50 ideas to fix Michigan

Stop mortgaging tobacco cash

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Stop mortgaging tobacco cash

Idea 32: Stop stealing from future taxpayers by mortgaging the tobacco lawsuit settlement money.

Why: Lansing has a created a borrow-and-spend problem. In 2005, the Legislature and governor passed a law that permitted $875 million in deficit spending through 2008, with more possibly going forward. The law creating the 21st Century Jobs Fund business subsidy declared that the 1998 tobacco lawsuit settlement revenue stream is an asset that can be sold. This is done by borrowing against it. The Legislature then borrowed $400 million in an attempt to diversify Michigan's economy by subsidizing high-tech and other companies. In June 2007, it borrowed another $415 million (nearly $300 million annually through 2025) to avoid budget cuts. In 2008, it authorized another $60 million in debt to fund the "Pure Michigan" and related public relations campaigns.

Benefits: Those three trips to the tobacco lawsuit loan window are responsible for about $80 million in annual debt service payments. That money is not available for government services, including revenue sharing for communities, college scholarships and certain Medicaid programs. Stopping this practice would free up money for higher budget priorities.

How: The best solution might be a ballot initiative to remove any ambiguity in the state constitution's balanced budget provisions. Publicizing this practice might shame lawmakers into stopping it.

Obstacles: Lawmakers prefer to spend but fear asking current voters to pay more, thinking it is better to stiff future taxpayers.

Source: Mackinac Center for Public Policy