Business Leaders Ask Lawmakers to Turn State Around

Guest Column
by Doug Rothwell

January 16, 2010

Business Leaders for Michigan, an organization composed of many of the state’s largest job providers, has created the Michigan Turnaround Plan to help make Michigan more competitive and once again become a “Top Ten” state for job and economic growth. It is a holistic, specific and achievable plan based on hard data.

The case for a turnaround plan is strong. For the past decade, one out of every two of the nation’s job losses has come from Michigan. Over the past generation we have seen our per capita income go from above to below average — and it’s still falling.

The impact on the state budget has been going from a $2-billion surplus in 1999 to a $2-billion deficit in 2010. Restructuring in the auto industry has been a big reason for our economic downturn, but not the only reason. Michigan has underperformed the nation in virtually every job sector for the past decade and is average to below average on nearly every ranking of state job climates.

There is no silver bullet to fix Michigan. It will take a multi-step strategy, like the Michigan Turnaround Plan, to become a top ten state again. But to get started, Business Leaders for Michigan has outlined the following legislative agenda to kick-start the turnaround process:

Step 1: Reform the Way We Manage State Finances
Amend the Management and Budget Act to establish a two-year budget cycle for state government to more accurately project ongoing costs of programs.

Form an independent public-private revenue forecasting council to complete quarterly revenue and spending estimates.

Step 2: Right-size and Enact Budget Reforms
Remove barriers for local municipalities and school districts to increase efficiency through sharing services by amending the following laws:

• Compulsory Arbitration of Labor Disputes in Police and Fire Departments (PA 312 of 1969)
• Urban Cooperation Act (PA 7 of 1967)
• Intergovernmental Transfer of Functions and Responsibilities Act (PA 51 of 1951)
• Conditional Land Transfer Act (PA 425 of 1984)
• Emergency Service Authorities Act (PA 57 of 1988)
• Public Employment Relations Act (PA 336 of 1947)
• Metropolitan Transportation Authorities Act (PA 204 of 1967)
• Metropolitan Councils Act (PA 292 of 1989).

Consolidate school administrative functions (HR, IT, finance, purchasing, etc.) across K-12 school district lines.

Adjust public employee health care contributions to the national public sector average (currently 17.8 percent).

Reduce state employee compensation to the average compensation of state workers in the U.S. and eliminate the scheduled 3-percent pay increase.

Reduce the state workforce by 5–10 percent.

Enact reforms to Michigan’s corrections system that bring our costs in line with other Midwest states.

Step 3: Get Michigan Competitive to Attract and Retain Jobs
Make Michigan more competitive and move us significantly toward becoming a top ten state for job growth by reforming the Michigan business tax structure by enacting a proposal that would:

• Eliminate the Michigan Business Tax Surcharge;
• Reduce the MBT gross receipts tax rate from 0.8 percent to 0.45 percent;
• Adopt a 5.5-percent sales tax on services (exempting B2B transactions, health care, education, housing, and other services that are already taxed);
• Reduce the sales tax on goods to 5.5 percent;
• Be revenue neutral in 2010.

Require all legislation and regulatory change proposals that impact business to include fiscal notes estimating the financial and compliance costs to business before any committee hearings are held.

Some will say that serious reforms and change to turnaround Michigan will be difficult in an election year. But the cost of not acting is unthinkable. Michigan faces a $2-billion budget deficit next year that could more than triple within four years. In addition, hundreds of local governments and school districts are facing their own fiscal deficits.

Since Michigan job providers already pay a 3 to 4 percent profit penalty relative to other states, few will want to invest and grow their businesses in such an unhealthy fiscal environment unless we take steps now to begin adopting the five principles of the Michigan Turnaround Plan:

1. Change the way we manage our finances;
2. Right-size and enact structural budget reforms;
3. Get our tax and regulatory climate more competitive;
4. Set priorities for state investments; and
5. Make changes to our economic development strategy.

The Business Leaders for Michigan legislative agenda is a “down payment” on implementing the Michigan Turnaround Plan — it is but a first step of many that will be needed in the coming years to make Michigan a top ten state again. But it’s an important step, one that will grow the confidence of job providers and begin putting more people back to work.

Readers who are interested in learning more can visit www.michiganturnaroundplan.com.

Doug Rothwell is president and CEO of Business Leaders for Michigan.