management A Michigan Snapshot John E. Nixon, CPA State of Michigan Budget Director GOVERNING Outlook Conference Panel: New Administrations and Priorities January 31, 2011 1

2. My focus today: Michigans Game Plan Inside look at Michigans economic and budgetary climate Our forward-thinking strategy Partnering for success The challenges facing the Great Lakes state are great… 2

3. $1.8 Billion Michigans estimated budget hole for Fiscal Year 2011. This marks the states 9 th consecutive year of budget reductions. An inside look at Michigans weaknesses

4. States rainy day fund dries up The rule of thumb for a budget reserve balance is to maintain a fund equal to at least 5% of expenditures. An inside look at Michigans weaknesses 4 Source: State Budget Office, OFM - LM, 10/13/2010 Budget Stabilization Fund Fiscal Year End Balance (in Millions)

5. States unemployment rate 47 th in the nation An inside look at Michigans weaknesses 5 Michigan 11.7% United States 9.4% Source: Bureau of Labor Statistics - January 2010 Source: U.S. Dept. of Labor December - 2010 Percent

6. General Fund revenues down substantially 6 6 May 2010 Estimates Note: Totals exclude transfers and savings from adjusting statutory revenue sharing payments to local governments. (Millions) Source: Office of Revenue and Tax Analysis, Dept. of Treasury, 10/21/10 An inside look at Michigans weaknesses

7. Programs outgrow sustainability An inside look at Michigans weaknesses Source: OHHS, MA Team 1/10/11 7 Michigan Medicaid caseload at record level –Up almost 828,000 since 2000 –Number of full time state caseworkers remained relatively flat from 2001 to 2010 (329 to 366 employees) October 1998 through November 2010

8. But Michigan has some things in its favor, too 8

9. Expenditure growth lowest among states Source: Office of Revenue and Tax Analysis, Michigan Dept. of Treasury, 12/30/09 (Based on NASBO State Expenditure Surveys 2001 and 2008) 9 An inside look at Michigans strengths

10. Pension reform alters tax obligation for taxpayers Pension eliminated for new hires (1997); 401(k) plan established Thirteen years later… 21,000 active workers eligible for state pension 55,000 retirees receiving state pensions 29,000+ employees (54%) enrolled in 401(k) plan An inside look at Michigans strengths 10

11. Consolidated IT environment Enables efficiencies and self-service 357 online services 70 email systems to 2 37 data centers to 3 64 percent reduction in contractors Security controls implemented –10,928,702 Web browser based attacks blocked (2010) An inside look at Michigans strengths 11 Michigan earns A in 2010 Digital States Survey

12. 12 Michigans plan to move forward Michigans forward-thinking strategy The can has been kicked far enough.

13. The Challenge for Michigan: Structural Balance Michigan must get back to its core principles. Address structural deficiencies Address long-term liabilities Right-size government programs Michigans Plan Revenue Expenditures

14. Our plan is to put an end to crisis management Two-year budgets Long-term plan Performance metrics to assure value for money Additional accountability thru transparency 14 Goal: Get back to a AAA credit rating. Michigans Plan

15. 15 Government needs: Innovators Business-minded thinkers Collaborators Government cannot do this alone. This is your call to action…

16. Partner with government The business community is the key to moving states forward Come to the table! –Offer ideas –Provide solutions –Share data –Bring best practices –Collaborate –And help advance initiatives 16

17. Questions John E. Nixon, CPA State of Michigan Budget Director StateBudgetOffice@michigan.gov (517) 373-4978