LANSING ? Socialism or economic stimulus? Those were the questions Tuesday when the Michigan House Commerce Committee reviewed Gov. Jennifer Granholm?s proposal for a $2 billion bond to fund technology start ups in the state.

The hearing came as the Senate prepares to vote this week on a $1 billion bond proposal and House members work on completing an alternative that backers promise will get up to $1 billion in economic development incentives available in a quicker time frame and without using a bond requiring a public vote.

The socialist characterization came from Rich Studley of the Michigan Chamber of Commerce in discussing the Granholm plan to amend the constitution so the state can hold equity interest in private companies. Studley said he was not trying to use incendiary language, but only to point out that government ownership of private companies is classic socialism. He also continued the Chamber’s assault on the wisdom of investing state funds in new companies, particularly those in emerging technologies.

“It is our belief that these high risk speculative investments is not investing at all; it can be more accurately described as gambling,” Studley said.

Studley said the proposal errs in another way when it sets up an outside board in conjunction with the Michigan Economic Development Corporation to direct how the bond money would be invested, saying that offers taxpayers insufficient ethical safeguards when the state has proven expertise on its staff in the Department of Treasury.

He said the Chamber would support alternatives such as devoting a smaller bond to more limited uses such as harbor, airport and highway projects, higher education facilities or other means of prodding economic development, or targeting the money that would be used to repay the bonds to cover costs of providing the tax cuts embodied in the governor’s business tax restructuring proposal rather than increasing taxes on some sectors of the economy.

Bob LaBrant of the Chamber said the proposal marks the first time in 43 years voters would be asked to amend the constitution in order to pass a bond, and said the requested election for November this year – when he said over half of the state’s population are not facing any other ballot issues – is a statewide “stealth election.” He said the proposed constitutional amendment (HJR I) marks a retreat from reforms that were instituted in response to disastrous state equity ownership of railroads and canal companies.

Both said they were intrigued by the option being crafted by committee chair, Rep. Bill Huizenga (R-Zeeland) and Rep. Andy Dillon (D-Redford) to amass a pool of funds by securitization of the state’s tobacco settlement funds. That proposal is expected to be ready for presentation to the committee soon.

The bond plan was better received by the Small Business Association of Michigan, though it has not taken a formal position on the governor. Mark Clevey, executive director of the Small Business Foundation said the Granholm bond proposal “is a great start and doesn’t go far enough.”

He said it should include flexibility to provide funds to medical information technology which proponents say holds the promise to improve patient care and save millions of dollars and in other biological-based products other than bio-fuels. Clevey also stressed the importance of targeting investments to ventures that are commercially viable rather than simply pure research.

“We need commercialization to be factored in from ground zero,” he said in proposing that commercialization constitute 75 percent of the criteria in awarding funds.

And Pat Kelly of the Van Andel Institute in Grand Rapids said the bond represents a critically important facet in the state’s hopes to diversify as well as a chance to rebuild state credibility in its interest in life sciences investment.

“If this does not represent a significant part of our economic future, what does?” he asked. “It is a proposal aimed at building nothing less than our economic structure.”

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