LANSING - The massive gap of revenues vs. income to fund operations of Michigan's government, said Lynn Jondahl, is "incredible - we have a structural deficit in Michigan that will continue to grow."

Jondahl, executive director of a public policy group called the Michigan Prospect, spoke to delegates at the Michigan Building and Construction Trades Council Legislative Conference on March 1.

There was no partisanship or call for tax increases - just an eye-opening, blow-by-blow look at just how much Michigan's budget structure is out of alignment. Jondahl cited research by Paul Rozycki, political science professor at Mott Community College in Flint.

Here are a few of the gory details:

• In 2005, according to the House Fiscal Agency, Michigan is expected to receive $7.82 billion in tax revenues, but $1 billion in spending is expected to be cut compared to 2004. In 2000, the state spent $9.78 billion.
• Over the next 10 years, based on current revenues and expenditures, Michigan can expect its deficit to grow by an average of $400 million per year - for a total of $4 billion.
• Since 1990, Michigan's personal income (adjusted for inflation) has risen by about 27%.
  At the same time the state's tax revenue used to support General Fund programs has fallen by over 22%, according to the League for Human Services.
• When inflation is taken into effect, Michigan is currently operating on general fund revenues that are below the levels spent in 1972. In real dollars, Michigan is spending less than it did in 1997.
• The effects of the revenue shortfall have been "dramatic," Rozycki said in his report. He said the state workforce, which peaked at 70,000 in 1980, is currently at about 55,000, a level it hasn't seen since the mid-1970s.
• Where does the state's income come from? The income tax is the largest single revenue source for the general fund and generated nearly 50% of the estimated general fund revenues in FY 2004-2005 - about $3.99 billion. Income tax cuts will reduce revenues by more than $800 million per year now that they are fully in place.

The Michigan League for Human Services estimates that total revenue lost due to the income tax reductions has been almost $2.5 billion from 1999 to 2004.

Rozycki's report said the second major revenue source for the general fund is the Single Business Tax (SBT) which produces about 25% of general revenue funds - almost $2 billion. The Single Business Tax, which has been in effect since 1975, modified or replaced 11 separate business-related taxes. The SBT is a tax levied on total compensation paid to labor and capital by business, not on profits.

It is a form of value-added tax meant to tax every step in the production of an item.

In 1999, the Michigan legislature supported Gov. Engler's proposal by which the SBT (then levied at the rate of 2.3%) was scheduled to be reduced by .1% per year and was to be phased out gradually over the next 23 years. Due to state budget deficits, however, the phase-out has been halted temporarily because the state's "rainy-day fund" fell below $250 million.

• Cutting spending is not without other costs. An analysis last year by the W. E. Upjohn Institute for Employment Research indicates that a $1 billion in reduced spending would result in the loss of another 23,000 jobs statewide, with about half of the loss occurring in the public sector and the rest in the private sector.

"Ten years ago the state addressed some major tax concerns with Proposal A," Rozycki wrote, "which shifted the tax burden from the property tax to a greater reliance on the sales tax.

"It may be time to revisit the ever-changing needs of our state once again and review our overall tax system. At the very least Michigan's tax system needs to take into account the changing nature of our economy. We need to rely less on the manufacturing sector and rely more on the service economy as the state shifts its economic focus."

Jondahl concluded: "We really need to worry about tax revenues. When we cut spending, we cut jobs. There are consequences to everything we do. Are we willing to increasingly put our workers out of business in both the public and private sectors?"