Business chief: Five ways to boost Michigan’s economic growth

economic growth

Doug Rothwell is president and CEO of Business Leaders for Michigan

 

LANSING — Doug Rothwell says Michigan still has a long way to go to become a top-10 state economically, despite recent improvements.

“Every time the nation gets a cold, we get pneumonia,” said Rothwell, president and CEO of Business Leaders for Michigan. “We came out of this deep trough in the recession of the last decade, and so the numbers look relatively good because you’re coming off such a low base. But if you look at where we stand in absolute terms, we’re still average to slightly below average on most of the metrics that you would find most important for economic growth.”

The group he leads, which includes the CEOs of many of the state’s largest companies, has set out five priorities to help the state improve:

  • Long-term state fiscal health, including dealing with unfunded retirement liabilities, preventing local financial emergencies and allowing Snyder-era financial practices to continue into the future

  • Creating more economic development tools, including business incentives

  • Investing in infrastructure

  • Building Michigan’s talent pool. BLM said it will commission studies this year looking at best practices from other states regarding K-12 education and how job training is delivered for employers. Findings could be ready in early 2018.

  • Developing the next to-do list to support Michigan’s burgeoning mobility industry.

Bridge Magazine reporter Lindsay VanHulle recently sat down with Rothwell to discuss the organization’s top policy priorities. [Disclosure: Rothwell is a member of the steering committee for The Center for Michigan, of which Bridge Magazine is a part] Below is a condensed version of their interview.

Gov. Rick Snyder has created a task force to look at possible legislative solutions to municipal underfunding of pensions and retiree health care. Obligations are estimated to top $10 billion statewide. How do we tackle this issue?

Let’s preserve benefits. Let’s not talk about this as dealing with unfunded liabilities, because we sound like bean counters. And you need to be sensitive to people in all of this.

You’ve said that the state’s economic development incentives don’t go far enough to help large corporate or community development projects. Why the effort now to create new incentives?

We feel there’s a real opportunity right now, kind of regardless of what you think about what’s going on in Washington. There is clearly a move to repatriate more jobs back to the U.S., and that’s going to present an opportunity for states. ... We know that our tools for larger projects are not as effective, and so there’s legislation that would create a new business incentive called Good Jobs for Michigan (that would capture some income taxes). It was introduced last year (and will be) reintroduced again this year in March. There’s also the brownfield redevelopment package (that passed last week in the Senate).

It’s going to be tough. In this Legislature, there’s a lot of folks that have concerns about the role of economic development. We get that, certainly with the tax credits that just are still out there. ... This program is needed for us to be able to get new revenue coming into the state that wouldn’t be here but for this incentive.

It’s interesting that legislation to create new incentives is being led by Republican lawmakers. The GOP often has come out against incentives for ideological or philosophical reasons.

We’ve done an analysis of who the states are that are competing the most against us, and they’re led by Republican governors with Republican legislatures. ... Our point to them is, look, this is not — outside of Michigan, this is not seen as a partisan issue.

Are caps and sunset clauses reasonable when considering incentives?

We’re fine with that. ... We think that the program will prove its worth, and that if it doesn’t, then it ought to be sunsetted. But if it proves its worth, I think there’s going to be a lot of support for extending it for as long as it needs to be.

There’s no cost here. If you don’t get the jobs, the state’s not out any money at all. If you do get the jobs, you’re actually still ahead because we’re only capturing one revenue source: personal income taxes.

You said you’re happy to see Snyder set aside money in his 2018 budget proposal as a “down payment” to invest in Michigan’s infrastructure. Aside from that, what other investments are needed?

He knows — we know — it needs to be more. How do you do it? Well, we’d ideally like to see user fees increased. That means gas taxes, for example. The likelihood of that is probably very slim given they just did this (in 2015), but maybe if the federal government comes up with a big infrastructure proposal, maybe we can revisit that. ... We’re still feeling like there’s some possibility of progress on infrastructure. I think the big question is: How far does Washington go in terms of how much progress we can make?

That is the big unknown.

But we should be ready. We should be having those conversations and (be) ready so that when Washington moves, we can move fast. I’m sure that whatever they do is going to require some state match. They’re not just going to give money out. And we really don’t have that match available right now. I mean, again, what they passed in the road bill (in 2015) was barely sufficient just to meet our repair needs, let alone new construction.

You said PricewaterhouseCoopers will lead Business Leaders for Michigan’s upcoming best-practices study of K-12 education in other states. What do you hope to learn?

We’re not trying to change the whole education system as we know it. We’re trying to say: What are some things that can be done that really would have impact (on student outcomes)? That may mean that you have to change governance, that may mean that you have to change finances, but that’s not how we’re going at it.

On the topic of mobility, what does Michigan need to do next?

The question is: What more can we do? And so we’ve asked McKinsey (& Co.), who actually came up with our Mobility 1.0 plan about four years ago, to say what’s 2.0 look like? Because a lot of that original plan has already been implemented: Planet M was called for, (American Center for Mobility) was called for, the World Mobility Leadership Forum we did this fall. So we’ve ticked off a lot of those to-dos.

How can the state build on the autonomous vehicle legislation adopted last year?

As of right now, Michigan’s legislative standing is state of the art. What we don’t know is what comes next. My guess is, is that there will need to be things done in the legal area, for liability insurance and the like that we don’t even know right now what that looks like.

What do you think should be included in any next-generation mobility strategy?

The other big one is talent. That was part of Mobility 1.0, but I’m not sure — of all the things that we called for, that’s the one that feels to me that we still don’t have maybe a really good handle on in terms of what specific skills and talents and how much (we’ll need). And remember, part of it is: How do we redeploy people that may be affected by this change in mobility? You know, truck drivers, for example. If commercial trucks are affected by autonomous driving and you need fewer truck drivers, well, then, what do we do there? ... Now’s the time to start thinking about it.

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Comments

marco
Mon, 02/27/2017 - 11:37am

I can't say that such a thing doesn't exist; but, I've never seen a study that shows specifically how Michigan or its local jurisdictions have benefited in the past from incentive programs such as those granted by the Michigan Economic Growth Authority. Many people believe that the jobs promised by companies have never materialized (at least not in full), and that the statements about "but for" the incentive the project would be located outside of Michigan are not genuine. Where is the transparency and accounting?

jesse
Mon, 02/27/2017 - 12:56pm

Having been involved in so called "economic development", I can tell you that it has accomplished nothing. Bureaucrats deciding who gets money and who doesn't is the most assinine way of trying to build a stronger economy. Legislators for the most part are just ordinary and don't have the slightest idea of how an economy works. They can read all the latest gobbledygook being put forth by Professor's in their Ivory Towers, but none of those books is worth the time it takes to read them. The way to establish a strong, growing economy is for legislatures to sit down and shut up....stop spending other people's money on "pet projects" that never work. Reducing gov't size and scope, spending, over regulation is the only practical answer. No CEO that I know is going to create, grow or improve their business based upon special, limited exemptions. It's the whole system that is our of whack. Go back to the basics and start all over again is the answer.

jesse
Mon, 02/27/2017 - 12:46pm

The question of educating and/or training workers should be addressed by looking at the failure of education and business's on a practical level. First, the education system has failed to educate. Most college graduates can't even write a complete sentence. Secondly, having the state assume the responsibility for training of workers has failed. The state doesn't understand what business needs are and as result always aims the wrong direction. Education should concentrate on teaching the basics (English, Math, Science, reading and writing) because that is what is missing in the "new education" curriculum. Secondly, business's should return to training workers themselves. Business knows what they need best, not some bureaucrat looking at statistics. By going back to basics and completing the circle of knowledge and experience is the practical way to get things back on track. Tell the bureaucrats to sit down and shut up . Let educators do their jobs and put business back in the driver's seat.

alicia haley
Mon, 02/27/2017 - 5:54pm

building the talent pool is easy. invest in education, teachers, and higher education

jesse
Sun, 03/05/2017 - 9:39am

As a business owner, I've seen the results of gov't sponsored and controlled education. The "Educated pool" is a myth put forward by NEA, MEA and other unions....Most candidates with degrees that I've interviewed personally have no idea how to apply themselves. Most can't even write a complete sentence. They certainly can spout social engineering concepts though. Most have been severely damaged by the education system and will never be able to really pursue any career. but will talk progressive liberal politics at the drop of a hat and can spew that gobbledygook at the drop of a hat.

John Q. Public
Mon, 02/27/2017 - 7:41pm

So, in a nutshell, BLM wants to:

1. Retain future tax revenues that normally accompany increased economic activity by giving them to its members as "incentives";

2. Demand more of the services that those revenues would fund but for the fact that they were given to its members.

duane
Mon, 02/27/2017 - 11:19pm

Mr. Rothwell talks of the future but thinks inside the ‘Box’ of the past.
When he talks about incentives [state tax dollars] he fails to understand how his members sell their products/service, it is on value for the money. Why don’t his members apply that principle to their State tax dollars? Why isn’t Mr. Rothwell asking his members about what and how the State programs/agencies could provide better/needed value to businesses? We hear about the barriers to success that regulations are, why isn’t he talking about how government could work with business to make Michigan help success?
When Mr. Rothwell talks about K-12 best practices this sounds like businesses comparing administrative protocols/policies. The reality is that learning is driven by the individual student [whether in the workplace or K-12]. It may be a challenge for Pricewaterhouse to assess this because they will need to talk to students, but it would provide more value that schools and businesses could use than simply benchmarking protocols/policies.
Mr. Rothwell wants to see which jobs will be winners and losers in the ‘mobile’ future. That never works because it will be different from whatever he imagines, simply look at computers/internet/phones they are nothing like what best guesses tried to divine. The ones who survived and succeeded were the one that were willing to invest in changing with the future, Mr. Rothwell and his members would do better to use that Pricewaterhouse effort to find how to prepare people to being part of change, embracing change, making themselves use change.
If he wants to know how to boost growth, he should look to those Michigan businesses that are successful for at least 75 years, for they have manage to succeed before technological change and through it all, and most are likely will succeed the next wave of change.

Ray Pittman
Sun, 03/05/2017 - 8:12am

Wouldn't User Fees be a more effective source revenue if the Legislature didn't reserve the right to reappropriate them to other priorities?

Bernadette
Sun, 03/05/2017 - 11:11am

This is an interesting article, but does not take into account how history has written the story of today. Michigan is still not diversified enough. As Mr. Rothwell says, “Every time the nation gets a cold, we get pneumonia".

His points about education are interesting but once again he wants bean counters to "analyze" why our educational system is not working. Those of us who had children go through the public education system in the 80's and 90's when Michigan's performance was ranked high, have seen the degradation of the system over the past generation, and it is disheartening. Much of this is due to people like Betsy Devos, and her "privatization" model. So once again "for profit" trumps the public good.

The final point I will make is Washington. The Trump administration is imploding. Snyder was right in not supporting this autocrat. Anyone who aligns themselves with this current administration will be part of "draining the swamp".

John S.
Mon, 03/06/2017 - 11:50pm

Michigan would not seem to be in a strong bargaining position with respect to developers demanding subsidies, particularly if the supply curve for investment capital is elastic (businesses have a lot of alternative investment opportunities). With other states also offering subsidies, it looks like a zero sum game (not including deadweight losses) with subsidized businesses the winners and states and their taxpayers the losers.