How Big Is Michigan's Government, Really?

The Detroit News on Saturday published an article in which reporter Ron French compiled various indicators to suggest that Michigan state government is smaller now than at the start of this decade (“Michigan’s shrinking government”).

There are various ways to measure this, and one used by Mr. French was to compare total state spending in Fiscal Year 2008-2009 — the fiscal year just ended on Sept. 30 — to the year "2000." The article did not specify whether that meant fiscal Year 1999-2000 or calendar year 2000, so I called and asked. Mr. French told me the comparison was to FY 2000-2001, which only included three months of calendar year 2000.

This is one of many sources of confusion for those who would keep track of Michigan's state budget. In this case, getting the year right matters when adjusting the figures for inflation — are we talking cost of living increases since 2000 or since 2001?

Here are the correct figures when adjusted for inflation: Total state spending was $34.5 billion in the state fiscal year that began on Oct. 1, 1999. For the fiscal year that ended on Sept. 30, 2009, $44.5 billion was originally appropriated (the final number will be different due to additions of federal "stimulus" money and subtractions of state money during the year). That represents a nominal increase of 28.8 percent. Inflation as measured by the Consumer Price Index increased by 25.4 percent during the same period, so gross state spending during the decade actually rose a modest 3.4 percent.

Over the same period, state spending from state sources — not counting federal money — has fallen by a substantial amount when adjusted for inflation. This is not surprising given that Michigan's economy has also shrunk this decade — our state Gross Domestic Product is 3.3 percent smaller than it was in 2000, after adjusting for inflation.

Permission to reprint this blog post in whole or in part is hereby granted, provided that the author (or authors) and the Mackinac Center for Public Policy are properly cited.