On Tuesday afternoon, Michigan State Treasurer Nick Khouri addressed an audience of about 75 students, faculty and community members as part of the University of Michigan Center for Local, State, and Urban Policy lecture series, titled “Fiscal policy in Michigan: Past, present, and future”, to discuss the primary focuses of the state treasury moving forward.

Khouri, a University alum, was appointed state treasurer by Gov. Rick Snyder in April 2015 after working in the private sector as vice president of Corporate Affairs at DTE Energy in Detroit. His role as state treasurer involves collecting and investing state money, advising the governor on tax and revenue policy, collecting state taxes, overseeing state credit and ensuring local government financial health.

In his introduction of Khouri, Public Policy professor Barry Rabe touched on the unique contours of the past decade of Michigan economic history. 

“This is a state that has had good times and bad times over the past half-century and beyond,” Rabe said. “What an interesting decade we have been through, what an interesting time the Snyder years have been in the fiscal condition in the state of Michigan.”

Khouri began his talk by calling attention to the highlights of the current Michigan economy. As of January, state unemployment is at 4.7 percent, down from 14.6 percent during the recession in 2009. Personal income growth has outpaced the national rate, and Michigan has successfully diversified its employment base away from manufacturing and into sectors such as professional and business services. Khouri said now there are jobs available, the task at hand is adequately training employees to be efficient in those roles.

“It’s the real focus now of everybody,” Khouri said. “These jobs are available now, at least during this part of the cycle. How do we get the employees trained and ready to take the jobs that are available right now?”

While the state has mostly recovered to its position prior to the recession, it is experiencing a downward shift in its size and relative wealth compared to the rest of the nation.

“We’ve had to painfully, slowly adjust our budget and our fiscal policy towards this change in relative deterioration in the economy,” Khouri said.

Khouri gave an overview of the tax revenue, with over 85 percent generated from the property, income and state taxes. He noted that the tax burden on Michiganders has decreased, as Michigan has only the 30th highest taxes in the nation.

Before the final part of his talk in which he mentioned policy focus areas for the future, Khouri addressed the struggles of Michigan local governments, of which there are 1,800. He said both rural and urban areas alike are encountering economic challenges.

“When we talk about the fiscal health of local governments, the answer is it depends,” Khouri said. “It really does vary by geography, by size, by function. It’s not just urban areas. Some of the districts that are struggling the most are in the (Upper Peninsula).”

Among the issues facing local governments, Khouri mentioned the lack of diversity in their revenue sources, that they rely too heavily on property taxes. Another pressing issue is the unfunded liabilities of pensions and healthcare.

“I know there’s this question of justice, of what retirees need and deserve, that’s not what I’m talking about, although it is what I’m talking about,” Khouri said. “What I’m talking about is the unfunded liabilities continue to grow and (the local government’s) ability to service that is not growing at the same pace.”

As Khouri turned toward the future of the Michigan economy, he showed predictions of economic expansion, with the treasury’s general fund and school aid revenues rising.

He outlined objectives of sustaining current progress, avoiding yo-yo fiscal policy and preparing for next recession. These objectives necessitate addressing long-term spending needs while the economy is good, reforming the tax system to match the evolving economy and improving the fiscal health of local governments across Michigan.

He ended his talk with advice to the public policy students in the audience.

“You’re the next generation of policymakers,” Khouri said. “I think you’ll do fine. Just focus on the basics. Focus on the policy, not the politics. Take a longer-term view of what’s required and not just a short-term view.”

LSA sophomore Johnny Luo, who will be studying public policy at the Gerald R. Ford School of Public Policy next year, said he was motivated to come to the event for professional development, as well as his coursework in economic inequality. Luo said he thought  the new generation of policymakers would bring a fresh perspective to solving Michigan’s economic challenges.

“The thing (Khouri) talked about so many times was that we need new energy in our state policies and our state legislature,” Luo said. “I think that’s the way — some new idea or new ideologies.”

After his talk, Khouri fielded specific questions from a panel of graduate students enrolled in a public budgeting course. The students had collected submissions from the audience and via Twitter. When asked what he most wished the public understood about his domain, Khouri said he wished people understood the trade-offs that come with policy.

“Like life, broad public policy issues are always trade-offs,” Khouri said. “They’re never black and white. I think, without really thinking about it, I wish people understood that most of these typical questions are balancing acts between two goods, and it’s not good and bad.” 

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