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Is There A Better Time To Restructure Michigan?

DougRothwell — Tue, 11 Nov 2008 20:22:29 -0600

Current revenue forecasts put the current year state budget at a $500-800 million deficit.

This comes AFTER the State increased taxes last year by nearly $1.5 billion.
This comes BEFORE we know what will happen to the fate of Chrysler and the rest of our auto industry.
This comes WITHOUT knowing how many of the thousands of auto employees who recently received buy-out packages will no longer earn income to pay the state income tax.

We could be looking at deficits in the billions.

We recently produced a report outlining ways of saving over $800 million/year in structural costs. But it will take time to fully achieve these savings and even they might not be enough. We need to enact all of those ideas plus many more.

While blue ribbon committee's are out of vogue, why not use them to identify prisons, community colleges, state universities and school districts that could be consolidated? What about reformulating revenue sharing and public education spending formulas to require a very high level of administrative efficiency (which only can be reached through large economies of scale) to receive the full state allocation? Everything has to be on the table. Is there a better time to get started on this work?

The View From Outside Michigan

DougRothwell — Mon, 10 Nov 2008 06:08:42 -0600

As I sit in North Carolina writing this Blog, I am struck by how different the emotional mood is here than back home. The whole country is feeling economic anxiety today and North Carolina is no exception. But North Carolina, a state I cited previously as a “benchmark” for Michigan to emulate, remains optimistic about its future. They believe their public institutions are largely doing the right things and their private leaders remain engaged to see things through.

The focus down here remains on economic development the “old fashioned way” – creating good jobs. There’s
a strong interest in rebuilding downtowns, transit, etc. But they focus on the fundamentals: maintaining a competitive business climate and cost structure, remain welcoming and appreciative of business investments, and build on the state’s assets that most impact the economy – higher education
and infrastructure.

It’s hard to have North Carolina’s optimism given what we seem to be experiencing every day. But if we can’t lift the negative emotional cloud that hangs over us, we will only make matters worse. So much in business is based on confidence in the future. Who will want to stay or move to a place where people are pessimistic about the future?

We can lift our spirits by getting engaged, not withdrawing from the public arena. The way to get Michigan back on track isn’t that complicated. Yes, it will take some time to get the economy growing again, but we know how to do it. Do we have the will
to fight back? If we don’t, who will?

Making Michigan More Competitive

DougRothwell — Sat, 25 Oct 2008 10:16:15 -0500

A few weeks ago I wrote in the Detroit Free Press that we need to chart a uniquely Michigan Path to Prosperity instead of copying the strategies of other states. One pillar of the Michigan strategy is to reduce the cost of doing business.

Let's face it, we need to do something bold to jump start our economy. Here are some ideas we should be thinking about:

What if we adopted all the suggestions proposed in a Public Sector Consultants report we recently released and eliminate the MBT surcharge?

For the cost of revenue we appear to be giving up to lure temporary film production work, we estimate the state could practically make Detroit a tax free zone for new business investment. Wouldn't this have a greater economic impact?

What if we recognize the MBT isn't much better than the SBT it replaced and get serious about designing a new business tax system that really makes Michigan competitive?

What if we required a fiscal note for every new regulation proposed by a state agency or the legislature that increases the regulatory burden on business? Better yet, what if we placed a moratorium on all new regulation and conducted a statewide audit to peel back some already in place?

What if we adopted serious incentives for school district and local government consolidation and disincentives for failure to consolidate to reduce costs so that we can enable a more competitive tax structure?

Any of the above actions would immediately get national attention and increase business confidence in our state. Why not get started right now?

A Rough Few Weeks, But Signs Of Transformation

DougRothwell — Fri, 17 Oct 2008 15:23:18 -0500

Yes, it has been another rough couple of weeks around our region. More auto cutbacks, unheard of market caps of our corporate icons, belt tightening everywhere.

But look closer and you'll see the signs of economic transformation.

Hundreds of people show up at a national conference in Detroit to hear how the creative economy can help re-brand our image and grow jobs.
The federal government seems to finally recognize our auto industry is critical to the nation's economic security.
The new North Terminal opens at Metro Airport giving our region the finest air gateway in America.
Automation Alley, Tech Town and the MEDC announce more new companies opening their doors or expanding - many you've never heard of before.
Oakland County forms a life sciences initiative to grow medical jobs.
Legislation gets introduced to attract business to the new Detroit Aerotropolis.
State legislators are actually talking about making meaningful cuts in Corrections spending and reducing business taxes.
A Cobo Hall deal doesn't seem too far out of reach.

Compare these developments with what's been going on in the past year. We've experienced a bitter fight over raising state business taxes, the Kwame Kilpatrick melodrama and the public "diss-ing" of the auto industry by national leaders.

Yes, it's been a rough couple of weeks. More are coming at us. But many of us are not letting events often outside our control stop forward progress.

Build Michigan's own road to recovery

DougRothwell — Wed, 08 Oct 2008 10:04:22 -0500

Be sure to check out the Detroit Free Press today, which features Doug Rothwell's opinion-editorial, Build Michigan's own road to recovery.

There is considerable debate about the best way to grow Michigan's
economy. Some advocate we "invest" our way to prosperity by spending
more on education, urban redevelopment, health care and other
government-run programs.

This is the approach followed by high cost states such as Minnesota
and Massachusetts. Others advocate we "cut" our way to growth by
cutting taxes, government spending and regulatory burdens. This is the
approach taken by Deep South states such as Alabama and Mississippi.

Neither approach alone works for a state like Michigan.

To read the full article, visit Freep.com.

An Upper and a Downer in Michigan's Rough Economy

DougRothwell — Mon, 15 Sep 2008 18:35:04 -0500

The Upper: The Governor's focus on alternative energy is paying off. New companies and jobs are coming to the state in a critical sector to our state's economy. If Michigan doesn't do everything it can to be a player in this space, shame on us.

The Downer: The Milken Institute's latest report on the top-performing cities ranks Detroit dead last of 200 largest metros and no large Michigan metro ranked higher than 185! The ranking is based on outcome measures, including job, income, GDP and high-tech growth over short and long-term periods. The study can be found here: http://bestcities.milkeninstitute.org/

The Bottom-Line: Getting new new industries to come to Michigan is a must, but so is making Michigan a more competitive place to do business. If we don't get the latter right, the former won't happen the way it could.

- Doug

As A New Administration Takes Charge, Let's Get Back To Basics

DougRothwell — Tue, 09 Sep 2008 06:12:06 -0500

We're all grateful the Detroit Mayoral Scandal of 2008 is behind us. But as we seek to regain positive momentum for the City, let's encourage the new Administration to focus on what matters most. No jurisdiction, including the City, can create economic growth without solid fundamentals.

Detroit needs an Administration committed to strong ethical behavior and integrity - awarding contracts only through competitive bidding, eliminating nepotism, and hiring professional staff.
Detroit needs fiscal discipline - balancing the budget without gimmicks, executing fair and responsible labor contracts, and eliminating structural deficits.
Detroit needs basic City services that can be depended on day-in and day-out - lights, streets, water, police, and fire.

These aren't the types of things the private or non-profit sectors can deliver. We can't set policy, balance the books or provide basic services. We can provide advice, staff expertise, research and sometimes resources. But ultimately these jobs get done by City government and only done well when there is a strong focus on the fundamentals.

One way we all can help our new Mayor and his team is to help them stay focused on the things that matter most. So, let's avoid the temptation to conjur up some "big projects" for the new Administration to announce. Right now, if we want them to succeed, they have to stay focused and put the basics back in place.

Good luck to Interim Mayor Cockrel and his team!

Latest Rankings Show Michigan Losing Ground

DougRothwell — Wed, 06 Aug 2008 06:28:43 -0500

The latest Forbes ranking of the "Best States for Business" lower Michigan from 46th worst last year to 47th worst this year. We ranked #39 on business costs, #44 in labor climate, #46 in economic climate and a terrible #49 in growth prospects. We only scored well on regulatory environment (#4), but this ranking factors in a state's incentive offerings (of which Michigan has plenty) and tort climate (which was dramatically improved in the 1990's). The only states that scored worse on the overall rankings were Alaska, Louisiana and West Virginia.

But the pain we are experiencing today might help us in a few years. The historic union agreements with the auto companies are going to make our cost structure more competitive. Our companies are getting leaner and more competitive to create jobs a few years down the road. Our cost of living is getting even more affordable. We're increasing our number of college graduates and increasing our level of venture capital.

Yet the actions that would likely have the biggest impact still aren't getting enough attention: lowering the cost of doing business through state tax, structural and energy reforms. Until these are dealt with, we should fear what our ranking will look like in 2009.

Sudan or Fixing the State Budget?

DougRothwell — Sun, 20 Jul 2008 09:48:21 -0500

Just wondering...

Michigan has the highest unemployment rate in the nation, the state budget is projected to have at least a $500 million shortfall next year, and our state leaders find the time to enact legislation to divest state investments in companies that do business in Sudan?

Let's be clear, no one is supporting Sudan in any way, shape or form. But, how is it that our state leaders find the time to dabble in international policy rather than their official role as managers of the state's business?

As a good friend of mine put it, "Michigan is burning and this is what our elected leaders are focusing on....says it all..."

- Doug

Tom Watkins Case For Heath Care Reform And How It Aligns With The Detroit Renaissance

DougRothwell — Thu, 17 Jul 2008 17:00:48 -0500

Tom Watkins makes a great case in the Detroit News for state government reform. Read his column which reflects much of our thinking at Detroit Renaissance that state government needs to adopt a strategic principles and actions to achieve a sustainable fiscal structure. One of those principles is to enact meaningful structural reforms to minimize the need for new sources of revenue such as bringing state employee health care benefits in line with the private sector and bringing local government and public school health care benefits in line with those of state employees. The private sector is making drastic adjustments to its healthcare plans.

As Watkins government should follow their lead by making "...the tough and necessary structural changes in prisons, consolidate school districts, and local units of governments, and address the runaway state employee health and pension benefits that were once modeled after the auto industry and that are no longer sustainable."

Read more about our recommendations to immediately improve the health of our state's economy and improve our overall economic competitiveness on
our website at: http://www.detroitrenaissance.com/agenda/improving-competitiveness