LANSING – A $1 billion plan that even supporters say contains some risks in an attempt to jolt Michigan’s economy in a new direction by funding technology start ups neared final approval Wednesday with broad bipartisan votes in the Senate.
With only four members opposed, the nine-bill securitization package was returned to the House, which had initiated the idea of using some of the state’s tobacco settlement money to create the large pool of cash for immediate investment into high tech, life sciences, venture capital, alternative energy, advanced automotive, homeland security and other avenues that seem promising ways to create jobs.
Senate Majority Leader Ken Sikkema (R-Wyoming) said he was an enthusiastic supporter of the package as a means to diversify the state’s economy, but said a necessary additional move is a cut in single business taxes. He said he will have a proposal before the Senate in that regard within days.
“With passage of this package, Michigan is taking a major step forward in diversifying our economy,” he said. “It’s got some downsides, but it is time for this state to take some prudent risks. The restructuring going on is permanent and we need to take advantage of that change.”
Governor Jennifer Granholm called the vote “a significant day for Michigan’s future” and pressed the Senate to quickly complete the task and get the package to her desk for signature.
Although the plan specifies a $1 billion fund, Granholm continues to characterize it as a $2 billion plan – the amount she originally had proposed be submitted to voters this fall in a bond package – because she says the total investment will include other funds leveraged from private investors and others.
“Today, the State Senate has given bipartisan approval to our plan for investing up to $2 billion to create tens of thousands of good high-paying jobs – jobs that will keep our kids in Michigan and help us diversify our economy,” she said in a statement. “Michigan families need the House of Representatives to do the right thing by passing the jobs plan quickly.”
Separately, the governor’s campaign sent an e-mail to supporters suggesting the House – which crafted the securitization plan as an alternative to her bond proposal – may “play games” with the bills and put them into a conference committee which would delay their implementation.
House leaders say they are concerned most about the breaking of the tie-bar to the legislation cutting business taxes, but have not decided whether they will accept the Senate changes or put the bills into conference.
Matt Resch, spokesperson for House Speaker Craig DeRoche (R-Novi), said the chamber had not yet set a date for addressing the bills. But he said the caucus remains convinced that tax cuts must be part of the package.
“We felt it was very important to have tax relief with the investment,” he said, adding the caucus is eager to see what Sikkema proposes in that regard. “We’ll look at what comes over from the Senate to make sure there’s tax relief for Michigan businesses.”
Granholm also said it is now time for the Legislature to complete work on the tax restructuring bills and her proposed changes in the Michigan Merit Award program to give scholarships at the college level rather than at the conclusion of high school.
Tricia Kinley of the Michigan Chamber of Commerce said securitization is an important proposal but continued to express concern about breaking the link to a business tax cut. “Taxpayers committed to Michigan deserve and need tax relief,” she said. “And if we can provide securitization we can provide tax relief.”
The state is expected to get about 56 cents for every dollar in promised tobacco settlement funds it sells to investors, meaning it would have to give up about $1.8 billion it is to receive over a several year period to raise the targeted amount of cash now.
Other opposition votes came from Sen. Nancy Cassis (R-Novi), who said the tobacco money could be used more directly to provide some of the business tax cuts she says all businesses deserve.
The package (HB 5047, HB 5048, HB 5109, HB 5215 HB 5216, SB 298, SB 359, SB 521 and SB 533) creates two main funds:
A competitive edge technology fund, which would make grants and loans for basic research, university technology transfers and commercialization of that research. That fund would be directed by a new 19-member Strategic Economic Investment Board, which would hire independent experts to help guide its decisions.
A 21st Century jobs Fund, which would guarantee loans made by financial institutions, invest in private equity funds, invest in venture capital funds; and invest in smaller businesses. Its annual allocations would be subject to the following limitations: no more than 40 percent for private equity, venture capital and smaller businesses; 70 percent for commercialization of competitive edge technology; 25 percent for guaranteed loans and 10 percent for basic research and competitive edge technologies. It also requires at least $240 million be directed to the life sciences over five years.
The Senate also carved out a $10 million designation for an agricultural development fund, with the money coming from the $50 million that is otherwise designated for life sciences (which would get the full $50 million over the following four years). Supporters said that investment recognizes the potential for creating jobs by finding more markets for Michigan products and processed food, and said it parallels provisions earmarking other funds for forestry projects.
The Senate also approved a change giving the governor the flexibility to select any member of the 21st Century Job Fund board to be CEO of the fund, rather than designating the director of the Michigan Economic Development Corporation for that position.
The package sets up a competitive process to entities to obtain the money, with out of state businesses needing to have significant existing or proposed activity in the state.
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