MICHIGAN: Bow Tie & Black Eye

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Minutes before Michigan's Republican-controlled state senate was due to vote last week on Democratic Governor Gerhard Mennen Williams' latest plan to ease the state's financial troubles, the state treasurer sent each senator a statement of Michigan's obligations and cash in hand. Its net: Michigan, in terms of its general fund, was broke; by month's end there would be no money for 20,000 welfare cases, by May 7 no salaries for state employees, university faculty members, or for the legislators themselves.

The point: Michigan Republicans, who have had a field day blaming "Soapy" Williams—and his powerful political ally, U.A.W. President Walter Reuther—for leading the state to bankruptcy, had an urgent responsibility to act fast if they did not want to be blamed themselves.

Borrowing Trouble. Much of Michigan's financial trouble did indeed lie far, far beyond Soapy Williams in the state's dusty, archaic constitutional tax structure. Michigan, the nation's twelfth wealthiest state in terms of per capita income, collects about $1 billion in state taxes. But five-sixths of the revenues from the 3% sales tax—biggest income source—must be turned back to city and town governments and school districts. All gasoline tax revenue must be spent on the highways. Result: the state must meet costs of state government, the state universities, the state police, the state mental health program, the state's unexpectedly high unemployment welfare payments (current unemployment: 340,000, or 11.5% of the work force) out of a general fund of little more than one-third of total revenue. The recession undercut expected revenues by $43 million.

Moreover, the state must also labor under an astonishingly low constitutional debt limit of $250,000—tantamount to no borrowing power in its own name.

Soapy Storm. Last February, Soapy Williams started a hold-down on nonessential state expenditures, asked for and got a bail-out of $30 million in taxes paid three months in advance by his old whipping boys, the corporations. In the state legislature. Democrats and Republicans began talking about "the need for compromise.'' But as the weeks went by, 1) the Republicans tried to get a 1% increase in sales taxes, and the Democrats balked; 2) the Democrats tried to hike the debt limit to $50 million, and the Republicans balked. Last week, even though the evenly divided house (55 Republicans, 55 Democrats) finally okayed a Soapy plan to mortgage the state's $50 million veterans' trust fund to raise ready cash, the G.O.P.-run state senate turned it down.

At that point, Soapy Williams tore off the kind of statement that has become the bane of 1) his friends, 2) his own presidential hopes, and 3) his state. The Republicans, he stormed, had voted for "payless paydays . . . cutting off welfare funds . . . the destruction of our universities." Old Guard Republicans, who engineered the senate defeat, were indeed rather pleased at the prospect of once popular Democrat Williams standing before the nation as a flat-broke Governor. But responsible figures in business, labor and press were getting increasingly concerned that, in all the wild swinging, Michigan was getting a black eye that would not soon heal.