MI & MD: Solving State Budget Crises with New Revenue

MI & MD: Solving State Budget Crises with New Revenue

Thursday, October 4th, 2007

Growing Economy

BY Nathan Newman

MI & MD: Solving State Budget Crises with New Revenue

Resolving a budget crisis that shut down state services for four hours, early Monday morning the Michigan state legislature approved a new budget that raised the income tax and expanded the sales tax to cover more services, largely erasing a projected $1.75 billion deficit in next year's budget. These were combined with $440 million in spending cuts, including cuts to the state's public universities and community colleges. These bills were passed only after a handful of Republicans joined most Democrats in the state House and Senate as a government shutdown was being implemented, which would have furloughed 35,000 of the state's roughly 53,000 workers.

As the Michigan League of Human Services documented earlier this year, the crisis in Michigan had been a decade and a half in the making as state leaders had slashed incoming revenue rates. State general fund revenues fell from 3.92% of state personal income in 1990 down to just 2.41% of state personal income in 2007 -- and with repeal of the Single Business Tax, revenues would have dropped to just 1.9% in 2008. This led to a cumulative $36 billion revenue decrease due to tax cuts over that period. 

Maryland Faces Its Own Budget Crisis:  The state of Maryland is facing an almost identical $1.7 billion shortfall for next year and is entering a special session to resolve the problem. As the Maryland Budget & Tax Institute details, despite its liberal image, Maryland lags most of the nation in both revenue collected and government spending as a percentage of income. In fact, Maryland ranks dead last among states in government spending. 

To deal with the budget crisis, Maryland Governor Martin O'Malley has proposed a package that, along with increasing the state sales tax, would cut property tax rates and would actually reduce income taxes for 95% of Marylanders. Maryland currently has a flat income tax rate of 4.75% for all taxpayers and the Governor has proposed converting that into a progressive set of tax rates where lower-income families will pay less and wealthy residents will pay more through higher tax brackets of up to 6.5%. 

Progressive Maryland, a coalition of religious, labor, social service and civil rights organizations, praised the Governor's package. However, they argued it could be improved by eliminating tax loopholes used by the wealthy, such as deductions for yacht owners and country clubs, and applying the sales tax to services used disproportionately by the wealthy, including on legal and financial services. The group is urging residents to contact their legislators to have them improve the package.   

What both Michigan and Maryland reflect is that the often mindless revenue cutting during budget crises is being replaced with the recognition that restoring previous revenue cuts are needed to address the long-term investment needs of our states. This is highlighted by poll data in Maryland showing that 69% of the public was willing to invest more in needed spending "even if taxes are increased to pay for it," with large majorities supporting higher taxes on the wealthy to reach those revenue targets.

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Valuing Families

Call to Action - Kids Need You!

In response to one of the worst misguided presidential vetoes in recent memory, Families USA has launched a petition drive urging Congress to override President Bush's veto on Wednesday of the reauthorization and expansion of the State Children's Health Insurance Program, or SCHIP. Click here to sign the petition and see a new ad from Families USA that highlights the complete lack of compassion exhibited by President Bush in his veto of health care for millions of American children.

Mobilizing around SCHIP is a real opportunity to highlight the growing isolation of the right-wing when opposing solutions to the health care affordability crisis. As a new Democracy Corps poll finds, over 60% of voters feel that rising health care costs are a "very serious problem" in our economy -- in fact is it the largest problem identified by voters in the survey. As for support for the current proposal to expand SCHIP health coverage for children through increased taxes on cigarettes, not only do 90% of Democrats support the idea, 62% of independents support expanding the program, and even 27% of Republicans are for increased SCHIP coverage.

Whether it's signing the Families USA petition or calling your Congressperson, the fight over SCHIP is not only critical to our state childrens' health programs but it is a fight that will help define the battleground for the broader campaign to achieve affordable health care for all families.

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Valuing Families

BY Adam Thompson

Universal Cancer Screenings and Treatments - Good Policy, Good Politics

Illinois Governor Rod Blagojevich has expanded access to the state's Breast and Cervical Cancer Program to an additional 260,000 uninsured women, virtually achieving universal coverage in the state for care of breast and cervical cancer. The expansion will include a public awareness campaign and should entice hospitals to screen more uninsured women now that they will be assured payment. Advocates are calling the expansion "a coup for women in Illinois." 

The program will offer all uninsured women ages 35 to 64 free pelvic exams, pap tests, breast exams and mammograms. Those receiving a cancer diagnosis will qualify for coverage for as long as they need treatment. Prior to the Governor's expansion, the program was limited to uninsured women earning less than 250% of the poverty level, or $52,000 for a family of four.

All 50 states now have breast and cervical cancer prevention programs, which are provided through Medicaid. Illinois is believed to be the only state to make it available to all uninsured women.

Americans Express Broad Support for Free Cancer Screenings and Treatment:  The Herndon Alliance, a broad coalition of national and state health care advocacy groups and individuals, is working to build a national consensus that all U.S. residents deserve quality and affordable health care. Early work of the Alliance has focused on developing messages and ways to talk about health care reform that speak to basic American values, such as fairness, and get beyond barriers to reform, such as fear of change. 

While the debate around how to achieve universal health care rages, with deep divides between the Right and the Left, the Alliance found 85% of Americans support universal cancer screenings. When asked if cancer is found, respondents concluded that people should receive the treatment they need.

A new report by the Miliken instituteAn Unhealthy America: The Economic Impact of Chronic Disease, emphasizes the economic logic of such preventive programs. It projects that the United States will be losing $4 trillion per year in treatment costs and lost productivity by 2023 due to cancer, diabetes, heart disease, hypertension, stroke, mental disorders, and pulmonary conditions. However, almost $1.13 trillion annually could be saved by then if the country promotes better nutrition, exercise, early disease detection, and faster adoption of improved therapies.

Universal cancer screenings highlight the broader health and economic gains that could be achieved by even more access to comprehensive health care. If all Americans, and importantly the middle class, are guaranteed free cancer screenings and treatment, the leap towards health care for all quickly becomes an obvious next step.

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Research Roundup

The National Institute on Money in State Politics has released a series of new reports:

  • new report on independent expenditures details how they are playing an increasing role in state politics, with $115 million in independent expenditures spent in just five states - Alaska, California, Colorado, Maine and Washington - where data was readily available. 
  • Unfortunately, while 39 states have some statutory reporting requirements for state-level disclosure, only those five states make such information available in comprehensive and relevant formats. Another Institute report, Indecent Disclosure, highlights the disclosure law problems state-by-state and recommends how to fix them.
  • And in Closing the Gap: State Party Finances Four Years After BCRA, the Institute found that state political parties raised $454.6 million in 2006, a drop from the $569.4 million raised in the similar 2002 election cycle. Yet the top 10 largest individual donors gave $25 million collectively in 2006, more than the top 20 individual donors in 2002 who gave slightly less than $9 million.

In two landmark studies, Out of the Picture and Off the Dial, Free Press highlights the lack of female and minority ownership of radio and TV stations, with women owning less than 6% of such media and people of color owning only 7.2% of the broadcast stations.  

Since 2001, median wages in nearly half of all states have failed to keep pace with inflation, according to a new analysis by the Economic Policy Institute. Overall, national median wages have increased by only 0.2% per year, compared to 1.5% per year during the 1995 to 2000 period. See their state-by-state table of median wages as well.

Highlighting the way corporations abuse workers' rights by classifying them as "independent contractors," the East Bay Alliance for a Sustainable Economy has produced a report showing that the use of independent contracting of truck drivers at the Port of Oakland endangers public health and economic growth. The report highlights how the independent contracting system increases pollution, a direct cause of 1 in 5 West Oakland children having asthma, and recommends changing the system to both improve working conditions for drivers and the environment for community residents.

In Too Many Babies Born Before Their Time: The Growing Problem of Preterm Births, Kids Count finds that in 2004, one in eight babies in the United States was born preterm, or before the 37th week of pregnancy. Those half a million preterm infants born in 2004 are the highest number ever recorded, reflecting failures in early health interventions that could have reduced preterm births and helped avoid the developmental disadvantages that often accompany it.

In Eligible but Not Enrolled: How SCHIP Reauthorization Can Help, the Urban Institute highlights strategies to enroll more low-income children in Medicaid and SCHIP programs. 

In a new study, the Urban Institute also argues that, while governments provide vouchers for housing and child care to support low-income workers' participation in the workforce, such help is useless if rental units or child care slots are unavailable. Families also often face challenges in gathering the information needed to negotiate for services in the private marketplace, so the report highlights promising strategies from various states in tackling these challenges.

The Center for American Progress has produced a state-by-state breakdown of the costs of the Iraq War and how much taxpayers in each state are paying to keep the war going.

Please email us leads on good research at


MI & MD: Solving State Budget Crises with New Revenue

Michigan League of Human Services - Michigan's Ongoing Fiscal Crisis: Falling Tax Rates Drive Ballooning Deficits

Maryland Budget & Tax Institute - What You Should Know About Maryland's Budget Challenge

Progressive Maryland

Alliance for Tax Fairness - Maryland Surevey Results on Budget and Revenues

Universal Cancer Screenings and Treatments - Good Policy, Good Politics

Herndon Alliance

Herndon Alliance - Polling Summary

Illinois Breast and Cervical Cancer Program

CDC's National Breast and Cervical Cancer Early Detection Program - State Programs

CDC - Overview of State and National Programs Through the Breast and Cervical Cancer Prevention and Treatment Act of 2000

Eye on the Right

As mentioned above, the President kept his word and vetoed the State Children's Health Insurance Program (SCHIP) reauthorization bill. To understand just how out of touch the president is, take a look at the numbers:

  • The program currently covers 6 million needy kids. The reauthorization would add 4 million.
  • This is only the President's fourth veto and the first for budget reasons.
  • The vetoed 5-year expansion would cost the equivalent of only 3 months of U.S. activities in Iraq.
  • The amount of money in Bush's minuscule alternative proposal is burned through every 2 weeks of U.S. presence in Iraq.

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The Stateside Dispatch is written and edited by:

Nathan Newman, Policy Director
J. Mijin Cha, Policy Specialist
Adam Thompson, Policy Specialist
John Bacino, Communications Associate

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