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

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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