Here's a plan to balance state budget

September 21, 2009
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I’ve written an open letter to the governor and the Michigan Legislature.

Obviously the only way to eliminate a budget deficit without an increase in tax revenue is to reduce costs. The misconception, though, is that costs can only be reduced by cutting services and payroll costs. My firm specializes in reducing what our clients pay to their vendors, without reducing the services that those vendors provide. And our compensation is based purely on a percentage of what our clients save. Therefore, we’d better be able to put our money where our mouth is.

Being a long-time resident of Michigan, I have a vested interest in Michigan having a balanced budget, without increasing the tax base and without reducing the services the state provides to its citizens. If I was responsible for a balanced state budget, I would immediately implement the following action plan.

Depending on the type of service being provided, as well as my knowledge of the marketplace, I would notify all vendors to the state (goods and services) that if they would like to remain on the approved vendor list the next time their contract goes out to bid, then they must immediately agree to price reductions ranging between 5 percent to 20 percent off their current contract price. (The actual price reduction request would be based on my knowledge and experience of the market for those particular goods and services.) 

Should vendors not accept the required price reduction, then the state would continue to honor the current contract pricing, but the vendor would be removed from the approved vendor list for all future bidding. Any exceptions would have to be approved by a special legislative board that had very restrictive authority and very specific guidelines. The list of black-listed vendors would be kept up-to-date on the Internet for all to see.

The above program could be implemented within a very short period of time (less than six weeks in most cases), and the financial impact would be felt instantaneously. 

These unusual times call for bold and decisive actions. Increasing taxes to close the gap will only serve to drive more businesses and individuals from our state, which in turn will reduce the tax base and increase the deficit further.

Michael Parry is president of Parry, Murphy and Associates in Alto.

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