The Michigan Turnaround Plan reflects our optimism for Michigan’s future, based on progress made by our state’s elected leaders during the past year and the opportunities this headway provides for building a more vibrant state.  Michigan’s turnaround has clearly begun, as evidenced by lower unemployment, higher economic growth and rising income levels.  We believe these results have been made possible by following the kinds of recommendations advocated for in the Plan.

While we continue to place a strong emphasis on improving the fiscal and business climate of Michigan, BLM believes such a solid foundation has been laid by Governor Rick Snyder and the Michigan Legislature that we can accelerate the pace of growth faster than originally projected.  BLM originally forecast it would take close to a decade for Michigan to become competitive again.  We now think Michigan can not only be competitive but also be a Top Ten state within that same time period.

To move Michigan to Top Ten status will require several actions:

• Prioritizing the investment of state revenue growth in higher education and transportation infrastructure.  These investments yield the greatest returns to grow the economy.  Specifically, to ensure we have the talent needed to fill future job openings, we recommend additional funding for universities based on how well they perform compared to their national peers.  Likewise, we need to invest more in the bridges, airports and highways that connect Michigan to the global economy.
• Supporting the growth of Michigan’s cities and metro regions, as they disproportionately drive the state’s economy.  Instead of investing in individual companies, we recommend that the state invest in services that benefit the growth of all Michigan businesses, as well as regional efforts that leverage unique economic assets and a few select urban redevelopment projects.
• Aligning policy, resources and efforts behind six existing Michigan assets that have the potential to grow a “New Michigan” economy by adding as many as 500,000 new jobs and $18,000 in per capita income over ten years – providing a clear path to Top Ten status.

These assets, and the opportunities they provide are:

1. Leverage Michigan’s status of having more engineers per capita than anywhere in the nation by growing and branding Michigan as a Global Engineering Village that meets the global demand for engineering solutions.
2. Capitalize on Michigan’s ideal strategic location, supply chain expertise and the growing shipment of goods to become an alternative to Chicago as a Gateway to the Midwest.
3. Support the growth of our universities as a Higher Education Marketplace that meets the increasing need for talent by boosting in- and out-of-state college enrollments and increases university-based research and development.
4. Develop a sustainable Natural Resources Economy that meets the world’s growing demand for food, water, leisure tourism and energy.
5. Build on Michigan’s automotive heritage to become the Global Center of Mobility that meets the world’s rising need for personal transportation.
6. Leverage our health and medical expertise to become a Life Sciences Hub that meets the needs of an older population and demands for higher quality of life.

The New Michigan strategy recognizes that while fiscal, budget, tax and business climate reforms are critical, they are insufficient for Michigan to become a Top Ten state in today’s economy.  The most economically successful regions of the nation and world have leveraged their unique assets to become growth leaders. We can do the same.

BLM believes that focusing on the six existing strengths identified in the Plan, rather than picking business sectors to attract to the state, is the best path to growth. These six assets were identified after researching a wealth of data, case studies and turnaround models from similar economies around the globe. Each promises tremendous opportunities for success. Together, they have the potential to make our state a vital economic powerhouse.

Michigan cannot become a Top Ten state without the support of all Michiganders. We invite you to be part of this work. Each of us can have a role in Michigan’s turnaround by sharing the Plan with friends and family, asking your community to align its work with the Plan and encouraging our state leaders to do the same.  If we focus our efforts, there’s no stopping Michigan from becoming the comeback story of the decade. 

Step 5 of the Michigan Turnaround Plan focuses on our cities and metro areas because we believe that healthy urban areas are essential to our state's long-term well-being. The report begins with a review of current economic conditions and focuses on how to grow the economies of our metro areas with a strong emphasis on innovation and exports as drivers of the next economy.  The strategy is based on facts and on the existing strengths and assets of our metro areas and it includes several recommendations our state, cities and metro areas can implement to help strengthen and grow their economies.  To read the report, click here.

The report also highlights the strength of our metros compared to their peers across the nation and some of the statistics may surprise you.  For example:

• Of the 20 largest U.S. metro areas, Detroit is first in terms of export intensity (the share of its output that is exported)
• Grand Rapids ranks 10^th among the 100 largest U.S. metro areas in terms of export intensity, and 10 of Michigan’s 14 metro areas are more export-oriented than the U.S. average

Clearly, exports are a very important piece of the economic picture.  As other countries continue to develop and grow, the ability to sell our products to them is a critical component of strengthening and growing our economies.  And as the report shows, we are well positioned to build upon our current successes.

The report also reflects the importance of manufacturing—which is good news for Michigan.  Everyone knows Michigan has a strong history of manufacturing, but what they may not realize is the connection between innovation and manufacturing.  You need a strong manufacturing base in order to grow innovation jobs.  And, the data shows that 11 of Michigan’s metro areas have a higher share of manufacturing jobs than the national average or the U.S. metro average. 

Talent is another critical piece of the pie.  The dynamics of a changing workforce and ensuring workers have the skills required for new jobs heighten the need for strong workforce development systems.  Immigrants, older workers and workers with higher education levels and skill sets are all part of the solution. 

The last section of the report—but perhaps the most important in sustaining long term growth in our cities and metro regions—is called “building the basics.”  Just as we believe our state had to get its fiscal house in order before it could move to making investments, the same is true for our cities and regions.

The basics are the foundation upon which all of the strategies in the urban report are built.  As citizens, it’s what we should expect and at the same time we should support elected leaders who are focusing on these as their top priorities.  It’s critical that our cities and urban areas have:

• sound fiscal management and ethics standards
• effective public safety
• results-oriented redevelopment strategies
• cost-effective and reliable basic services, and
• support for regional solutions

The recommendations in this report are good ones and they offer some solid steps that can be taken to help our cities grow. BUT, if our communities cannot provide basic services and do them well, then the other actions won’t achieve the same results.  

There is no silver bullet.  There wasn’t a silver bullet to fix our state and there isn’t one to fix our cities.  It will require hard work, the courage to make difficult decisions and implement policies and programs that will bear fruit years down the road, the ability to know who and what we are and are not, and the vision and leadership to stay the course.  The state has begun that path as have some of our cities and metro areas; now it’s time to help all of them on the same path.  What is clear in the report is that we have a solid footing from which to grow—and that’s the best news of all.

Our universities, considered some of the finest in the world, drive talent production.  Here in Michigan, we graduate a higher percentage of students than the national average in science, technology, engineering and math (STEM) disciplines.

Our higher education institutions are also driving innovation. In 2009, Michigan’s universities ranked 10^thin the nation in research and development spending at $1.7 billion.  This level of investment is important because it fuels patent development, business start-ups and ultimately more jobs. In fact, between 2004 and 2008, Michigan ranked in the top 5 for patent activity and business start-ups.

Our universities spur economic growth. A 2002 study by the Michigan Economic Development Corporation put the total economic impact of Michigan’s public universities at almost $40 billion – at that time representing 12.6% of Michigan’s gross state product. In 2010, Michigan’s major research universities alone had an estimated economic impact of $15.2 billion, equal to 4% of our gross state product.

We believe these numbers will grow if we invest in our universities and increase their ability to attract more research dollars, increase innovation, and create more businesses. To realize this potential, we need a long-term, shared commitment to higher education from both the state and our public higher education institutions.

From the state, we are seeking a commitment to make higher education a higher priority in the budget. This will help make college more affordable for hundreds of thousands of Michigan young people.

From our universities, we are looking for dedicated efforts to control costs, leading to   more affordable tuition bills. Our universities also need to increase research and development efforts to best-in-class status and partner with businesses to increase industry-supported research and development, so we can put that ingenuity to work right here in Michigan.

The goal of the MTP is to make Michigan a “Top Ten” state for job, economic and personal income growth. Thanks in great part to the difficult work done by our leaders in Lansing over the past year, much of the original plan has been fully or partially achieved. We have begun to see some evidence of an economic turnaround with lower unemployment, higher economic growth and rising incomes.

While work remains on fiscal, budget, tax and business climate reforms, those measures alone are insufficient for Michigan to become a “Top Ten” state in today's economy.  The regions around the nation and the globe that have been most economically successful leverage their unique assets to drive economic growth.

As our chief producer of talent, one of our main sources of innovation, and as a powerful driver of Michigan’s economy, our higher education system is one of Michigan’s MOST valuable assets.

In fact, according to the Tax Foundation, a non-partisan tax research group based in Washington D.C., as a result of this change Michigan now has the 7^th most competitive corporate tax environment nationally. This represents an incredible improvement over Michigan’s previous rank of 49^th in this category.

Still, in the same index, Michigan ranks below many of its competitors in areas such as Property Taxes and Unemployment Insurance Taxes. And our regulatory environment ranks 43^rd nationally according to Pacific Research Institute, a non-profit free market think tank located in San Francisco. We must continue to improve in these areas to compete nationally and globally for jobs, economic and personal income growth. Going forward, Michigan should take the following actions:

• Phase out the Personal Property Tax without adversely impacting those communities that are overly dependent on Personal Property Tax revenues;
• Create a responsive, collaborative regulatory system that includes aligning Michigan’s regulatory requirements with national standards;
• Provide a seamless, one-stop process for business growth that aligns state and local site development and business regulations;
• Create a modern, cost-effective incentives program;
• Strengthen Michigan’s workforce by fostering a frictionless workforce; environment, matching education and training supply with workforce demand, and attracting and retaining skilled immigrant, mid-career and young talent; and
• Increase capital availability.

Some will point to states like California and Massachusetts and say that the lowest tax states don’t always win. It’s true that companies compare the total cost of doing business against a region’s assets when evaluating site location decisions. Some regions of the country such as the Silicon Valley of California and the Boston areas in Massachusetts, have been able to attract and keep industries in high-tech and related fields because those businesses perceive the value provided in those regions, whether it’s the of quality of life, access to capital, or highly entrepreneurial, highly skilled workforces, as sufficient to mitigate the higher cost of doing business. While Michigan has made important strides to improve our cost-value proposition, businesses don’t yet perceive Michigan’s assets as valuable enough to offset our higher cost structure. 

In our next blog, we will look at how the state can provide greater value by investing in key areas that will promote future growth.

In 2011 significant progress was made in addressing the first three steps of the Michigan Turnaround Plan (MTP). These recommendations represented “fixing the basics” – common sense actions needed to set Michigan on sound financial footing and put in place practices to make Michigan competitive over the long-term.

Step 2 of the MTP focuses on providing state and local government and local public school services in an effective and efficient manner. Several key measures were enacted last year to advance this area, including:

• Legislation to bring school employees’ share of health care costs in line with the private sector
• Contract negotiations that brought state employees’ share of health care costs in line with the private sector
• Legislation to make a local community’s ability to pay the primary consideration in contract arbitration with local police and fire services
• Legislation amending several state statutes to remove barriers that had previously made it difficult for local governments to consolidate services

In 2012 and beyond, our focus needs to turn to the following at the state level:

• Improve the cost & productivity of our state workforce by adopting a total compensation system that enables the state to compete for talent in highly competitive fields and rewards performance at a cost comparable to the average state
• Reduce corrections costs to the Great Lakes average
• Improve the efficiency of state government by investing in programs that have a proven track-record of reducing long-term costs (e.g., prisoner re-entry, home health care) and adopting best practices to provide self-directed citizen and business transactions through the use of technology.

For our public schools, we need to improve our return on investment by accelerating the sharing of school services and the consolidation of schools where appropriate, and by fully transitioning school employees to a defined contribution retirement system. These measures will direct more resources to improving student learning through proven methods, including:

• Providing access to quality early childhood education
• Maintaining rigorous standards in reading, math and science
• Maximizing the time students spend on academic learning
• Attracting, training and retaining excellent teachers
• Attracting and training excellent school leaders
• Measuring and rewarding schools, teachers and school leaders that perform at a high level

Our local governments should adopt their own Turnaround plans that include steps to “fix the basics” by ensuring:

• Sound fiscal management practices
• Cost-effective, reliable basic services
• Strong ethics standards
• Effective public safety
• Competitive tax & regulatory standards
• Results-oriented redevelopment strategies
• Professional communications that improve perceptions
• Support for regional solutions

State government can enable improvements in local service delivery by:

• Providing incentives & disincentives in all state programs that recognize local service sharing
• Aligning federal & state program boundaries with regional economies
• Accelerating efforts to consolidate local administrative services and increase regional service delivery

In 2011, great strides were made toward getting the state on sound financial footing and improve the tax and regulatory environment. In 2012 we need to build on those efforts at state and local levels to help make Michigan as competitive as possible.

There is a lot of discussion in the world today about the debt being racked up by many nations.  In most cases, this debt was accumulated after years of not following sound fiscal and accounting practices.  America is a good example.  For years we’ve failed to balance our budget, based budgets on overly optimistic revenue forecasts and did not take into consideration the long-term costs of our policy actions.  Our growing debt obligations has led to a great deal of uncertainty about the future.  This has caused job providers to slow investment and consumers to cut back on spending.  Michigan experienced much the same situation during the past decade and this has contributed to our “one state, decade long” recession.

This is why Business Leaders for Michigan made the first step of the Michigan Turnaround Plan about responsibly managing finances.  The Plan is a holistic, fact-based strategy to make Michigan a Top Ten state for job, economic and personal income growth. 

Our original plan called for the state to manage its money the way a responsible household or business would – by balancing the budget without one-time gimmicks, projecting revenues using sound information and projecting spending needs over the long-term.  Fortunately, the state has implemented many of these suggestions during the past year and as a result has been able to start paying down debt and generating a small budget surplus.  As a result, business confidence is up and Michigan’s economy is turning around.

We must build on the solid foundation laid this past year by memorializing in policy or law the practices outlined above so we don’t slip back into bad habits after this Governor and legislature leave office.  We need to continue paying down the billions of debt we racked up the past decade and require that every piece of proposed legislation have a “price tag” attached to it so policy makers understand the consequences of their actions.  We also recommend the state adopt a long-term strategic plan that clearly identifies what we should expect from state government to guide annual budgets.   

Adopting sound accounting practices and fiscal policies don’t get much attention in the news.  But we’ve seen around the world what happens when we ignore these basics.

Michigan’s unemployment level has dropped faster than the national average while personal income and the overall level of economic output is rising faster than most states over the past year.  The rebound of our automotive industry and the manufacturing sector have been major drivers of these improvements and underscore the importance of continuing to support these critical businesses.  But the state’s turnaround is also being powered by businesses from all sectors, large and small, that are gaining renewed confidence in Michigan as a place that is finally committed to a long-term turnaround.

 When Business Leaders for Michigan unveiled the Michigan Turnaround Plan in 2009, we thought it would take five years to implement most of the recommendations and another five to see major results.  In one year, thanks to a tremendous commitment from Gov. Snyder, Senate Majority Leader Randy Richardville and House Speaker Jase Bolger to accelerate Michigan’s job recovery and return our state to prosperity, much of the original Michigan Turnaround Plan either has been fully or partially addressed. We are already seeing tangible economic benefits.  From adopting long-term budget plans and aligning public sector employee benefits with the private sector to getting Michigan’s business taxes in line with other states and reforming archaic regulations, Michigan is on a path to global competitiveness. 

One year doesn’t complete an economic turnaround and, after a decade of decline, Michigan will need several more years of progress to accelerate growth as fast as we would like.  But 2011 was the year the state’s long-awaited turnaround began.  Happy New Year 2012 – you have a hard act to follow. 

When searching for role model states, some point to Indiana because it’s a bordering state that has grown at a better rate than we have for years.  Others point to North Carolina or Texas as states that have diversified their economies and have been consistently ranked as some of the best states for business. Some even say we should aspire to be like California because they have Silicon Valley! 

The latest role model being suggested is Minnesota.  Why?  Because Minnesota has a higher per capita income than Michigan and it’s a “mid-west” state.  But comparing Michigan to Minnesota demonstrates the difficulty of comparing us to any other state.  Minnesota’s population is half our size and about one-third less diverse.  In Minnesota, one city drives over half its economy, versus Michigan’s more diverse economic geography.  But what’s more significant is that since 2002, Minnesota’s per capita income and employment rates have been falling.  In fact employment growth has ranked 39^th worst since 2002 according to non-partisan think-tank Minnesota 2020. 

Similarly, Michigan has often searched for the "silver bullet" that would grow jobs.  For years we tried a number of different tactics to spur growth such as targeting certain industries or diversifying away from manufacturing.  We tried building big projects with the thinking that more development will naturally follow the anchor investment.  We’ve even tried eliminating taxes entirely in places to jump start growth.   Recent theories suggest the best way to grow Michigan's economy would either be to just increase the number of college graduates or invest more money in community amenities, like parks, transit, cultural centers, etc. to make them more attractive places to live and work. 

All of these ideas can be part of a well-rounded economic growth strategy.  But Michigan runs the risk of delaying real economic progress if we look at them as stand-alone solutions.

The truth is there is no one state we can emulate or one solution we can adopt that is going to lead to sustainable growth.  In practice, the places that offer the best value for the money are the ones that grow the most.  Like a customer shopping for a product, businesses both large and small generally select locations that offer a wealth of amenities for a reasonable cost.  It’s the reason why Ford sells more cars than Porsche.  It’s a better value proposition. 

That means Michigan has to have competitive costs, reasonable regulations, functional government, excellent service, a strong infrastructure, nice communities and lots of amenities - not one more than the other.  Business Leaders for Michigan developed the Michigan Turnaround Plan because Michigan needs a holistic strategy to get back to being a Top Ten state again for job, economic and personal income growth. 

So rather than look to one state for the answers let’s focus on getting as competitive as we can in today’s global economy.  Rather than focusing on one dimensional policy solutions, let’s recognize we need to work on multiple fronts concurrently to grow our economy.   But perhaps most importantly, let’s focus on growing a new Michigan that builds on our competitive assets and unique strengths and doesn’t try to copy some other place. 

Michigan’s economy began turning around this year because we have begun to follow a uniquely Michigan path to economic success.  Unlike other states, we are improving the business climate without pitting one group against the other.  We are recognizing that our automotive and manufacturing sectors not only distinguish us, but are keys to our long-term success.  And we’re taking pride in what defines us – a state, like the commercial says, “that has been to hell and back” but embodies grit, determination and stamina. 

Michigan doesn’t need to be like some other state or search for the next silver bullet to grow again.  We need to be who we are – a state that works hard doing some things extraordinarily well and offers good value for the money.

What often gets over-looked is that small business is also responsible for most of the job reductions because they fail at a higher rate than large businesses.  A good deal of their business is also dependent on contracts with large companies as corporations focus on staying lean.

But what might be most over-looked is the role big business plays in driving exports.  The more a region exports, the more income it brings in from outside its borders that grows the wealth of its citizens.  To grow income significantly, you need to export at scale and only big business has the size, brands and capabilities to export at a large scale.