LANSING ? Gov. Jennifer Granholm has postponed the introduction of her proposal to sell $2 billion in bonds to invest in research-oriented and advanced technology businesses until May – and there is concern about whether there will be enough time to put it on the November ballot.
Granholm has said the plan would allow the state to invest $200 million annually over 10 years in cutting edge businesses, positioning Michigan to be the home of new technology related businesses and helping the state to diversify its auto-centered economy. She estimates the program, which she first unveiled in her February 8 State of the State speech, would create 72,000 jobs.
A dispute continues between the Republican-controlled Legislature and the Granholm administration on whether the proposal can be put to a vote this November. Republicans contend the constitution unambiguously requires bond proposals to be placed on the next “general election” ballot – in November 2006. But the administration says because the proposal is a constitutional amendment, not a bond proposal only, it is not subject to this scheduling requirement.
To be put on the November ballot, when many cities and villages will hold municipal elections, the Legislature will likely need to act not much later than early August to allow enough time for the Department of State to determine ballot language and clerks to prepare ballots. Two-thirds majorities in both the House and Senate are needed to put the constitutional amendment on the ballot.
“As of today, it would be tight, and we still don’t have the proposal from the governor,” said Ari Adler, spokesperson for Senate Majority Leader Ken Sikkema (R-Wyoming), of the logistics of moving the issue through the legislative process in time, presuming the two sides agree it legally can be placed on this year’s ballot.
Said Matt Resch, spokesperson for House Speaker Craig DeRoche (R-Novi): “It would certainly present a challenge. To give something of that much magnitude and that much money enough consideration to know whether it would be a good policy for the state, we would definitely need some time to look at that.”
Asked if there is some concern within the administration about having enough time to get the proposal on this year’s ballot, Treasurer Jay Rising said: “Sure, in some ways. Especially if we have to have two months of hearings.”
That was a not so subtle shot at the hearing schedule the House and Senate set for the other major piece of Granholm’s plan to improve the state’s economy – overhauling how the state taxes its businesses. House and Senate committees are holding hearings throughout April and May on the proposal.
Added Granholm press secretary Liz Boyd: “The Legislature has the time to address these issues and will have the time to address these issues if they use it wisely.”
In the absence of a formally introduced plan to amend the constitution to allow the spending, administration critics and others have poked at the particulars of it that are known. Specifically, criticism has focused on the less discussed aspect of the proposal that would amend the constitution to allow something currently prohibited with a few exceptions: the investment by the state in the equity of businesses.
Officials at the Michigan Chamber of Commerce said they have studied the origins of this piece of the constitution and say it stemmed from the state’s investment in the mid-1800s in a number of canals. With the advent of the railroad not long after, the canals were rendered obsolete, and the state was left with major debt on its investments.
Rich Studley, senior vice president of the Chamber, said his organization supports the other component of the administration’s bonding plans to speed up road projects.
But it opposes the $2 billion proposal because of the risk involved with investing in start-up companies, Studley said. The Chamber questions how the state will know which companies will succeed.
“We believe that bonding for infrastructure is a legitimate role for government,” he said. “We have serious reservations about any proposal to bond for jobs that would involve state government incurring long-term debt for short-term operating expenses or ongoing operating expenses or using state funds to pick winners and losers by making high-risk equity investments.”
But Rising dismissed any parallel between the canal fiasco and the administration’s proposal.
“I guess I’m not going to worry about what happened in 1850,” he said.
Rising noted that voters already have approved three exemptions to the prohibition on the state investing in equities – for its pension system, for endowment funds and for charitable or educational endowment funds. The administration simply wants to extend this ability.
“The voters made that decision that for certain programs the investment of the state is appropriate already,” he said.
But the concern about investing in companies that could flop and fail to return the state’s investment is real, one economist said. Charles Ballard, a Michigan State University economics professor, said the proposal could aid the economy – if state officials pick the right businesses in which to invest.
“What if you guess wrong?” he said. “It’s not easy to pick a winner. … That issue is a very, very serious one.”
But Rising said the state would succeed in making its investments with great potential for significant returns. When a business succeeds, the state will receive revenue from it because of its stake in the company.
“If they’re successful, you get some upside out of that,” he said.
Rising said he is hopeful that the proposal will receive a relatively smooth legislative reception because Senate Republicans have proposed creating a life science investment authority that relies on some similar principals to the governor’s bond plan.
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