Praying for structural change

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About 18 months back, Ann Arbor's Mayor Hieftje held a session of his public policy class entitled "Is Ann Arbor overrated?", with various blogger guest discussants. He commented that the cities of Michigan are lined up and running towards a cliff of fiscal crisis. Yes, all of them - Ann Arbor's more or less bringing up the rear, but it's running the same direction as all the rest. Some cities have already gone over - Flint, Highland Park, Hamtramck - and have survived the fall with various degrees of injury. Detroit's just a matter of time, and not much of it. But many people are hoping that Ypsilanti will serve as a bellwhether of Michigan's fiscal problems and a catalyst to change, as Ypsi is recognized across the state as being much more well-run than its predecessor's into crisis. When well-run cities start going over the brink, this theory states, people will finally realize that something's broken, and that it's not just Flint. I've since heard basically this same view echoed by a number of other regional and State leaders - when Ypsi goes, that's when our State can be expected to decide there might be a problem with our municipal structure. Thanks, guys. We love you too.

At any rate, it's once again time for Ann Arbor's biennial budget process, and the news is bleak. If Ann Arbor's bringing up the rear of the pack, the pack's a lot tighter than I'd thought. (Granted, Pfizer's departure is a new factor - previous estimates of A2's finances didn't include estimates of the kind of catastrophic plant closing that has become de rigeur for Michigan's more classic industrial cities.) Here's just the most recent indicator, from today's A2 News - City retiree health care bill growing.

I'm surprised the headline is so calm, considering the lede:

Backed into a corner by a looming retiree health care bill, Ann Arbor city officials say their only options may be mass layoffs, seeking a property tax increase or borrowing money by selling bonds.

According to actuary reports, the city faces a projected $50 million deficit over the next 10 years for pension and retiree health care costs that will have to come out of the city's general fund.

Tom Crawford, the city's chief financial officer, said another potential $20 million would have to come out of operating expenses to continue putting money into the retiree health care fund the city started about nine years ago.

None of the solutions I've heard mentioned are all that great.

  • Mass layoffs? I seem to recall that Ann Arbor's already cut its workforce by 20% or so in the last 5 years alone. Obviously, that hasn't fixed the problem.

  • A retiree health care property tax? "[C]city officials say it's unlikely voters would support another tax. The city already levies a 2.0-mill property tax to help pay for its employee benefits."
  • Issue $100m in bonds to cover the liability and hope the bond interest is enough? Hmmm...
  • Engage in union busting? "City Administrator Roger Fraser said three of the city's eight unions have agreed to cost-sharing for health care that will carry over into retirement," but will that really be enough? I've certainly heard outright union-busting prescribed for all the ills of various cities and school districts, and mentioned as a possible advantage of receivership - but I also know enough labor history (besides coming from and marrying into union families) that I can't condone that solution.

This is all, of course, a familiar story. With the Detroit News recently reporting that GM's health care costs are expected to hit $2,000 per vehicle in the upcoming years, "get the unions!" has become a pretty common refrain. Personally, I'd prefer a solution that would reduce our highest-in-the-world-as-share-of-GDP health care costs while not involving a further dismantling of the middle class. Considering how hard it was to get where we are today (see "labor history", supra), it would be a shame to just shrug and give it all up unquestioningly, dismissing as unacceptable solutions shown to work, just because "that's not the way we do things."

(In related topics, consider the EU-wide push to dramatically increase fuel-efficiency, already 30% better than Big 3's. We insist that it can't be done, that trying would create our demise at the hands of overseas manufacturers, while failing to realize that they're outperforming us because they've already done it. Whoops.)

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I was planning to post on

I was planning to post on energy issues, the auto industry and Representative Dingell, especially considering how far behind I am on those topics lately - but the News brought the health care issue to the fore instead, allowing me to talk about the Big 3 and cities at the same time.

I also considered a title of "preying for structural change", considering the sacrificial lamb approach that Hieftje's metaphor communicates. Ah, these moments of second-guessing!

Not that I'm pessimistic, oh no!

This post was called "apocalyptic" last night IRL - which I don't mean it to be. Nor "fatalistic" nor "nihilistic" nor anything of the sort. People are intelligent and creative, and we'll tear down the things that don't work and use their parts as scaffolding to build new things that do - but I don't think that'll happen until enough people decide that we're not going to fix our problems by tinkering at the last 2%. We've got to unwind further than last year's legislation, the most recent election, last quarter's market performance, and find the things buried 10, 20, 50 years ago that need to be excavated and fixed. If your car runs out of oil and the engine seizes up, the fix is going to be a lot harder and more involved than replacing the windshield wipers.

As far as prescriptive advice goes, I've not got a lot of detail. I can tell you that our current health care "system" causes problems for everyone from local government to large corporations to independent businesses, and that I think a universal health care system of some sort is necessary, fairly soon, if we want to maintain anything resembling our Fordist quality of life, social mobility, and sense of human decency, but I'm not enough of a health care policy expert to tell you how to structure the thing. But just because you and I aren't experts on the details, doesn't mean we can't discuss the concept.

Speaking of the last 2%

Listening to NPR this morning, heard Granholm talking about the projected $3Bln shortfall, $2Bln of which is from the repeal of the SBT. Last one across the state line, turn out the lights.

Last one...

...won't be Comerica, apparently And after all that the Tigers did for them last season! Tsk, tsk.

Once more with feeling - recruiting big corps is not the key to economic development. Capital moves, and it can move away every bit as easily as it came.