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Moving Michigan Forward: Continuing Our Comeback

Moving Michigan Forward: Continuing Our Comeback. Presented by: John E. Nixon, CPA State Budget Director, Michigan State Association of Accountants, Auditors and Business Administrators April 24, 2013. Where We Started. Perpetual $1.5B deficit Uncapped liabilities Job killing tax system

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Moving Michigan Forward: Continuing Our Comeback

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  1. Moving Michigan Forward:Continuing Our Comeback Presented by: John E. Nixon, CPA State Budget Director, Michigan State Association of Accountants, Auditors and Business Administrators April 24, 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 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; 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 2013 - 2015 Michigan Wage and Salary Employment Year-Over-Year Change (In Thousands) Consensus Forecast 7 Note: U.S. Bureau of Labor Statistics. 2012-2015 estimates are 1/11/13 Consensus Forecast. 1/25/13.

  8. Michigan’s Unemployment Rate Improving Faster Than the U.S. Rate 2015 Michigan 7.6% 2015 United States 7.1% Consensus Forecast Source: U.S. Bureau of Labor Statistics. 2013-2015, 1/11/13 Consensus Forecast. 1/25/13.

  9. Michigan Personal Income Continuing Growth in 2013 - 2015 Michigan Personal Income Year-Over-Year Change Consensus Forecast 9 Note: U.S. Bureau of Economic Analysis. 2012-2015 estimates are 1/11/13 Consensus Forecast. 1/25/13.

  10. Michigan Housing Starts are Rebounding Treasury Forecast Sources: U.S. Bureau of the Census & Treasury Forecast. 1/11/13.

  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.” 11

  12. Investing in the Future • Infrastructure • Education • Medicaid expansion • Health improvements • Jobs • People • Public safety • Quality of life 12

  13. 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 13

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

  15. 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 ($13.1B from State) 15

  16. Early Childhood – Major New Investment • $130M investment over the next two years • More than double the 2011 investment • 2014 Investment - $65M total • Creating 16,000 new placements • Increasing funding per slot from $3,400 to $3,625 • 2015 Investment – adding another $65M more • Creating an additional 18,000 placements • Value added to all 16

  17. Investing in Our Children Early 17

  18. K-12: Continuing Focus on Student Growth • $13.2B for K-12, including $11.5B of state funds, 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 per pupil) • Continues performance and best practices funding, as well as technology grants • Supports online courses 18

  19. K-12 Per Pupil School Aid Appropriations - FY 2010 to FY 2014

  20. Savings from reforms equals $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

  21. Higher Education • Total funding of $1.4B for universities, a $31.4M increase • An increase of $24.9M for performance formula funding • $1.1M increase for MSU’s Ag Bio Research and Extension • Total funding of nearly $336M for community colleges • $5.8M increase for performance formula funding • $31.4M for retirement costs • $1.1M for the Virtual Learning Collaborative • Capital investment challenges for FY 2015 21

  22. Expanding Medicaid • Work toward better care at lower cost to society • Critical issue is having patient centered medical home vs. 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 22

  23. Cumulative Deposits into the Health Savings Fund will Finance Medicaid Expansion for the Next 21 Years 23

  24. Making Dental Health a Priority • $11.6M to expand Healthy Kids Dental to reach 70,500 more children • Additional 100,000 children in FY 2015 610,000 kids 510,000 kids 80 counties 78 counties 336,000 kids * In millions 75 counties 65 counties 24

  25. 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 25

  26. Long-term Savings • One-time, surplus funds • Important for Michigan’s ratings • Rainy Day Fund • Michigan Health Savings Fund • Disaster and Emergency Contingency Fund 26

  27. History of the BSF 27

  28. Other Items of Interest • MAIN replacement • IT Investment Fund • eProcurement 28

  29. Why Replace MAIN? • System nearly 20 years old • Processes more than 17 million transactions a year • More than 4,200 system users • 4,400 batch and online programs • 2.4 million lines of code • Improved user friendliness • We will be better equipped to implement system enhancements quickly and affordably • Improved efficiency and effectiveness • Enhanced transparency and data analysis • Reduced costs and complexity 29

  30. MAIN Replacement • Replace MAIN with state-of-the-art technology • MAIN leaders • Executive Sponsor: Director Nixon • Governing Board Co-Chairs: Nancy Duncan and David Behen • Project Executives: Mike Moody and Lynn Draschil • Board Members to be named shortly • MAIN consulting firm • Information Services Group Public Sector • Assisting state with gathering requirement and developing RFP for software and integration services • Expect to issue RFP in October 2013

  31. IT Investment Fund • $47M – Ongoing IT funding to replace legacy systems and make enterprise-wide technology improvements beginning FY13 • 18 major projects currently underway • MAIN replacement • Sales, Use and Withholdings • Implementation of ICT Roadmap • Eight Transformational Change Projects • Cyber Initiative: Cyber Range • Opened Nov. 2012 • Training/testing facility with public/private partners 31

  32. 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 32

  33. Thank you. Questions? 33

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