In an interview with HUMAN EVENTS last week, Michigan Republican Gov. Rick Snyder spoke with vigor and in detail about his new budget, his plan for pension reform in his state and his vision of stemming the growing exodus of young people from the Great Lakes State upon completing their education.
But what is even more dramatic than the new governor’s agenda is the fact that Rick Snyder is governor at all. Although he’s been involved in numerous community activities in his hometown of Ann Arbor and is a past chairman of the board and chief executive office of the high-tech computer hardware company Gateway, the 52-year-old Snyder had neither held nor sought office before he decided to run for the state’s top job last year. In 2010, however, candidates without political resumes proved quite appealing. The University of Michigan graduate (who holds undergraduate and law degrees as well as a master’s degree in business administration) delivered a message of running the state like a business that resonated with primary voters and quickly won over many seasoned GOP activists.
“Rick called and came to see me three times to get my support,” recalled Stanley Grot, longtime GOP activist in Macomb County. “He came to talk to our Tea Party group, which has about 800 active members, and we all liked him and went to work for him. He was something new and different.” Republican voters agreed. In the primary last May, Snyder was the easy winner in a field that included the state attorney general, a veteran congressman, the Oakland County sheriff and a state senator. To those who derided him as a “nerd,” the Republican hopeful cheerfully agreed, but insisted he was “one tough nerd” who wouldn’t hesitate to tackle the Water Wonderland’s mounting fiscal problems. He not only defeated Lansing Mayor Virg Bernero, a liberal Democrat, with ease (58% of the vote), but also led Republicans to a sweep of all four statewide offices, majorities in both the state house and senate, and control of the state supreme court—the biggest GOP sweep in Michigan since 1966.
A sure sign that the new governor was going to do things differently from his predecessors came in January. Historically, the budget director unveils the governor’s budget proposal for the coming year, but Snyder chose to deliver the message in person.
“When you are talking about dealing with a $45 billion budget and a deficit of $1.5 billion, you don’t send someone else to do it!” he said.
In explaining his budget, Snyder stressed that it not only deals with the deficit without raising taxes, but also reduces various taxes by more than $700 million over a three-year period. As he put it, “It’s really a simple affair. We propose reducing our business tax and wiping out the second business tax that small businesses are required to pay. That’s right, small businesses pay two taxes here. Well, small businesses are also the largest source of job creation, and by getting rid of this tax we’re going to help them create more jobs.”
The Ire of State Employee Unions
Like fellow Republican Gov. Scott Walker in Wisconsin, Michigan’s Snyder has been in the throes of controversy with state employees’ unions over the future of their pensions.
To Snyder, the way the pensions are funded is a key reason for both Michigan’s deficit and the growing number of young people who seek employment elsewhere after earning their degrees. In his words, “the public retirement income is not included in the state tax base. If you are a retired state employee living in Michigan, you don’t pay taxes on your pension. That means that people in the private sector are paying twice as much to cover the public-sector pensions.”
The tax burden is shifting to younger wage-earners in private jobs, he said, “and that is a major reason so many young people are leaving Michigan. If one gets a bachelor’s degree and then goes on to get an advanced degree, the chances increase of a move out of the state. The more educated one is, the more likely you are to leave.”
The governor’s solution is a long-term structural shift in paying for state pensions. Under his plan (which is included in his budget), state employees who are 67 and older in 2012 will still collect their pensions without them being taxed by the state. Those who are 60 to 66 in 2012 will pay partial taxes on their pensions. Any employees who are 59 and younger and collecting a pension will be subject to the Michigan income tax like any other wage-earner in the state.
Addressing all inequities in Michigan’s current retirement system is Snyder’s goal in the long run. Eventually, he hopes to treat all retirement income the same, and to treat working and nonworking seniors the same.
In a state with 47,404 state employees (and nearly four times that many on county and local payrolls), Snyder’s changes struck some nerves hard. Almost to a person, union leaders have denounced the pension plan, and massive early retirement from state jobs is increasingly predicted for next year.
Yet, the Republican governor’s budget with the controversial pension reform has passed the state house and is awaiting action in the senate in a matter of days. Both chambers are firmly in Republican hands.
More Reagan and Kemp Than Milliken and Ford
In recalling the occasions when he volunteered for Republican candidates while growing up in Michigan, Rick Snyder mentioned campaigns by Republican Gov. (1978-’82) William Milliken—an unabashedly liberal GOPer who frequently locked horns with his state’s conservative Republicans. It wasn’t so much Milliken’s liberal ideology he admired, Snyder explained, “but that he would lay out an agenda in a string of major speeches in a year—a State of the State address, then a budget address, and then speeches on policy. I plan to do the same thing.”
He also mentioned Gerald Ford. By working on Ford’s campaign in 1976, then-high school senior Snyder got to attend the Republican National Convention in Kansas City at which then-President Ford edged out Ronald Reagan for the nomination.
“I liked Jerry Ford because he was a Michigander and, look, I got to go to the national convention as a senior in high school and learned a lot,” said Snyder, who spoke at the dedication of Ford’s statue in the U.S. Capitol days before our interview. “But please don’t get me wrong: I sure admire Reagan a lot.”
His youthful political activities notwithstanding, Snyder today is less like Milliken and Ford and much more like Reagan and the late Jack Kemp. A self-styled “policy guy” who clearly loves the details of possible major changes in the public policy agenda, the governor spoke of an “economic vitality incentive.” Under this plan (which is also contained in his budget), state revenue-sharing with municipalities would be continued, but now local governments would be required to demonstrate changes, such as more accountability and transparency, reduction of waste and assuming more responsibility for retirement plans and medical insurance for employees.
In a state where the cost of Medicaid is approaching $10 billion, Snyder would like to get a waiver from the Obama administration so his state can cap Medicaid payments and experiment with ways of reforming the system. “How to keep people from using the emergency room as their primary care giver,” is how he defines the goal.
Very much like Reagan in the 1960s, Michigan’s governor today is keen on recruiting people with private-sector backgrounds for his administration. He proudly noted that Steve Hilfinger of the high-powered Foley & Lardner law firm heads his commission to review and overhaul regulations that stymie business opportunity. Dan Wyant, head of the state Department of Environmental Quality, also comes from the private sector.
“And our new state treasurer is Andy Dillon, the former Democratic speaker of the house,” Snyder proudly told us, “and he also has a background in private equity.”
As he discussed policy and what he would like to do to with Medicaid and other problem areas, Snyder cautioned that “when you try to do too much at once, your efforts can get diffused. Right now, the budget is critical. And we’ve got to be doing economic gardening, not economic hunting. There’s lots of opportunity here in Michigan.”