MACKINAC ISLAND ? Despite efforts by the Michigan Senate Republicans to dilute Gov. Jennifer Granholm?s $2 billion tech bond job proposal, Granholm found some decision makers at the Detroit Regional Chamber’s annual conference pressing for a plan as large as $5 billion to deal with an economic outlook as dour as any in recent memory.
The governor, who said she would be open to a larger proposal, insisted that $2 billion is the minimum that should be done to take advantage of current circumstances, saying the state must be “bold” in its approach. Granholm used the conference as an opportunity to build support for the bond and other parts of her jobs and economic package including revisions in the single business tax.
The Senate is poised to vote this week on the scaled-down bond proposal, but prospects in the House are murkier and the clock is ticking if the plan is to appear on this year’s November ballot as the governor wants.
Granholm did not plow any new ground in trying to build support for the proposals, but her tone was more urgent. And Saturday, she told reporters she may call on legislators to return in the summer to pass the bond if they recess for the summer without taking action.
“I certainly hope and expect that they will pass legislation that will create jobs,” the governor said. “If they’ve got a plan, they should bring it to the plate. If not, they should do mine and do it with urgency.”
House Republican spokesperson Matt Resch said a special summer session would not be required since leaders plan to complete their work before recessing.
The deadline to put an issue on the ballot is in early September, but Granholm said the public needs time to understand the issue.
Granholm said she appreciates the decision of the Senate to proceed with a bond plan, but said the $1 billion amount GOP leaders are pushing will not make a sufficient impact. “I would like them to think more boldly,” she said, adding she was encouraged by the response of business leaders at the conference.
Senate majority Leader Ken Sikkema (R-Wyoming) said he is not wedded to that amount, but said the first step is to identify how the money will be spent. During the euphoria of those pushing for ever higher bond amounts, Sikkema had attempted to be recognized to talk about the cost of repaying the bonds and warn about a Christmas tree turning into a tax obligation that will face residents for 30 years.
“This notion that we go out for a $4 billion-$5 billion bond plan means a massive tax increase,” he said. The state would be obligated for $120 million a year for 30 years under the governor’s proposal, and that comes at a time when the state “can’t afford the things we want now.”
He said he set the bond plan in the Senate at $1 billion so he had room to negotiate on that as well as other job proposals the GOP has put forth.
Rep. Andy Dillon (D-Redford Township) is working with Rep. Bill Huizenga (R-Zeeland) on an alternative that would not involve a constitutional amendment requiring a vote of the general public and also would raise about $1 billion. Its emphasis, he said, is in getting capital to research and development efforts more quickly than would occur under the governor’s plan and do away with the proposal to let the state have a stake in private companies.
The alternative would “securitize” about 25 percent of the state’s tobacco settlement funds to raise the money for investment in research. The proposal would not devote funds, as would the governor’s plan, for infrastructure, but Mr. Dillon said, “the capital markets are every bit as important as roads and sewers.”
He said he is “not out on a limb” with the proposal, which he said is in the final drafting stages. Audience members applauded when Ms. Granholm said the state has “plenty of room” to take on more debt based on its ranking as 26th among all states in per capita debt.
“Because we can afford it, we need to send the message that if we don’t want to invest in ourselves, who will. We must create and shape our own destiny, our own cycle,” Granholm said of the need to provide an economic boost.
But the governor would not commit to a larger bond plan when asked why she chose $2 billion as the amount (“Do I hear $2.5 billion?” she asked the audience at one point), but she put Rep. Lorence Wenke (R-Richland) on the spot asking him if his caucus would go to that amount. Wenke said he could support $2 billion, but added, “$3 billion is a bit much.”
She asked the business leaders for help in getting the proposal on the ballot and to pass it once it is on the ballot.
The critical economic outlook the state is facing was emphasized by a series of headlines in recent weeks which the governor displayed, such as the downgrading of General Motors and Ford debt ratings to junk bond status, the state holding the nation’s highest unemployment rate and several companies laying off workers or facing severe financial strains.
Granholm said the investment from the bond would also help the state go to other countries – Granholm is making a trade trip to Japan in July – and urge them to invest in Michigan where they would be close to suppliers.
“The question is can we come together to make the changes we need,” Granholm said. “We need dramatic change; we are in an economic crisis in this state.”
BUSINESS TAX: The governor warned that Michigan’s economic base will not only stagnate, but will look to move out of the state unless auto manufacturers get some tax relief, which she included in a restructuring of the business tax.
“We cannot allow our major employers to up and leave,” Granholm said as she related the conclusions of a conversation she had with an auto manufacturer.
The GOP and the governor remain fundamentally divided over the question of whether a tax restructuring should be revenue neutral as Granholm insists, or if all businesses should be given some tax relief. The governor told reporters Saturday she would love to be in a position to give cuts to all businesses, but that the state budget cannot take further cuts and defended her plan as rectifying 30 years of a structure that created “winners and losers” in the tax structure.
Sikkema remains opposed to the governor’s proposal after six hearings around the state by Senate and House committees. The Big Three, Oakland County leaders and others do support the plan, but Sikkema said small business in particular has opposed it.
THE SERIOUS ECONOMIC CLOUD: Former state budget director Mark Murray, now president of Grand Valley State University, said the governor’s tax and bond plans are at least in the right arena to deal with an economic crisis as troubling as the state has seen. He said he is disturbed by an apparent under appreciation of the seriousness of last month’s announcement that Wall Street downgraded long term debt of Ford and General Motors to junk bond status.
“May 5 may have been the red letter day of the year and maybe the red letter day of the decade,” he said. It marked the analysis of a third party of the long-term outlook of the two anchors of the Michigan economy, yet he said it has been treated by most officials as “one day’s news and the next day we turn to something else.”
Murray said higher education, schools, businesses and every sector needs to understand how serious are the implications of that analysis and the imperative that the state needs to change its approach to the economy.
“The day for business as usual, May 5 was as clear a signal as we could get that we need to get across the divide and get moving on doing all the things we need to move forward,” Murray said.
In addition to the bond and business tax changes, he said the state will have to extend the sales tax to some services and make reforms in some of the ways public bodies operate, especially in introducing competitive bidding on school
