Change is Coming to Lansing

"If you want something different, don't keep doing things the same way," was how Doug Rothwell put it at the December 13 Summit of the Center for Michigan and the Business Leaders for Michigan. This was on the same day that Rothwell was named to be the new chair of the Michigan Economic Development Corporation (MEDC) by Governor-Elect Rick Snyder and outgoing Governor Jennifer Granholm who took the unprecedented step of jointly appointing a mostly new board to run MEDC. I was fortunate to be at the Summit, and I came away inspired and a little anxious after Rick Snyder spoke to the audience. Change is coming to Lansing, and the implications for elected officials and engaged citizens are profound.

"We are going to be bold" said the new Governor, and while he recognized that turning around the economy of Michigan will require a marathon of persistence, "our sprint will be at the beginning, not the end of the race." I have known Rick Snyder for several years now, and while he has a reputation of being cool and cerebral (i.e. a nerd), he was more fired up and passionate in this speech than I have ever seen him. "Get ready" he said, "it is time to stand up." While his speech was short on specifics, the day was filled with numerous speakers, and here are some things I think we need to prepare for:

Jobs and Economic Development were the #1 issue on everyone's mind. A first step was the remaking of the MEDC, and the Governor-elect and several Republican speakers stressed that government does not create jobs. The Michigan Business Tax (MBT) will be reformed in significant ways, but it also sounds like that specific tax incentives and other industry-targetted economic development efforts will be abandoned, or at least de-emphasized. Doug Rothwell noted that Michigan has the 48^th most burdensome business income tax among states. While he said that cutting taxes is not a long-term economic development strategy, in the short term state government has limited options to spur new private investment quickly. And, a big cut in business taxes would also get Michigan international attention because it is unexpected.

A business location specialist, Ron Pallina, who is author of a new book, Selling out a Superpower, said "We need to understand that we are competing with other nations. Companies say, 'we want to stay in US, but for us to stay here we need the least cost environment.' Today business location is a case of economic survival." His top three recommendations for Michigan: lower corporate taxes, create a right-to-work state, and foster more cohesion in the economic development team of elected officials, MEDC, and local economic development teams. "Michigan is not as well coordinated or speedy in its response to the need of employers."

Doug Rothwell also called for state investment in business incubators: "We need entrepreneurialism to grow our economy, but it takes time."

Budget Reforms. Michigan faces a $1.5 billion structural budget deficit in the coming year, and there will be short-term pain in addressing it. No one talked specifics, but I fear for the impacts on local revenue sharing which represents 25% of the City of Owosso's revenues. A lot of attention was given to the cost of public employees. This is a particular challenge for local governments, where employee compensation represents a majority of their costs; for the state, labor costs are only about 10% of the budget. Legacy costs for retired workers are also a looming challenge that could "eat up the entire stream of new revenues" according to Jeff Guilfoyle of the Citizens Research Council. There are $50 billion in unfunded pension and health commitments in the State, which is equivalent to $5,000 for every Michigan resident.

Solutions for budget reforms centered around multi-year budgeting and shared services. Robert Daddow of Oakland County advocates for the State to go to a multi-year budget. This will provide more stability, certainty, and understanding, especially to local governments and school districts. Oakland County has a three year budget. It gives local leaders more time to realize savings and solve problems; it spurs long-term thinking and avoids one-time budget fixes and gimmicks. Also, he stressed the importance of local governments to provide timely accounting reports to board and the public on a monthly, quarterly, and annual basis. This year Owosso started providing detailed budget reports on a monthly basis; our budget however is an annual one.

Jack Poll, Mayor of Wyoming, the second largest city in Kent County, stated his belief that local governments can achieve cost savings and efficiencies through shared services. He cited the opportunities and challenges with doing this around firefighting services in Kent County. The primary stumbling block is reaching agreement on the desired, or acceptable, level of service. "We need an effective model and standard to measure ourselves against," he said in asking for the State to help facilitate service sharing. "We need to get the legislature to clear the decks to allow for inter-municipal cooperation."

Education. Mike Flanagan, Superintendent of Public Instruction for the State of Michigan, believes that local school districts should share services too. He does not see a need for the consolidation of local districts, but recommends that non-instructional services such as transportation be delivered by intermediate service districts. He also suggested putting in place statewide health insurance, benefits, and a salary schedule. He said that these changes would allow local boards and administration to focus on student achievement, rather than on labor issues and the delivery of services.

Beyond this discussion, there was little attention given to K-12 education. Rather, there were several calls for increased investment in early childhood education, which provides significant long-term benefits for kids. For every dollar invested in early childhood education, $17 will be returned in lower services and increased revenues. Higher education was also touted. John Austin of the Brookings Institute reported that Michigan is 50^th in the relative share of state budget allocations to higher education. He recommended that we leverage our world-class institutions for economic growth, citing the positive examples of the Research Triangle in North Carolina and Austin, Texas. "Universities are engines for local economic development, the growth of the state, and our global competitiveness."

Place-Making. John Austin also called for investments in the quality of life in Michigan. He noted that the growing regions of the country have world-class cities with culture, good transportation infrastructure, and a talented workforce . He also called for investments in our natural assets as a way to retain and attract an educated workforce: "Michigan is a beautiful state, but the beaches have got to be clean and the parks need to be open; Colorado has had great influx of talented people because of its natural resources. Our youth, our college graduates want to be part of sustainable communities and work in green industries; they do not perceive Michigan as a place for this – in fact, we have been antagonistic."

Bi-Partisanship. The day ended with a call for cooperation and action. Democratic State Senator John Gleason said that it was "time to put blame aside. Now is a unique opportunity for the State of Michigan. We have been too partisan in the Legislature. We cannot put forth our best effort because of the peripheral powers and parochial interests." Republican Jase Bolger, the new Speaker of the House, said that "our problems are too profound to let partisanship get in the way." Governor-elect Rick Snyder called all legislators "my partners" after being thanked by the Democrats for his efforts to reach out to them.

The next Governor also stressed that the reform efforts were not just about government. "We all need to work together," he said. And Phil Power, the visionary force behind the Center for Michigan, called on us to be "all in for Michigan." Given these strong statements, the seriousness of the problems before us, and the passionate commitment of Governor-elect Rick Snyder, I anticipate some radical changes in government in the year ahead. Whatever our line of work or effort, private or public, we need to be clear about our own mission and look for ways to move forward with new partners. It is said that the Chinese character for crisis is the combination of chaos and opportunity. I think there will be lots of both.