Whether you know it by its new name: Business Leaders for Michigan – or still think of it as Detroit Renaissance, the fact is that “BLM” is a major force for business leadership in Michigan. And they have some very interesting ideas as to how to turn this state around.
First: Business Leaders has two top-flight leaders, CEO Doug Rothwell and Dave Brandon, the chairman of the board who is also the CEO of Domino’s Pizza.
Beyond that, however, BLM has an all-star membership that includes the top leaders of Michigan’s biggest businesses and universities. Together, they account for 300,000 jobs, $1 TRILLION in annual revenue and 130,000 students. Only the Michigan Chamber of Commerce has comparable, statewide business clout.
Business Leaders for Michigan adopted their name change partly to indicate that broadening the reach of the former Detroit-based group signaled an important step forward: Bringing together major institutions with a big stake in Michigan’s future.
Late this summer, the group came up with their Business Leaders Michigan Turnaround Plan — is an ambitious, far-reaching and surprisingly detailed blueprint to return Michigan to a position of top ten national economic leadership.
It sets out a compelling case for change: “Michigan has been getting relatively poorer, smaller and less competitive. The result is a state with chronic budget shortfalls and the highest unemployment rate in the nation. Incremental changes to the state’s budget, tax and economic policies will be insufficient to grow the stat’’s economy. Only a holistic, transformative strategy will do the job.”
Their manifesto forcefully argues that the reason for Michigan’s economic troubles is an uncompetitive business climate: Our companies pay, on average, 3-4 percent more state and local taxes than our competitor states. Companies considering locating in Michigan find the total costs of doing business here is higher than elsewhere. They feel that our business climate is among the worst in the nation.
Like most good business plans, the BLM turnaround plan sets out specific goals: Long-term, the goal is to make Michigan a “top ten” state for job and economic growth. The short-term goal is to make us at least above average in these things.
So … how go we get there? Five ways:
1) Michigan must change the way we manage state finances by requiring two-year state budgets, ruling out any new programs unless others are eliminated and forming an independent council of economists to compile quarterly revenue and spending forecasts.
2) Right-size spending now, by reducing state employee compensation to the average of state workers around the country, or to the average of Michigan private sector workers. Reduce the state workforce by 5 to 10 percent, and adjust state employee health care premiums to the national public sector average. Business Leaders for Michigan estimates those steps, combined, would save from $597 million to $1.93 billion.
3) Undertake a wide-ranging series of structural reforms in the organization, workings and cost of Michigan government at all levels. BLM specifically targets potential local government and school district service sharing, reforms in the prison system and transition to a defined contribution retirement system for educators. The group says these alone would save Michigan around $1 billion a year.
4) Reform the business tax system to make it competitive, more predictable and stable. Also, make it match more closely the changing composition of the economy to one more service-driven. That necessarily means a reduction or elimination in the impact of the 22% surcharge slapped on top of the Michigan Business Tax a little over two
years ago. Some leaders associated with BLM have advocated broadening the base of the sales tax to include services, while reducing the rate to make it roughly revenue-neutral.
5) Finally, invest in our future! Everybody who has run a business knows perfectly well that while you can save a company from collapse by cutting costs, you can’t thrive on cost-cutting alone. A business or a state has to invest in its durable, distinctive competitive advantages. Among those: Our great universities, our airport and freeway infrastructure, and our lakes and communities which make Michigan a great place to live.
Taken together, the Business Leaders for Michigan Turnaround Plan is a sensible but ambitious attempt to pull together – from the perspective of the business community – many of the reform ideas that have been floating around for the last couple of years.
This agenda for reform is backed by people, companies and universities with clout. That’s important, because if we’ve learned anything from the endless and inconsequential haggling that has been going on in Lansing this year, the only way we’re ever going to get serious reform is by bringing heavy clout to bear.
CEO Rothwell and Board Chair Brandon both deserve a big pat on the back for pulling some of the most powerful people in Michigan together in such a focused and important way.
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Editor’s Note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics and a former chairman of the Michigan chapter of the Nature Conservancy. He is also the founder and president of The Center for Michigan, a bipartisan centrist think-and-do tank which is sponsoring Michigan’s Defining Moment, a public engagement outreach campaign for citizens. The opinions expressed here are Power’s own and do not represent the official views of The Center. He welcomes your comments at ppower@thecenterformichigan.net.
4 Comments
Phil, solid post. I would like to offer one additional observation.
Many states in the US, and many countries in the world are leveraging the value of social production through the active participation of business, education and citizen resources to rapidly advance their economies. They are actively involving stakeholders in problem solving on a non-economic basis. One of the major challenges to any organization effectuating rapid change is socialization and ownership of that change by the stakeholder communities – in this case business leadership, government employees, and educators.
Many of the best ideas obviously come from those most affected as hard as it sometimes is to engage them. However, failing to do that will lead to the State falling even farther behind even if successful in pushing program elements.
Building value networks efficiently to fully leverage the State’s resources, especially in times of tight budgets is key. That is what most other states are doing and that is what Michigan must do. It is a key strategic imperative. It involves much much more than simply pushing the right messages. It means driving active contributions.
Solid post.
Much of what Business Leaders for Michigan has to say is eminently reasonable, but I cringe every time I see this suggestion that we reduce state worker compensation to the average of private sector workers.
About 24 percent of Michigan’s adults have a bachelor’s degree or higher, yet 55 percent of state employees have this level of education, as over half of jobs in state government require at least a bachelor’s degree. These college-educated state employees are already paid less than college-educated workers in the private sector (see Charlie Ballard’s study, “The Retrenchment of the State Workforce in Michigan”). If the average state worker compensation comes out higher than the private sector average, well, it doesn’t take a bachelor’s degree to know that’s because more than twice as many state government jobs require college degrees than the private sector average.
BLM’s policy folks must be informed enough to know that it’s folly to keep suggesting driving state worker salaries down to the state private sector average – unless they think the state would somehow run better if we drove out college-educated public servants and replaced them with high school grads! I can only conclude from the fact that I see this suggestion over and over again that BLM is disingenuously trying to undermine any and all public support for the possibility of tax increases by portraying Michigan’s state government as horrifically bloated despite all of the cuts in recent years.
I am really disappointed with point #4 about Michigan business taxes. What do the Michigan business taxes have to be to compete with Ohio business taxes, Mexico, and in the global economy? Why should the state of Michigan and local governments be using business taxes to balance their budgets? Its tradition but not real world. If business taxes are not a problem, eliminate all tax abatements and Renaissance Zones as being not needed. Be consistent.
I read the proposed plan and agree with its high level primary conclusions — reduce state gov’t / waste and improve MI as a place to do business. What is largely missing are the specifics of Michigan’s assets that need to be capitalized on. It’s a bit disingenous to highlight our educational system without mentioning the tremendous brain drain that takes place. Also, where is mention of our hospitals / research institutions and similar assets that can position Michigan to lead in the next revolution in the way Health Care is managed in this country. I’d like to see working groups take this framework and drill down into industry by industry goals. A good start — but definitely more work to be done.