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Moving Michigan Forward: Continuing Our Comeback

Presented by: John E. Nixon, CPA State Budget Director, Michigan Michigan Association of CPAs May 7, 2013

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

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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

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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 .Accomplishments Year 3: Looking forward • Maintain structural balance • Protect education and stabilize state agency budgets • Invest in critical infrastructure.

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

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 . ranked 50th in 2008 and 2009 • 2012 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.Michigan’s Economic Turnaround • GDP growth 6th best in nation in 2011.

7 -63.1 -112.0 48.0 -16. Bureau of Labor Statistics.3 51.S.9 -9. 2012-2015 estimates are 1/11/13 Consensus Forecast.6 -7.2015 72.Michigan’s Employment Expected to Increase in 2013 .2 -291. 1/25/13.8 -71.3 -58.0 36.3 -76. 7 .7 -105.6 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Michigan Wage and Salary Employment Year-Over-Year Change Consensus Forecast (In Thousands) Note: U.0 53.

1/25/13. 2013-2015.6% 2015 United States 7.S. Rate 15% 12% 9% 6% 3% 0% 2001 2005 2009 2013 Consensus Forecast Source: U. 1/11/13 Consensus Forecast. Bureau of Labor Statistics.1% 8 .Michigan’s Unemployment Rate Improving Faster than the U.S. 2015 Michigan 7.

6% -6.8% 2.S.0% 1.1% 3.6% 2.Michigan Personal Income Continuing Growth in 2013 .0% 2.0% 3.3% 4. 9 .4% 2. 1/25/13.3% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Michigan Personal Income Year-Over-Year Change Consensus Forecast Note: U.8% 2.6% 3. 2012-2015 estimates are 1/11/13 Consensus Forecast.7% 2.2015 5. Bureau of Economic Analysis.4% 4.5% 1.

000 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Sources: U.000 30.000 40.000 50.000 10. 1/11/13.000 20.Michigan Housing Starts Are Rebounding 60.S. Treasury Forecast 10 . Bureau of the Census & Treasury Forecast.

” 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 upgraded 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.

7 Billion Health and Human Services $22.1 Billion Education $15.9 Billion 12 .6 Billion Budget Stabilization/ Health Savings Fund $178 Million Jobs $6.1 Billion Environment $922 Million Government Services $2.3 Billion Total Gross: $50.Total FY 2014 Budget Recommendation Public Safety $3.

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 $14.1 Million 13 .4M 9% Education $187.7M 31% Total: $596.9M 2% Government Services $51.

measure and reward real results • Invest and save ― Short term and urgent ― Long term and important • Paying and lowering our bills ― Retirement  Michigan Public School Employees Retirement System  Michigan State Employee Retirement System ― Updating old.Budgeting Responsibly • Invest and save wisely ― Live within our means ― Prioritize to make a difference ― Ask for. outdated and worn assets 14 .

Investing in the Future • • • • • • • • Infrastructure Education Medicaid expansion Health improvements Jobs People Public safety Quality of life 15 .

rail. bridges. harbors • 16 . public transit.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.Driving the Economy Forward • • Invest $1.

Investing in Our Roads $25B Gap 17 Source: OEI. RMF – 07/27/12 .

1B from state) 18 .Creating a P-20 Educational System • More seamless system – Student growth – Careers or self-enrichment • Three tiers – Early childhood – K-12 – Higher education • Total $15B investment ($13.

625 • 2015 investment – adding $65M more – Creating an additional 18.000 new placements – Increased funding per slot from $3.Early Childhood – Major New Investment • $130M investment over the next two years ‒ More than double the 2011 investment • 2014 investment .$65M total – Creating 16.400 to $3.000 placements • Value added to all 19 .

100 Placements $239.100 Placements $174.3 M $0 FY10 FY11 FY12 FY13 FY14 Rec FY15 Rec Reflects State Appropriations and Number of Half-Day Preschool Placements 20 .100 Placements 28.000 66.7 M $98.900 Placements 30.3 M $109.000 $95.Investing in Our Children Early Preschool Funding Will Double by FY 2015 with $130M Investment over Two Years $250.3 M $50.3 M Appropriations (in thousands) $150.000 28.3 M $104.000 Placements $200.000 48.700 Placements 32.000 $100.

000 per pupil) • Continues performance and best practices funding. as well as technology grants • Supports online courses 21 .2B for K-12.5B of state funds.K-12: Continuing Focus on Student Growth • $13. including $11. an increase of $227M • Includes an equity payment to further close the foundation allowance funding gap ($24M to raise the lowest funded districts to $7.

000 $0 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 22 .000 $3.000 $1.000 $2.208 $7.357 $6. adult education funding.K-12 Per-pupil School Aid Appropriations .000 Michigan Public School Employees' Retirement System Best Practices/ Performance Funding All Other Categorical Funding Special Education Basic Operations NOTE: Does not include federal funding.000 $6.622 $6.FY 2010 to FY 2014 $8. or deposits made into the MPSERS reserve fund $5. preschool funding.000 $4.000 $7.971 $7.818 $6.

8 B Before Reform $13.1 B After Reform Before Reform After Reform 23 .200 per resident and more than $10.1 B $20 $10 $- $18.000 per student Total Estimated Liabilities for MPSERS Both Pension and Healthcare Total Estimated Liabilities for SERS Both Pension and Healthcare $50 $40 $ in Billions $50 $40 $30 $ in Billions $30 $20 $10 $- $46.7 B $31.Retirement Reforms • Long-term results: savings of $2.

• Savings from reforms equal $482M or $315 per K-12 student in FY14 • FY14 funding recommendation is an increase of $436M or $250 per K-12 student • These two actions translate into $918M or $565 per student in FY14 24 .

a $31.9M for performance formula funding – $1.8M increase for performance formula funding – $31.1M increase for MSU’s Ag Bio Research and Extension • Total funding of nearly $336M for community colleges – $5.Higher Education • Total funding of $1.4M increase – An increase of $24.4M for retirement costs – $1.4B for universities.1M for the Virtual Learning Collaborative • Capital investment challenges for FY 2015 25 .

more ER visits Simpler and better for families. providers and small business Reserve one-half of short-term savings to cover future costs and reduce federal risks 26 .Expanding Medicaid • • • • Work toward better care at lower cost to society Critical issue is having patient-centered medical home vs.

Cumulative Deposits into the Health Savings Fund Will Finance Medicaid Expansion for the Next 21 Years $700 $600 $500 $400 $300 $200 $100 $0 -$100 FY 2014 *in millions FY 2016 FY 2018 FY 2020 FY 2022 FY 2024 FY 2026 FY 2028 FY 2030 FY 2032 FY 2034 Cumulative Deposit into HSF General fund cost 27 .

000 kids $120.500 more children ― Additional 100.000 kids 186.0 $40.000 kids 285.0 $100.0 117.000 kids 440.6M to expand Healthy Kids Dental to reach 70.000 children in FY 2015 Healthy Kids Dental Program Has Increased Access to Dental Care for Michigan Children $140.0 $60.000 kids 80 counties * In millions $80.Making Dental Health a Priority • $11.0 610.0 $FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 Exec Exec 59 counties 61 counties 37 counties Rec Rec 28 .0 510.000 kids 78 counties 75 counties 65 counties $20.000 kids 336.

2M to continue and expand Pathways to Potential Currently in 124 public schools ‒ Detroit ‒ Flint ‒ Pontiac ‒ Saginaw 29 • .Improved Services to People • Paving the path to independence ‒ $6.

Honoring Our Veterans • $8.6M for a new innovative Veterans’ Service Delivery Initiative ‒ Create a new agency to focus directly on veterans’ services • 600.000 to add an additional five qualified service officers to connect veterans with services 30 .

5M for blight elimination and $4M for “Good Neighbor” property maintenance 31 .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.

Long-term Savings • • • • • One-time surplus funds Important for Michigan’s ratings Rainy Day Fund Michigan Health Savings Fund Disaster and Emergency Contingency Fund 32 .

2 2010 $2.3 $0.2 $1.000 Millions $800 $580.1 2007 Fiscal Year $2.0 2004 2005 $2.0 $2.1 $365.264.History of the BSF The Budget Stabilization Fund (BSF) peaked at $1.1 $600 $400 $200 $145.2 2009 $2.2 $81.4 $1. $1.400 $1.2 2011 2012 2013 2014 Projected Projected $0 2000 2001 2002 2003 33 .200 $994. Michigan has started to rebuild the BSF balance in FY 2012 and projects that the balance will be approximately $580 million by the end of FY 2014.3 billion in FY 2000 but was quickly depleted.2 2008 $2.0 2006 $2.1 $505.

Questions? 34 .Thank you.

He was also one of Government Technology Magazine’s Top 25 Doers. Nixon is a Certified Public Accountant. Nixon holds a BS degree in Corporate Finance from Brigham Young University and an MBA with an emphasis in Information Technology from the University of Utah. Reporting directly to Governor Snyder. he is responsible for overseeing the state budget. with the vision of making the State of Michigan one of the most innovative and responsive governments in the world. He was named Public Official of the Year by Governing Magazine in 2012. Nixon heads an agency of 2. leading the department’s mission of providing vital administrative and technology services to enable Michigan’s reinvention. three boys and three girls.700 employees. . Management and Budget (DTMB). He served as President of the National Association of State Budget Officers (NASBO) in 2010. where he graduated as a member of the Phi Kappa Phi and Beta Sigma Honors Societies. and the administrative functions of state government. Nixon. CPA State Budget Director Director. having previously served as Utah’s budget director for Governors Jon Huntsman and Gary Herbert.John E. government technology. Nixon and his wife DeAnn have six children. Michigan Department of Technology. Dreamers and Drivers in 2012. Management and Budget John Nixon serves as the State Budget Director and Director of the Michigan Department of Technology.