Michigan’s economic and fiscal future hinges on adopting sustainable budgeting practices. Insights from other states show the tangible benefits of fiscal restraint, efficiency, and lower taxes. By examining how other states have managed their budgets, Michigan can learn valuable lessons in improving its fiscal health and thus secure a prosperous future.

In 2023, Americans for Tax Reform launched its Sustainable Budget Project. This project monitors state government spending and tracks which states have enacted “sustainable budgets.” The Sustainable Budget Project defines a sustainable budget as one that grows no more than a specific rate: the inflation rate plus population growth, as expressed as a percentage. This project is similar to Mackinac Center’s Sustainable Michigan Budget.

For comparison, Texas has focused on fiscal discipline and low taxes, creating a business-friendly environment that attracts investment. It has kept government spending in check, which fosters an environment conducive to economic growth. As a result, it projects a $21 billion surplus next year despite the recent large budget increase.

In contrast, California faces a significant economic challenge due to high taxes and heavy spending habits. With the state facing an upcoming budget deficit of at least $45 billion, Gov. Gavin Newsom has proposed painful spending cuts to various social programs. This development highlights the risks of unsustainable budgeting. California relies on volatile revenue sources (especially a progressive income tax with high rates) and has failed to implement spending discipline, leaving it in a precarious fiscal situation.

Other states, such as Alaska, Colorado, North Dakota, Oklahoma, Texas and Wyoming have kept spending growth below the rate of population growth plus inflation over the last decade. They’ve maintained lower taxes and enjoyed better economic health even though most of these depend partially on volatile oil and gas activity. These states have demonstrated that sustainable budgeting can lead to greater economic stability and improved quality of life for residents. Their commitment to fiscal discipline has allowed them to weather economic downturns more effectively and avoid severe budget shortfalls.

Implications for Michigan

Michigan's budget growth outpaces both inflation and population growth, placing a heavy burden on taxpayers. Officials can reduce this burden by adopting sustainable budgeting practices like those of successful states. This will support more economic growth and attract businesses. Sustainable budgeting can also enhance Michigan’s economic resilience, making it less susceptible to economic shocks and fiscal crises, which have historically burdened oil and gas states.

The benefits of sustainable budgeting extend beyond fiscal stability. By reducing unnecessary spending and lowering taxes, Michigan can increase disposable income for families, encourage consumer spending, and boost total economic activity. This can lead to more jobs, higher wages and improved living standards for all Michiganders.

To achieve sustainable budgeting, Michigan should implement strict budgetary controls, such as spending caps and mandatory budget reviews. Additionally, the state should focus on long-term fiscal and economic health by eliminating wasteful spending, increasing spending prudently and reducing tax burdens. Transparency and accountability in the budget process are also crucial for spending taxpayer money wisely.

Sustainable budgeting is not just about balancing the budget — it's about ensuring a brighter future for all Michiganders. By adopting best practices from other states, Michigan can become a model of fiscal discipline and economic vitality, providing a stable and prosperous environment for its residents and future generations.

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