It was largely what you might expect — but with one silver lining. After reciting the all-too-familiar facts of Michigan's many woes, the article went on to praise the Pure Michigan advertising effort as one of the state's few good things.

"A lovely tourism campaign has advertised Michigan’s beaches and forests, a bright antidote to relentless gloomy news stories."

They were on the mark. The campaign, funded last year at $40 million, proved hugely effective. Market research conducted by Travel Michigan, the state's tourism agency, indicated that the 2009 campaign – the first national TV campaign the state has ever executed – brought in 1.2 million tourists who would not have visited the state if they hadn't seen the Pure Michigan ads.

Other research conducted by Longwoods International for the tourism office found the Pure Michigan ads returned to the state nearly three bucks in increased sales tax revenue for every dollar invested in the ads. Travel Michigan boss George Zimmerman says these tourists spent an increase of $250 million in the state in 2009. (Full disclosure: I'm the unpaid vice-chairman of the Michigan Economic Development Corporation, which houses Michigan Travel.)

Anecdotal evidence of the campaign's success abounds. Daniel Musser III, President of Mackinac Island's Grand Hotel, told a Senate Finance Committee hearing that half the customers who booked the top packages last year were from out of state.

So while the automotive sector declined, hopes and badly needed profits surged in Michigan's tourist business, which vies with agriculture for standing as our number two industry.

Sensibly, this was followed last month by the Michigan House of Representatives last month approving — nearly unanimously — $33 million in Pure Michigan funding for this year, coupling that with a promise of long-term sustained support.

The bill was then passed on to the Senate Finance Committee, chaired by Sen. Nancy Cassis (R-Novi), who promptly embarked on a muddled discussion about the methodology that lay behind the 3:1 return on investment research report. She charged Travel Michigan with failing to provide her with the details. "None of this can be verified," Cassis told me when we talked last week.

When I asked Travel Michigan head George Zimmerman about this, he responded that the full research report for 2009 had not been completed, but that the return on investment part was complete and had been transmitted to Senator Cassis. He also said that there were no pending requests for information from the Senate committee.

So tourism supporters were saddened when the Senate last week approved only $9.5 million in extra funding to keep the Pure Michigan campaign from going dark this year.

Added to the $5.5 million previously appropriated, this limits Pure Michigan spending for this year to around $15 million, hardly enough to put on a full national ad campaign. "The loss of momentum for Michigan travel is tragic," Zimmerman said.

But it looks as though that's it, at least for this year. State Representative Dan Scripps (D-Northport), one of Lansing's bright lights, told me the House is likely to go along with the $9.6 million measure as the best that can be done for now.

EDITOR'S NOTE: On March 9, the House actually stuck to its guns and substituted Scripps' bill for the Senate bill led by Cassis. Scripps bill is a long-term solution which would pay for future tourism marketing with growth in tourism related sales taxes and a fee on car rentals near Michigan airports. The standoff is now headed to a House-Senate conference committee and, if it isn't worked out soon, the delay will threaten the success of the summer tourism marketing campaign.

Sen. Gretchen Whitmer (D-East Lansing) commented at a Finance Committee hearing that "reasonable people choose amputation over death, so I’ll vote for amputation."

How sad. How shortsighted. And how silly.

As any business person knows, the key to running a successful company is to identify its key, durable, distinctive competitive assets. This done, you have to mount a sustainable long-term program of investing in them. This is first-year business school stuff.

We all know that one of Michigan's key competitive assets is the beauty and wonder of our natural resources that make our state a great tourist destination. And we all know that the Pure Michigan campaign is successful and cost-effective.

So what happens? Thanks to Sen. Cassis, our legislators decide to cut investment in promoting one of Michigan's world-class competitive assets. Does this make sense? No.

Is it a missed opportunity? Absolutely.

But sadly, in this case, as in so many others, Michigan seems to rarely miss an opportunity to miss an opportunity.

***

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

One goes to Governor Jennifer Granholm for taking the leadership reins at last, as expressed in her recent budget and reform proposals. Finally, she's calling for cuts in state employee pay and benefits. Going against the grain of her long-time political supporters in organized labor cannot have been easy.

I'm hearing that public employee unions are furious. But the governor did it, and she claims if her proposals are adopted they'd save the state nearly $8 billion over the next decade.

The governor is also calling for changes in prison sentencing rules and parole practices that will lead to further reductions in inmate levels and more cuts in spending by the Department of Corrections. Reforming the parole system is inherently risky. Any time you release any sizable group of convicts, it's virtually inevitable that at least one of them will do something awful.

But so will many other people this year who have no previous felony records. No policy will ever produce a perfect result. And any state that spends more on warehousing felons than on higher education for its young people is a state that has its priorities wrong.

And that's precisely what Michigan has been doing. That doesn't mean that the governor's proposed budget is airtight or flawless. For example, it relies on balancing the books with nearly half a billion dollars in stimulus money from Washington.

The budget also assumes saving $100 million from passage of good-time release for prisoners. Both may – or may not – come to pass. And if they don't … what's plan B? Plan C?

Meanwhile, though it isn't drawing as much press attention, the Granholm Administration is now negotiating new labor contracts with state worker unions. The next round of contracts won't have much impact on this year’s budget, if they lock in another round of pay increases, it will perpetuate a vicious circle that will damage state government flexibility for years to come.

The governor isn't the only one deserving a belated Valentine, however. My second rose goes to the business community for dogged pursuit of money-saving reforms in government at all levels.

The Michigan Chamber of Commerce, the Detroit Regional Chamber, the Grand Rapids Chamber, the Michigan Manufacturers Association and the Small Business Association of Michigan have been beating the reform drum for years and years. And Doug Rothwell, now head of Business Leaders for Michigan (the successor group to Detroit Renaissance) has spent countless hours bargaining, negotiating, and just plain pleading with our political leaders to enact far-reaching reforms.

Fortunately, I'm convinced that these messages are getting through to the governor, and I hope they'll resonate with House Speaker Andy Dillon and Senate Majority Leader Mike Bishop in time for serious negotiations before we get too far into this election year.

My overall sense is that this is beginning to happen, that some of the big picture items are now on the table. The governor finally has proposed spending cuts and reforms in the structure and cost of state government. And she has urged big reforms in our patchwork tax system that, as it stands, hurts our ability to attract business. Speaker Dillon has suggested pooling state worker health care benefits, something he says could save $900 million. Majority Senate Republicans have proposed a whole series of reforms and cuts.

The time has come for the Big Three to sit down together and hammer out a "grand bargain" to put Michigan on the road to big-time reform, and a sane plan to get our financial house in order.

The timing couldn't be better. The preconditions include big and good ideas; a state financial crisis that won’t go away; and a state whose economy is still running on almost empty.

Plus, virtually everyone I see – everybody outside Lansing, that is – is sick and tired of all the partisan positioning rhetoric that passes for actually getting something done.

Ironically, virtually everybody I talk with – inside Lansing – says the odds are stacked firmly against any real reform.

It's time for the politicians to pay attention to the people.

The window of opportunity in this political year is very narrow, maybe two-three months, before electioneering silliness crashes over us.

If our leaders can finally, actually get together this year and do something constructive to save our state, they'll deserve red roses for years and years to come.

***
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.

Or, allow us to summarize for you.

A week after the governor's budget address, the dust is clearing and economists are weighing in on the impacts. A few quick highlights…

POSITIVE MOVES, BUT STILL NO SUSTAINABLE SOLUTION: As we applauded last week, Granholm's budget makes some tough cuts on state employee pay and benefits and begins to restructure the outmoded state tax system for the 21st Century. But it relies heavily on more than a billion dollars in one-time federal stimulus, one-time bumps in tax revenue from tax code changes, and savings from prison sentencing reforms that face a steep uphill battle in the Michigan Senate. "It just pushes the problem after the next election," House Fiscal Agency Director Mitch Bean said at a state budget discussion in Lansing on Thursday. "It doesn't solve things."

DON’T EXPECT A SOLUTION THIS YEAR: The table is set. All four corners of the Michigan Legislature – both party caucuses in both chambers – have outlined many money-saving reform proposals and Granholm has taken the lead from Business Leaders for Michigan and the Anderson Economic Group to overhaul the tax system. But don't bet on it for this year. Granholm's recent speeches took whacks at "pundits" who doubt Lansing's ability to pass comprehensive budget and tax reform before the 2010 election silly season overtakes serious policy considerations. The Center for Michigan is certainly among those doubtful pundits. So are some of the state's leading economists. "I don't believe you can solve it in one year and I don't believe you can solve it this year," Mitch Bean said Thursday. "I don't believe the political will exists to accomplish it this year. But I do believe it can be solved. The longer we let it go, the tougher it gets." If Bean is right, it means another year of long-term uncertainty for schools and local governments dependent on the state budget and businesses whose future tax liabilities remain unclear.

NO MAGIC BULLETS TO AVOID ADDITIONAL TAXES: Granholm's shift to a sales tax on services results in a more than half-billion-dollar net increase in tax revenues this year. (Though the switch steadily becomes "revenue neutral" by about 2014 as business taxes are reduced.) Because of the tax increase, the guv's budget has already been declared dead on arrival by House Speaker Andy Dillon and Senate Majority Leader Mike Bishop who are maintaining a "cuts first" stance. Economists Bean and Charley Ballard contend you just can't get there with all cuts. "There is tremendous disconnect between the political discussion, public perception, and the budget reality," MSU's Ballard said Thursday. Even an all-cuts budget for 2010-11 would still result in a half-billion-dollar deficit in 2011-12 because the outdated manufacturing-based state tax system is failing to capture revenues from the 21st Century services-based economy, the economists said Thursday during their lunch panel in the House Office Building in Lansing.
"If someone offers you a silver bullet to this problem, the first thing you should do is shoot them with it," Bean said.

As we've written in this newsletter many times and as the economists highlighted Thursday, our state tax system includes more than $30 million in tax breaks for everyone from workers who make less than $20,000 per year to Hollywood film companies, to advanced battery manufacturers who will benefit from more than $1 billion in tax breaks that come on line in the next couple years. Altogether, the state's inflation-adjusted economy has decreased by 3 percent in the past decade while the state's inflation-adjusted general fund budget revenues are down 43 percent over the same time period. "A three percent decline in the economy does not explain a 43 percent drop in revenue," Bean said. "Something else is going on and that something else is our state tax policy… We've done this to ourselves… Everybody loves to pass a tax cut… It's from both sides of the aisle. They are equal-opportunity offenders."

THE MONSTER MEDICAID BUDGET: There is no slowing the massive Medicaid system which now eats up more than one-fifth of the state general fund budget and accounts for more than 40 percent of the births and more than 70 percent of nursing home expenditures in the state. Part of the quandary is that the state gains nearly three bucks in federal money for every additional dollar in state Medicaid spending. "There is no tax structure that would keep up with this kind of spending increase," Bean says of the ever-ballooning Medicaid budget, which nearly doubled in the last decade. "This has crowded out a lot of things in the budget over the years. I don’t know what we can do about it. This is a national problem."

WHO WOULD PAY THE SERVICES TAX? A quick summary of how the governor's services tax switch would work, as described by a Senate Fiscal Agency analysis released this week… By 2014, businesses get a billion-dollar cut in the Michigan Business Tax. Consumers get a half-billion-dollar cut in the general sales tax as the rate drops a half-point to 5.5 percent. Consumers and businesses would see a billion-and-a-half tax increase as the sales tax is extended to services. All in all, by 2014, it’s a wash – the system is changed to better keep up with the 21st Century services economy, but overall tax revenues are neutral. So, who would pay the services taxes and how? Two-thirds of the total services taxes would be levied on four kinds of economic activity…

• About 25 percent from taxes on personal services like dry cleaning, haircuts and other "personal care," and funeral services.

• About 13.5 percent from taxes on sports and entertainment tickets and recreation like skiing, golf, bowling, and fitness centers.

• Another 13.5 percent from "administrative" services like waste hauling, landscaping, travel agents, and home and business security systems.

• Another 12 percent from taxes on information services like movies, and cable/satellite television.

That slogan dates back to the 1960s, but for Michigan, it was never truer than it is now. Our long-suffering state is staring at the very real possibility of yet another dreary round of inaction from a paralyzed state government. This year, we are facing yet another looming budget deficit, now estimated to be at least $1.7 billion.

What's maddening is that it is very clear what can be done about it. The stage is set for another "grand bargain," as Gov. Jennifer Granholm puts it. That would mean enacting a whole bunch of reforms in the structure, workings and cost of government at all levels, including downsizing public employee wages and fringes.

That would also mean simultaneously reforming the tax system, possibly by reducing the rate of the sales tax from 6 percent to 5.5 by extending it to services, exempting medical, educational and business-to-business services. Doing so would also allow the state to eliminate the 20 percent surcharge in the Michigan Business Tax.

That's the obvious, common-sense solution — and it is something that is anathema to many in the dysfunctional political culture we have today Most Lansing insiders I talk with guess there’s only a 10-20 percent chance our political leaders will get anything far-reaching done this year. Instead, they say, they'll pass some form of "continuation budget," kick the can down the road and leave the people who take office next year to clean up the mess.

There are two words for this, and they go together: Appalling is one. Stalemate is the other.

Now, to be fair, two of our state's most powerful leaders have made valuable suggestions to end the impasse: Speaker of the House Andy Dillon (D-Redford) has proposed putting the health care programs of all public employees (including teachers) into one giant pool. Dillon estimated that this would save $900 million; others think it would be less. But it’s clear his suggestion is one of the few big enough to be relevant to Michigan's financial problems.

That has, naturally, earned him the opposition, even hatred, of the public employee unions, especially the Michigan Education Association. But at least he’s shown the guts to go out on a limb.

So, too, finally, has the governor. After years of being unwilling to accept the necessity of cutting the costs of government, she unveiled last month some very sensible reform proposals, including giving state workers strong incentives to retire, cutting fringes and pooling health care. She estimates annual savings at $450 million.

That's a very significant step. And Granholm deserves lots of credit for taking on traditional Democrat-leaning interest groups and leading like a governor should.

But what the third member of our top leadership, Senate Majority Leader Mike Bishop (R-Rochester)?

Last year, he rammed through an all-cuts budget plan that sacrificed programs and still has people screaming. This year, Senate Republicans produced a reform plan that encouraged local governments to share services, ending some Medicaid coverage and a 5 percent pay cut for public employees. He's also hinted that the $1.8 billion deficit can be cured by spending cuts alone.

Democrats disagree. Has Bishop shown any hint that he might compromise? Nah. Last year, Bishop refused to budge from an all cuts budget. Most Republicans figure he won that round. By and large, they see no reason to change now, especially with every legislative and executive job up for election in November.

Best as I can figure it, the Republican political playbook goes this way: Oppose any compromise whatsoever with Granholm/Dillon and the Democrats. Then savage them for failing to get the job done.

Beyond the obvious hypocrisy involved, failure to act to solve Michigan's financial problems merely makes those problems that much worse for the millions of citizens who have every right to ask their leaders to stand up and lead for the common good.

But too many people can't see past the political gamesmanship, especially when Bishop is running hard for the GOP nomination for Attorney General, in a contest where he is now an underdog to former congressman Bill Schuette.

Too often, in today's leaders' heads, prospect of higher office trumps obligation to the common good. Indeed, last week, Michigan pundit-at-large Craig Ruff quoted British author Lytton Strachey, who long ago sarcastically asked "What has posterity ever done for me?"

Granholm is term-limited out of office at the end of the year; but it looks like she's chosen to try to establish a legacy of responsible leadership. Dillon is likely going to run for governor; regardless of what happens, he can lay claim to having made a far-reaching, responsible proposal to attack the state's financial problems.

And Senator Bishop? Only time will tell. But he might be well advised to remember that if you're not part of the solution, you're a big part of the problem.

***

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.

Overwhelmingly, jobs, good ones and lots of them. A thriving, diversified, growing economy, attractive enough to keep talented people here and bring in others from elsewhere.

In short, a prosperous Michigan.

Whether we'll get there again remains to be seen. Obviously, the biggest factors are the dynamism and imagination of the private sector – whether the Michigan-based domestic auto industry pulls itself together, for example. But public policy can have an impact, too.

There are two basic ways to look at this:

One might be called "hunting and gathering," in which state agencies like the Michigan Economic Development Corporation (MEDC) feverishly work to put together packages to attract or retain companies with big plants and lots of jobs. (Full disclosure: I'm the unpaid vice-chairman of the MEDC board.)

The upside of this strategy is that when you get a hit, it's likely to be a big one. The downside is that chasing smokestacks these days may not result in lots of new jobs, even when you successfully keep or lure a major installation.

Take autos, for example. Certainly, the industry will remain at the core of Michigan's economy. But motor vehicle manufacturers themselves are unlikely to produce many new jobs. Even if they once again thrive, they will do so by making enormous productivity gains that mean more vehicles will be built with fewer workers.

Another way to look at economic development policy is "gardening," that is, doing what you can to encourage, nurture and help smaller home-grown companies, whether they are outright start-ups or ones that have been around for several years.

The downside of this strategy is that one little company obviously won't produce lots of jobs. However, taken together, small companies provide at least half of all jobs in Michigan. And, most importantly, experts agree that smaller firms will produce the vast majority of future new jobs.

Lots of attention has been paid in recent years to efforts to help start-up companies, by accelerating the transfer of inventions from university laboratories into the market, or by finding venture capital firms willing to invest. This is anything but trivial for our economy.

Michigan's three major universities — Michigan State, the University of Michigan and Wayne State — have founded something called the University Research Corridor, which is meant to help and nuture such companies. The URC calculates that its work has a $14.5 billion annual impact on the Michigan economy. So far, it has also led to the birth of 102 start-up companies.

Unfortunately, venture capital firms often jerk newly started companies to their headquarters in places like California or Massachusetts in order to keep a close eye on how they’re doing.

So let's focus on "second-stage" companies, those that have evolved past the startup phase, but have not yet grown to maturity. A business typically enters its second stage when it approaches $1 million in sales and continues until it reaches around $50 million.

By that time, a company should have developed the professional management of a mature firm.

Second-stage companies have been in a sense the neglected stepchildren of our economic development strategy. Yet they are the ones that will provide lots of jobs if they succeed. They are the ones with roots firmly planted in Michigan soil, and far less likely to be uprooted by a venture capitalist.

Yet the needs of second-stage firms are much different from those of either startups or mature large companies, according to Dan Wyant, president of the Edward Lowe Foundation, an operating foundation that focuses on new and growing businesses.

Rob Fowler, CEO of the Small Business Association of Michigan (SBAM), based in Lansing, agrees: "Typically, second-stage firms need access to capital and to management experience," says Fowler. "Most public economic development programs don't really focus on the particular needs of second stage companies."

To test their ideas, I talked with Yan Ness, CEO of On Line Tech, Inc., an Ann Arbor firm started in 2003. His firm is a classic second-stage company, with sales of around $20 million and 20 employees. Ness says he needs three key things: Executive and management training; access to skilled and experienced candidates for jobs; and capital. "Capital structured for the growth stage we're in is crucial,” he explained. "We're beyond the interest of the VCs (venture capital firms) and too risky for a bank, but we absolutely must have access to capital in order to grow."

Another second-stage firm is SPACE, Inc., an office infrastructure company based in Midland. Founded in 1995, the firm now has 34 employees and $10-$15 million in sales.

"We've got to concentrate on our management team, says Kathie Fuce-Hobohm, SPACE's dealer principal. "We grew very rapidly, maybe too much so, and that stressed the entire firm. And I needed extra training in financial literacy, for example. If I had known about the kind of help available to second stage companies like mine, I would have avoided lots of mistakes," she adds.

The lesson couldn't be more clear. Michigan needs an economic development strategy that wastes less time on unproductive "hunting and gathering," or smokestack chasing.

We need to concentrate more on "gardening," on nurturing and sustaining our home-grown companies. The sooner our economic development policies reflect this focus, the better.

***

Editor's Note: The Edward Lowe Foundation can be reached at 269-445-4200 or www.lowe.org. SBAM is at 517-267-2203 or www.sbam.org. 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.

Here at home, it's clear that the near-collapse of our domestic automobile industry is the major contributor to our present economic disaster –and before that, to the decline we have faced over the past 10 years. Never mind whether the biggest culprit was narrow-minded and poor management, bad product decisions, or kowtowing to the unions. The fact is that the industry shriveled, and over the decade, Michigan lost nearly a million jobs.

Now, our state is beginning to lose population as well.

Nationally, the worst economic downturn since the 1930s was clearly provoked by a combination of astounding greed, terrible risk management and asleep-at-the-switch government regulation of the financial industry And, as anybody who is trying to find a job or has lost their house can tell you, we're not nearly out of the woods yet.

Certainly not in Michigan, where we have spent the last decade utterly failing to come to terms with a financial crisis that threatens to swamp state and local government, our schools and the quality of life in our communities. (The projected deficit for next year's General Fund is more than $2 billion.) Failures roost equally on the right on the left, with Republicans shouting for more and more tax cuts and Democrats trying to figure out how to disguise tax increases. Neither party has anything close to a plan to get our financial house in order, and both are doing everything they can to duck the far-reaching reforms that are necessary.

In Washington, the national debt is now estimated by the Treasury at $12.1 trillion and climbing fast, while the deficit for the current fiscal year is estimated by Bloomberg News Service at $1.4 trillion — nearly three times the previous record.

Rising deficits are the product of high spending for wars in Iraq and Afghanistan, government intervention to undo the recession and tax cuts enacted over the years by the Bush Administration. Once again, neither Republicans nor Democrats have proposed a solid or realistic plan to get our national financial house in order.

Worse, it appears that our political institutions – nationally and in Michigan – are losing the capacity and/or the will to function effectively to fix our problems. In Washington, the atmosphere is nothing less than acrid, futile partisanship, "the worst I’ve ever seen," according to U. S. Rep. John Dingell (D-Dearborn) and he should know. He has served in the House longer than anyone in history.

Over the past decade in Lansing, each party has taken turns beating up on the other, rather than achieving anything in particular to help the people of the state get through their financial crisis. For example: Experts on both the left and right agree that Michigan's tax system (both personal and business) needs wholesale reform, but political topsiders concede there's little chance anything will be done until after this fall's election … if then.

That is frustrating, because oddly enough, the climate for reform, in Michigan at least, has never been better, if only because things are so bad … and the prospect for change is so dim.

Business Leaders for Michigan, the group formerly known as Detroit Renaissance, has presented a "turnaround plan" that offers ways to bring our state into the top ten in the country. Other reform groups, including The Center for Michigan, have proposed similarly far-reaching packages. Business and reform leaders in the state spent much of the holiday break meeting face to face with Gov. Jennifer Granholm, Speaker of the House Andy Dillon and Senate Majority Leader Mike Bishop to plead for progress on reform.

The likely outcome: Forget about it.

Looking at the wreckage, it's hard to overstate the sad consequences of the past decade for both our state and our nation.

Here at home, we appear to be losing faith in our capacity of sustain our distinctive competitive assets such as our universities, the brainpower of our kids and our magnificent quality of life.

How we are to retain the best and the brightest – let alone attract them from elsewhere – when we have no clear long-term strategy or short-term recipe for reform – is not at all clear.

Nationally, I am beginning to suspect that future historians will point to the decade we've just lived through as the beginning of America’s relative decline in worldwide leadership and prosperity.

And nothing would make me happier than if the next ten years prove me dead wrong.

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.

In my view, it was the best possible example of citizen engagement and clear headed interest group participation, taken at a time when many have despaired of such a thing ever happening.

Billed as an Action Group meeting on budgeting and tax reform in Michigan, the session was cast as an experiment to see if a group of engaged citizens and diverse experts could find ways to exchange views in a constructive way and begin the task of exploring the issues that will characterize Michigan's policy debates from now until Election Day 2010 and the swearing in of a new governor and legislature in 2011.

Experts included:

Economics professor Charles Ballard, Michigan State University
Rob Fowler, President and CEO of Small Business of Michigan
Dan Gilmartin, Executive Director and CEO of the Michigan Municipal League
Sharon Parks, President and CEO of the Michigan League for Human Services
Doug Rothwell, President and CEO of Business Leaders for Michigan
Doug Pratt, Director of Communications, Michigan Education Association
Richard Studley, President and CEO of the Michigan State Chamber of Commerce

As the issues guide distributed to participants made clear, the facts of Michigan's present situation are dire. There is a structural gap between what the state takes in and what it spends that has persisted for years at levels between $1-2 billion. Left unaddressed, this gap is projected to reach $10 billion by 2017.

This means that the choices for future governors and legislators are limited but clear: 1) raise taxes; 2) cut spending; 3) implement a strategic combination of tax increases, spending cuts and structural reforms in the organization and cost of Michigan government at state, local and educational levels.

While there were substantial disagreements between the various interest groups represented – business, labor, education and local government – it appeared to me there exist elements of a "grand bargain" that could drive Michigan policy in a new and much more constructive direction than the paralysis of recent years. Components might include expanding the sales tax to services, cutting business taxes and implementing reforms in the structure, workings and cost of Michigan government at all levels.

State revenues have deteriorated enormously within the past two years, the consequence of the prolonged recession. Amounting to more than $9 billion in 2006, the General Fund is now projected to be less than $7 billion for FY 2010-11. Many agreed such a radical shortfall in revenue will require the state no longer conduct business as usual.

Audience members used "clickers" to express their preferences on a number of issues.

Should the state budget be bigger, smaller or about the same as it is now? If the state were to increase spending, most said K-12 schools, followed by economic development. If the state were to cut spending, the big favorite was public safety (including the Department of Corrections).

In other votes a majority preferred to extend the sales tax to services, if taxes were to be increased, while nearly the same number chose to cut business taxes.

Opening comments by panel members confirmed their perspectives:

Ballard: "Our policy of systematic disinvestment in education is just crazy."

Fowler: "Michigan is like a struggling company. We can just raise prices (that is raise taxes) or we can become more competitive by strategically cutting expenses."

Gilmartin: "If your revenue stream looks like the ones faced by our local government units, you'd close the door and go out of business."

Parks: "We have millions of people with much greater needs, but less ability to provide help for them than at any time I can remember."

Pratt: "Investing in public education has a far greater payoff for the Michigan economy than any other investment."

Rothwell: "There is no silver bullet, no magic solution. The state lacks a comprehensive strategy to manager our financial affairs or foster its growth."

Studley: "The biggest problem with our tax policy is that we're rapidly running out of tax payers. A strong and growing economy is essential to any tax reform plan."

Julie, a young entrepreneur, asked the panel to justify to her just why she should stay in Michigan. Fowler pointed out that Michigan, rather than chasing big manufacturing companies -"smokestacks" – should develop an entrepreneur-friendly culture, "gardening rather than hunting and gathering." Gilmartin agreed that the tax climate is not the key issue for young people: "The young people who are moving to Chicago are doing because they like Chicago as a place, not because of the tax climate."

John Austin, Vice Chair of the State Board of Education asked which component of the
state's education structure was the more important, K-12 or higher education? Rothwell answered that it was higher education, including community colleges, while Ballard suggested very early childhood education programs had proven to have enormously high payoff rates.

Fred Dillingham, a former State Representative and now head of economic development for
Livingston County argued that "Michigan is no longer a wealthy state," and any policy we select has to take that into consideration. Pointing out that when considering tax policy, the rate of tax was less important than the base on which the tax is levied, he argued that extending the sales tax to services while perhaps cutting the rate from the present 6 percent might be a good compromise.

And I pointed out that many observers have essentially given up on the idea
that Michigan leaders can get anything serious done before the next election.

"Doing that would be just admitting that our politics is broken. Instead," I urged, "let's find a way forward right now. Let's find some specific things we can agree on and get them done."

"No," she said. "No, no, no, no."

Pause.

Then, “no, no, no, no, no.”

“Just practicing for the terrible twos,” said my wife.

She was right, of course. If there’s something two year-olds are really good at, it’s saying “No” over and over and over again.

All this came to mind when I reflected on the continuing quarrel between Gov. Jennifer Granholm and Senate Majority Leader Mike Bishop over school funding. Alert readers will remember that in order to plug the state budget deficit — which was almost $3 billion — the legislature first cut school spending. Then the governor cut it some more, saying the money just wasn’t there.

The result was cuts amounting to between $292 and $600 per child in every school district in Michigan.

Senator Bishop claimed the governor was just trying to scare the legislature into increasing taxes. The school people went ballistic.

They held rallies on the Capitol steps and complaining that unforeseen cuts of this size (especially coming so late in their fiscal year) would devastate the schools. Governor Granholm has been urging people to beat on the Republican-controlled state senate to adopt “narrowly targeted” revenue increases.

And Senator Bishop has been busily saying “No, no, no, no.”

Until now, I’ve been content to watch as this spat played out. But when I was over in Utica the other day, local school people bent my ear about how you simply cannot manage a business – or a school district – when, nearly half way into the fiscal year, you have no idea how much money you’re going to have to work with.

They pointed out that if Michigan is going to compete in a global economy, the last place to balance the budget is on the backs of our young people, who need all the knowledge and skills they can get.

Now, there are two dimensions to this quarrel, the long and the short term. The long-term issue is that our schools, like most other elements of state and local government, are in dire need of a stiff dose of structural reform. Our teachers pay is near the top of the national charts, but our students rank in the middle. And teachers still get rich health and pension benefits that chew up nearly half of any funding increases for our schools. And there are all kinds of ways to share services between school districts that would save millions.

But nobody – including Senator Bishop, notably – appears prepared to talk seriously about long-term structural reforms.

The short-term issue involves the current, sudden big cuts to schools that everybody agrees would be chaotic and, maybe, inflict long-term damage on our kids and our state.
The governor has offered a bunch of ways to overcome the shortfall in school funding, but Bishop isn’t buying any of them … because he claims they are “tax increases.”

Well, I’m not so sure.

One proposal would put off scheduled reductions in the personal exemption on the state income tax. This would cost the average Michigan resident $4.35 a year, but it would add up to $55 million for schools. Is a delay in a scheduled tiny reduction of an existing levy a tax increase? I doubt it.

Another idea is to expand the sales tax on cigarettes to snuff and little cigars. That would yield an extra $21 million, according to the Michigan Department of Treasury. Sure, that’s a tax increase for people who use those products,  but why did we exempt snuff and little cigars from tobacco taxes in the first place?

And there are the famous “tax expenditures,” special state tax loopholes given to one particular industry or other. These are complicated matters, ranging from severance taxes on oil produced from “stripper wells,” to subjecting international phone calls to the sales tax. But they could add up to many millions.

But to all of that, Senator Bishop keeps repeating, “No, no, no.”

Now I admire steadfast adherence to principle as much as the next guy. But this is the legislature, for heaven’s sake, where trade-offs and compromise are the stuff of political life!

There are also legitimate questions about Senator Bishop’s  motives, which no doubt include his desire to get the GOP nomination for state attorney general next year. That’s a prize awarded by party activists at their convention, not the voters in a primary. He may be calculating that winning it requires him to bend his knee to the hard-line no-taxers in the Republican Party.

As Lucy, now four, has learned over the past couple of years, growing up in a family requires learning how to get from endless “No” to the occasional, negotiated “Yes.”
Maybe it’s time for Senator Bishop — and everybody else involved in this conflict — to look into their own personal mirrors.

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.

***

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.

Too bad the bard isn't around to comment on the goings-on these days in Lansing, where the sound and fury is loud, and maybe we have a balanced budget … and maybe we don't.

The most optimistic scenario I can come up with is that the legislature and governor will actually now sit down and agree to far-reaching structural reforms in the organization, workings and costs of Michigan government at all levels. In return, the lawmakers might actually find some "revenue enhancements" to undo some of the damage that the "balanced budget" is doing to schools, college students, local government and much else around our state.

House Appropriations Committee Chair George Cushingberry (D-Detroit) was recently quoted by the MIRS news service that he's optimistic the legislature and governor can manage to move down the path of reforming Michigan government in the next 10 months.
But in his column last Sunday, Nolan Finley, Detroit News editorial page editor, indicates he believes this will never happen.

Instead, he thinks our term-limited legislators and governor will leave at the end of next year with hands empty of any real accomplishment. That will leave a state that is progressively worse off, and leave any hopes for reform in the untested and unknown hands of those who will then be newly elected.

However, there is still time to prove that prophecy wrong.

And for those who actually want to give the reform process a shove forward, I offer two good points where we should start: Public Act 312 and the Urban Cooperation Act. PA 312 prevents police and firefighters from going on strike by requiring that unresolved labor disputes go to binding third party arbitration.

That sounds good — in theory. But a 2006 report to the governor estimated the act drives up local government costs by 3 to 5 percent. City managers also complain that it prevents money-saving consolidation among neighboring police and fire departments.

The act can also result in budget-busting back pay awards. In Ann Arbor, according to the local Chamber of Commerce web site, an arbitrator’s award dinged the city for $1.6 million, largely in the form of retroactive pay increases.

Critics also argue such awards can drive up pension benefits to the point where retirement incomes can be greater than wages while officers are on the job. In Taylor, for instance, homeowners are paying six mills in property tax to fund pensions for police and firefighters who are eligible to retire after only 20 years of service.

To put that in perspective: According to State Rep. Doug Geiss (D-Taylor), that’s the same millage residents are paying to fund public schools for 10,000 local children.

The act has an interesting history PA 312 was introduced by then Senator Coleman A. Young, who later became Mayor of Detroit — and then called the law the biggest mistake of his political career.

The second poster child for reform, the so-called Urban Collaboration Act, was adopted back in 1967. It requires that if two or more local government units want to consolidate or merge departments, the employees of the newly merged entity then all get the highest wages and benefits offered by any of the cities involved.

Long-time former Grand Rapids City Manager Kurt Kimball tried for years to get money-saving service sharing agreements among the communities in the area, only to find himself frustrated time after time by the Urban Collaboration Act. "It's a poison pill for local government reform," he says.

Last May, The Center for Michigan held a conference on government collaboration and accountability. The meeting's guide on the issues quoted a Michigan Municipal League official as saying "We can talk about consolidation in Lansing until we’re blue in the face.
Local units of government are even open to the idea. But without changes in the Urban Cooperation Act and Public Act 312, it’s nothing but talk."

So here's a tip for the many folks watching impatiently for any signs of serious cost-saving reform in Michigan government: If you see the legislature and governor actually working to reform these two millstones around our neck, there may be hope.

Otherwise, what you are seeing is just one more noisy tale that sadly, in the final analysis, signifies nothing.

***
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

Odds are that will happen. Now let's assume further that they understand that merely passing a budget is not the same as putting together a solid, long-term plan to put Michigan's financial house in order and lay the foundation for our future prosperity.

And let's even assume they know how important that is– and that they are actually interested in developing that kind of plan.

If they do so, the window of opportunity is now wide open in a way it's seldom been before. Our three main political leaders – Governor Jennifer Granholm, House Speaker Andy Dillon and Senate Majority Leader Mike Bishop – are all term-limited out of office at the end of next year. So they don't have to worry about political backlash threatening their present jobs if they show real leadership.

But once we're into 2010, we’re in an election year and the political system will lose any appetite for serious change. It is essential that our leaders realize just how important this moment is when it comes to a chance for real reform in Michigan.

And so, here's a Roadmap to Prosperity which has arisen from the 7,500 people who have participated in 450 community conversations in the Michigan's Defining Moment campaign.

Milestone Number 1: Develop a shared vision for Michigan. Setting out a common ground vision for our future is essential. First of all, if you don’t know where you are going, you certainly aren't going to know how to get there. And if we don't have a shared vision, how can we possibly distinguish between what is important and what is merely trivial? In practical terms, without such a vision we have no way to establish rational taxing and spending priorities. Understanding that makes it clear that at the core of our two recent budget crises is a lack of common vision about where the state should be going and how best to get there. The budget battles two years ago and again this year were signal opportunities to reform a broken system. But instead of responding to this clear objective, the legislature and governor settled for piecemeal haggling to meet the "letter of the law," i.e., the constitutional requirement for a balanced budget.

The citizens are ahead of them. The thousands of people who have participated in the community conversations sponsored by the Center for Michigan are in remarkable agreement about their common ground vision for our state.

Those discussions indicated most people want a state with:

A talented, globally competitive work force.

A vibrant, diversified, growing economy.

A great quality of life.

Efficient, effective and accountable state government.

Milestone Number 2: Get our financial house in order. Every year for the past decade, Michigan has faced a billion-dollar plus chronic gap between revenues and expenses in the General Fund. This year, of course, it is much worse, thanks to the recession.

A "structural deficit" merely means that the money coming in is virtually certain to come up short, compared with our existing patterns of spending. If this annual deficit is left uncured, it will continue to balloon beyond our power to tame it.

So how do we fix that? Apart from a big increase in taxes — something that is highly unlikely — there is only one way to bring expenditures into line with revenues. That is to enact a series of far-reaching structural reforms in the organization and cost of our state and local governments and school systems. If we do that properly, we could realize billions in annual savings. For example:

If our prison system jailed people at the same rate of our neighboring states, we'd save $400 million each year.

Pooling health care benefits for all government workers, as Speaker Dillon has proposed, could save up to $900 million a year, if Dillon's estimates are accurate.

Consolidating functions and sharing services among units of local government and schools would save eventually result in significant yearly savings.

Without cost-cutting structural reforms like these, we are doomed to repeated, and worsening, budget crises for years to come.

Milestone Number 3: Lay a firm foundation for a growing, diversified, entrepreneurial economy. We need wholesale reform in our tax structure. The 22 percent surcharge slapped onto the Michigan Business Tax in 2007 is widely regarded as a disaster. Rethinking our tax structure should concentrate on simplicity, fairness, competitiveness with other states, and durability (we can't keep changing taxes every couple of years). And our tax structure should be aligned with our evolving economy. That suggests we repeal the surcharge, cut the rate of the sales tax and broaden the base to include services.

Michigan also needs a clear "plan to compete" that defines and exploits our durable, distinctive competitive assets.

Participants in community conversations identified these as including our great universities, our schools, the skills and talents of our work force and the quality of life available in Michigan, whether from our wonderful natural resources or our vibrant communities.

But we also need to mount a sustained investment program aimed at strengthening and exploiting our assets. Every experienced business manager knows while it’s possible to save a company by cutting costs, no company can thrive on cost cuts alone.

And at the same time, we need to recognize that if we do not enact structural reforms in costs of government, we will never find the funds for the sustained investment program we need.

Milestone Number 4: Reform the structure of dysfunctional Michigan politics. Michigan's ultra-strict term limits are widely regarded as the root cause for legislative fumbling and lack of leadership. They should be either repealed or changed and extended.

Voters also need to realize how our system of legislative district reapportionment works against electing leaders who can work together. The large majority of districts are gerrymandered to protect one party or the other. This means that the only election that counts in most places is the primary. But primary elections bring out the most extreme voters on either side, right-wingers in Republican contests and ultra-liberals in Democratic ones. In effect, our system is designed to assure election of the most ideologically extreme candidates from either side, and yet we expect them to collaborate once elected.

This Roadmap to Prosperity is clear. It's simple. And make no mistake about it: It will be very tough to accomplish, given our 10 million citizens and amazing number of special interests, each of which cares only about protecting its own. But it's a plan, which is more than our leaders seem to have in mind, as they haggle over budget-balancing deals that satisfy no one.

Where there is no vision, after all, the people perish.

***

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.

Granted, balancing the budget is important and legally necessary. But here's what all too many of them don't get:

A budget is not the same thing as a solid financial plan.

Sure, the Michigan Constitution requires that the Legislature pass a balanced budget by the start of the fiscal year on October 1. And getting there has been tougher than ever this time around.

What they now call the "Great Recession" meant lawmakers faced a staggering task. When they began, they were staring at a projected General and School Aid fund deficit of nearly $3 billion. Recessions come and go. But for Michigan, this is a problem that is no longer cyclical and by no means temporary. Our state is certain to face a budget crisis every year or so unless we adopt a solid, long term financial plan that gets our financial house in order.

That will have to be a plan that takes account of continued economic troubles, likely population losses and reduced state tax revenues for a number of years to come. In the short run, we’ll have another bad budget problem next year. This may be cushioned a little, since $510 million in federal stimulus money may still be available to help out.
But the year after that, we will be facing the mother of all budget crises, if nothing changes. The stimulus money from Uncle Whiskers will all be gone by October 2011. When that happens, Michigan’s budget is then projected to "fall off the cliff," according to Mitch Bean, director of the House Fiscal Agency.

The fact of the matter, as experts ranging from the Citizens’ Research Council to MSU economist Charles Ballard keep pointing out, is that Michigan has been living for yearly a decade with a budget that is structurally unbalanced by at least $1 billion each year.

"Structurally unbalanced" means simply that the programs now embedded in state spending will continue to always cost more than foreseeable tax revenue.

What the state badly needs, then is a solid financial plan, one which takes account of structural budget deficits — and over the long term, puts into place the kinds of reforms in the structure and cost of state and local government to bring annual budgets into balance.

Simply put, if we do not adopt far-reaching reforms in how our state takes in and spends money, we will continue to be doomed to have budget crises year after year after year.
So our leaders in Lansing may pat themselves on the back today for having finally gotten to a balanced budget.

Well, that's better than not having done so.

But the sobering reality is that just balancing the budget doesn't really solve anything, unless the deeper causes of the deficit are addressed. Now, for contrast, consider Oakland County. It's one of the country's wealthiest, but over the next three years officials there are predicting up to a 50% drop in the value of commercial and industrial property and a 25% decline in residential values.

That means an enormous hole in the tax base.

But Oakland County officials adopted a two-year budgeting model several years ago. Now, they have decided to push their financial planning out further. A new three-year financial plan will give them time to design and adopt reforms to cut the cost of county government to bring it into balance with reduced tax revenues.

Meanwhile, Michigan still budgets one year at a time.

Sadly, it is clear that all the energy now going into fighting over a balanced budget would be far better spent in thinking hard about what the state’s going to look like in the future, and adopting a series of reforms that bring spending into line with income.

There's not much appetite for that kind of hard-headed thinking in the corridors of our state capital. Many say it’s just too tough. But groups ranging from Business Leaders for Michigan, Citizens Research Council, the Detroit Chamber of Commerce and the Center for Michigan have already published lists of far-reaching reforms that could save billions each year.

Last week, I was on a panel moderated by Mary Kramer, The publisher of Crain's Detroit Business. The goal was to consider the state’s long-term financial health. I spent 15 minutes at home jotting down some of the reform proposals that have been floating around for years. By the time I had to leave to get to Novi for the debate, I had noted 14 proposals that in total, cut $2.6 billion each year.

Pie in the sky? If so, it is necessary pie. Without changes of this magnitude in the structure, workings and costs of state government, our state will never be able to overcome our annual budget frenzy.

So, balanced budgets are necessary, yes. But they are hardly sufficient for a financially stable state. Our leaders now need to turn from balancing one year’s budget to thinking about wholesale reform.
***
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

Dear Governor Jennifer Granholm, Speaker Andy Dillon and Senate Majority Leader Mike Bishop:

The State of Michigan starts a new fiscal year at midnight on October 1, just days from now. As you know, our state constitution requires we start the fiscal year with a balanced budget. The best estimate is that the General Fund and School Aid budgets are running a combined deficit of around $2.8 billion.

If a balanced budget is not adopted by the start of the new fiscal year, state government is required to shut down. Yes, you could possibly buy a few days with a continuing resolution, but that would only serve to make matters worse.

To mix a couple appropriate metaphors, the clock is pretty close to midnight and we're standing on the edge of a cliff.

Because the situation is so perilous and the politics and personalities involved so complex and sometimes hard to untangle, I asked some of the smartest and most experienced people I know to send me their thoughts. My note to them asking for comments read: "There is no strategic plan underlying the budgeting process. Rather, it's largely piecemeal and catch-as-catch can, with the only purpose to comply with the constitutional requirement of a balanced budget."

I received lots of responses; a few asked for anonymity.

This is from one of those, a long-term state official who served under both Republican and Democratic governors: "We're dying out here. Our hope is withering. Jobs are disappearing. Schools aren't running enough hours. Local police forces have been decimated. College tuition is increasing. We can hardly afford the basics, much less a bunch of small fees on top of everything we spend. If the plan is to have a state of 7 or 8 million people (down from 10 million) with need for less roads, no more power plants, less congestion at rush hour, fewer school children at risk of accident … we're well on our way."

Another widely admired former legislator: "While Lansing is focused on the politics and economic policy of cutting budgets and raising taxes, either alternative or a combination of the two will not address the state’s long term (structural) budget deficit. Without fundamental reform of state and local government and education, in the years ahead there will be repeated fiscal crises, political debate and the kind of uncertainty that makes Michigan unattractive to job providers."

Former GOP congressman and long-time State Senator John H. (Joe) Schwarz (R-Battle Creek) put it like this: "I believe they are trying. That said, unless those that sincerely believe they have a political future are willing to put their political ambitions aside and do what is right and what is sure to be wildly unpopular, we will continue to kick the can down the road."

Paul Dimond, an Ann Arbor lawyer and former White House domestic policy staffer: "The 'structural problem' is that Michigan has a budget built for a state that is well above the median in average household income, but we're now in the bottom third. And we're unwilling to face this harsh reality by focusing dwindling state revenues on priorities that matter most to the future of the state."

Mike Jandernoa of Grand Rapids, a member of the executive committee of Business Leaders for Michigan had this to say: "Without a vision for our state, all of the elected officials are restricted in making long-term strategic decisions. And in state budget crises, we need more than ever to make good long-term decisions which create a government with sustainable ongoing budgets."

Craig Ruff, overall Lansing wise man and pundit: "For there to be a truly strategic plan for appropriations, you'd need a strong, hands-on governor taking the lead and legislative leaders who would set key criteria for setting priorities. I don't see how leaders can raise taxes after appropriations are signed into law. You'd then have all the focus just on taxes (rather than linking tax revenue to state services). The public would be horrified."

So with all due respect, Governor Granholm, Speaker Dillon and Majority Leader Bishop, in the midst of all the chaos around you, I sincerely hope you will take the time to read this advice from some of Michigan's most capable people.

Sincerely, Phil Power.

***

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.

If the polls are to be believed, mass transit is very popular with people, both in Detroit and in the suburbs. It’s been a proven contributor to economic development elsewhere. Financing is now available through the federal government's stimulus package.

And last year, Hertel got his four bosses — Oakland County Executive L. Brooks Patterson, Wayne County Executive Bob Ficano, Macomb County Commission Chair Paul Gieleghem, and Detroit Mayor Dave Bing– to agree on something big: A regional plan to expand and improve bus service, light-rail and commuter trains.

Here's how it would work: There would be three service corridors adding up to many miles of mass transit: One along Woodward Avenue (Grand Boulevard to M-59), another out Gratiot, and a third along M-59.

Should be a no-brainer. But it isn't. People are dragging their feet. And, contrary to expectations, the chief foot-draggers aren't in Oakland County, the only place run by Republicans.

The foot-draggers are in Detroit.

Mary Kramer, the highly respected publisher of Crain’s Detroit Business, wrote a column on the subject in last week's issue that called out Norm White for opposing the regional elements of Detroit's transportation system. White is Mayor Bing's Chief Financial Officer and the former director of the Detroit Department of Transportation, or D-DOT, the division that runs the city's bus system.

Kramer linked White to former Mayor Kwame Kilpatrick and his mother, Congresswoman Carolyn Cheeks Kilpatrick (D-Detroit.) She is a member of the House Appropriations Committee, which has heavy authority over what the feds are willing to support.

According to Kramer, White pushed to end the city's mass transit proposal at Eight Mile Road, Detroit's northern border. Kramer asks: "If you want to get regional buy-in for light rail and expanded transit, why stop there? Why not, say, at least I-696 (two miles north in Royal Oak) in the first phase?"

Good question, especially given the fact that mass transit in Detroit only makes no more sense than a mass transit system that would be confined to the suburbs. That’s bad enough.

But now there's conflict brewing over what kind of mass transit system we'll have … assuming the politics are finally worked out.

Most people in positions of power have in mind a light rail system like Denver's, which features electric trains running quietly alongside freeways with economic development clustering around the stops.

That's fine, but it's expensive to build light rail, and takes a long, long time. Some are arguing it would be far cheaper and quicker to build a "Rolling Rapid Transit" (RRT) system based on modern, articulated buses that look a lot like high-speed electric trains.

Advocates for the RRT version argue that it provides almost exactly the same reliability, speed and convenience as light rail. And they say a bus-based system would cost less than $1 billion, around one quarter the cost of light rail. And they say it would take 6-7 years to build a bus-based mass transit system, as compared with 20-25 years for rail. They also argue that a bus-based system would also produce transit-oriented economic development around the stations.

Yet supporters of light rail fear that going with a bus-based system now will crush any possibility of rail in the future.

They may be right, but that sounds a lot like letting the perfect be the enemy of the good — which could mean nothing would be built.

Those arguments may seem to be splitting hairs, but they're important to a region that is suffering. According to Hertel, the economic impact of mass transit through the region would be between $1.5 and $3 billion. And Detroit is the only major metro area in the country lacking a functioning mass transit system.

If anyone has the background to know what might work, Hertel's the man. He has an extraordinary resume of varied successes over a 40-year career. He's been chairman of two different county boards (including Macomb) a state senator, boss of the Michigan State Fair and a professor. And he's a noted breeder of fine Percheron draft horses.

It will take a guy with as many varied talents as Hertel to finally sort out the politics, economics and clashing egos that go into making uo a regional mass transit system. He deserves all the luck in the world — and we deserve a world where he succeeds.

***

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

1. The chronic billion-dollar-plus structural deficit in the General Fund budget, something that exists regardless of the economy. This fact lies at the heart of every budget crisis we’ve faced for nearly a decade.

2. The need for sharing local government services. With 3,500 local governments in our state (including school districts), there are a ton of services to share, productivity to increase and dollars to save.

3. Spending on Michigan's prison system, which at $2 billion per year now exceeds what we spend on our public colleges and universities. If we just put people in the slam at the average of our neighboring states, we’d save around $400 million each year.

These three crucial issues weren't something the mainstream media traditionally paid much attention to. So — how did they get put on our radar screens? They have this much in common:

Each was initially brought to light through the work of one outfit: the Citizens Research Council of Michigan. It's one of our state's hidden gems, and an absolutely essential component of our now-shrunken public policy system.

Founded way back in 1916, CRC has established a long, long record of unbiased, nonpartisan, accurate research that has been at the heart of thoughtful, fact-based discussion of public issues. In fact, CRC's reputation is so good that all you have to do to end an argument is say, "Well, it’s in the CRC report."

In a week's time, long-time CRC Director Earl Ryan will step down. His successor – only the sixth to hold the job! – will be Jeffrey Guilfoyle, currently the Director of the state Office of Revenue and Tax Analysis in the Michigan Department of Treasury.

Ryan has been at the helm of the CRC since 1994, when he arrived from the Indiana Fiscal Policy Institute. He was born in Michigan, though, and won degrees in political science from the University of Michigan and Wayne State University. During his long tenure – and with the help of now-retired Research Director Tom Clay, who probably knows more about Michigan finances than any living person – CRC has gained steadily in stature.

Earl Ryan is a very thoughtful guy. Here's what he told me during a conversation last week:

"With the advent of legislative term limits, a new element has come about in state government: The enormous incentive to kick the can down the road and put off tough decisions until somebody new takes office. In a larger sense, Michigan has never been confronted by the kind of continual and very deep erosion of our economy that we've experienced over the past 10 years. But we keep deluding ourselves that things will soon get better and that we can put off for a while doing what we must do."

Instead, "we simply have never come to grips with this problem."

His successor seems well qualified. An economics major (Phi Beta Kappa, U of M) Guilfoyle earned his PhD in economics from MSU in 1998. Since then, he's worked for Anderson Consulting and in all kinds of positions in the Michigan Department of Treasury.

Guilfoyle expresses the same urgency and frustration held by his predecessor: Waiting so long to deal with the state budget "limits terribly what we can do," he said.

"We're looking at some very ugly choices, since our revenues and our expenditures are at such a disconnect. We’ll have either to kill some very popular and important programs or raise taxes."

Both the incoming and outgoing directors point to the disheartening lack of urgency in Lansing … and lack of understanding of just how serious our situation is elsewhere in the state. In part it's the Chicken Little problem: Politicians repeatedly cry "The sky is falling!" But when the sky doesn't fall – or state services don’t just disappear – people conclude it's all a bunch of fakery.

That leads to Ryan’s First Law of Sewer Finance: Nothing ever happens until people's toilets start backing up.

What Ryan says he is pleased about the board's choice of a successor, he says he is very happy with Guilfoyle's selection. And Guilfoyle says he's very excited about taking over the Citizens Research Council. "The need for the kind of information we provide at CRC is terribly important now. Most people who provide research and information have a vested interest in the outcome. We try to be neutral and unbiased."

They've succeeded admirably for nearly a century. In a political world where consistent high-quality and objectivity are sadly too often lacking, the Citizens Research Council is a magnificent asset to our state. I know I speak for many people in wishing Earl Ryan a happy retirement and Jeff Guilfoyle a fruitful time in office.

***

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

And it's true enough that Lansing has made some pretty poor choices. But some of those haven't been spending decisions, but penny-wise and pound foolish budget cuts.
For example, check out the ways Lansing has accepted repeated cuts in public support to Michigan's public universities, to the point we now spend more on warehousing felons in our prison system than on educating young minds in college.

We have repeatedly slashed funding for the Department of Natural Resources, even as we complain about the parks being closed. And we're on the verge of eliminating state support for the arts and culture, while at the same time trumpeting that one of the nicest things about Michigan is the quality of life to be found here.

This is part of our tendency to engage in what your mother might have called "cutting off your nose to spite your face."

Here's one seemingly small, but very important example of this that's been going on since the beginning of the year — important because there is still time to do something about it. The legislature and Governor Jennifer Granholm have:

What's the common thread in all of these budget reductions? They go after programs designed to educate and care for very young children. Some in the state Senate want to cut them even further.

That's too bad. Especially since there is compelling evidence that there are few more worthwhile investments.

Early childhood interventions have been shown to increase readiness to enter kindergarten, vastly increase learning rates through all levels of school, reduce welfare and criminality and increase the likelihood that families will stay together.

And such programs are cost-effective. According to a comprehensive analysis undertaken by the RAND Corporation in 2005, the benefits to society resulting from early childhood intervention programs range from 2 to 1 to 17 to 1.

Put another way, spending one dollar now on early childhood education and support saves the taxpayers something between $2 and $17 over the life of the child.

The RAND analysis looked at a number of studies that differed in their methodology and in the time over when they calculated society’s benefits. Probably the best study was undertaken right here in Michigan, at the HighScope Perry Preschool Program in Ypsilanti. The study followed children to the age of 40 and found that a per capita cost of around $14,000 resulted in net benefits to society of nearly $240,000. Think about that. Don't you wish you could find an investment that returned $17 for every buck you put in? Well, this is one of those, and we have been turning our back on it.

Our leaders in Lansing would defend themselves by saying, not surprisingly, that the state is in the midst of a budget crisis, facing a deficit that likely will run as high as $2 billion.

Unfortunately, they would add, the severity of the situation forces draconian budget cuts that sometimes result in throwing out the baby with the bathwater. (Perhaps I could have found a better metaphor. But then again, when you think about it … perhaps not.)

What they need to remember is that cutting early childhood care runs not only big social, but big political risks, many of them perhaps not fully understood by legislators who have too much to absorb and too little time to take it all in. According to a statewide poll conducted by Lake Research Partners this June, three quarters of Michigan voters want early childhood development and education programs protected from budget cutting.

Sponsored by the Early Childhood Investment Corporation, the poll found that 83 percent of adults think early childhood programs are "an absolute necessity" for their community.

These findings parallel the findings from the non-profit, non-partisan Center for Michigan’s public engagement campaign, Michigan's Defining Moment, which has so far involved more than 5,000 Michigan citizens in "community conversations" throughout the state.

Out of these emerged numerous citizen priorities, including economic development and pre-kindergarten education. Citizens believe that early childhood education and improved child care get children ready to succeed in school … and in later life.

Governor Granholm is negotiating with legislative leaders from both parties to find ways to plug the budget deficit. I suspect that in the rush to address this major financial crisis, they decided to cut early childhood programs without a full understanding either of their astonishingly favorable cost-benefit results and the degree of public support. That's not surprising, given how complicated all this is.
But there is still time to do the right thing, which in this case is also economically sensible and politically smart thing. Find the savings elsewhere, and restore the cuts to early childhood programs.

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.

McNamara was nationally important and very controversial. He was the chief architect of the war in Vietnam, and to a large extent he was the focus of the ferocious debate that accompanied the war.

Yet he was also important to Michigan, too, in ways now largely forgotten. And he also touched my life in a positive way.

McNamara was briefly President of the Ford Motor Company. He was the most successful of the team of "Whiz Kids," the management team of young Army Air Corps experts who arrived in Dearborn in 1946, when there was real risk Ford would go belly up.

All the while he worked at Ford, the scholarly and low-key McNamara lived in Ann Arbor, where he and his wife, Margy, felt at home. He formed many life-long friendships during that period, including my parents. My father liked very much his matter-of-fact ways, comparing him to a "comfortable pair of old shoes."

I remember quite clearly a dinner party at my parents' house in 1960, just after John F. Kennedy was elected President. The McNamaras were present, together with several other couples.

The phone rang in the middle of dinner. The call was for Mr. McNamara. He was away from the table for some time. When he came back, he had a slightly rueful smile. "That was Jack Kennedy," he explained. "He wants me to be his Secretary of Defense!"

In the excited babble of talk afterward, I don’t recall any discussions about Vietnam, which had bubbling at a low level ever since President Dwight D. Eisenhower had been asked by the French to pull their chestnuts out of the fire following their defeat at Dien Bien Phu in 1954. Back then, we had only a few hundred "advisors" there.  Bob McNamara would end up sending half a million more.

McNamara went off to Washington, where he played a crucial role in the Cuban Missile Crisis of October 1962, helping defuse the instincts of the military to strike first, and perhaps saving us from  nuclear war. But he would be remembered for Vietnam.

Then, in 1965 when I was in Washington running the congressional office of the late U.S. Rep. Paul Todd (D-Kalamazoo,)  my parents came to visit. The idea was for all of us to have dinner with the McNamaras the next evening. But Bob called, explaining that President Lyndon B. Johnson had called him up to Camp David and wondering if we would like to come along.

You bet! We flew up on the Air Force One helicopter, taking off from the White House lawn and settling down at the air strip at the presidential retreat in the mountains of Virginia.
LBJ greeted us. We all walked to the main residence, which featured a large flag stone patio overlooking President Eisenhower’s favorite putting green. President Johnson flopped down in a chaise lounge, reaching back with his arm. Imagine my surprise when it came forward with a drink in his hand! A white-coated waiter had been standing behind the President's chair, just waiting to hand him his drink when he sat down.

I’m not sure how it happened, but I wound up sitting next to the President, with Secretary McNamara on the other side. And we quite quickly got into a discussion – "argument" is too extreme – about Viet Nam. President Johnson sat silently between us, wearing enormous dark purple sunglasses, his big head rotating from one to the other of us as we made our points.

I seem to remember I argued that we were misconstruing the nature of the war. Instead of drawing the line against the spread of communism in Southeast Asia, we had got ourselves tragically involved in what was at heart a civil war amongst the Vietnamese themselves. Secretary McNamara, of course, disagreed. And we ended the discussion as the President and his Secretary of Defense walked off to have their own separate conversation.

My respect for McNamara – for his dignity, his patriotism, his blazing intellect and his devotion to his old friends – was always great, even though we differed over Vietnam. I was delighted to discover, upon reading the obituaries after his death, that privately he had come to the conclusion that the war was a mistake and had developed the way it did because we misunderstood the nature of the conflict in that sad country.

We left Camp David on the helicopter, and I never will forget landing at night with the White House lawn gleaming green in the spotlights and the very bright White House nearby.

A few weeks later, President Johnson offered me a job, one that appeared to involve reaching out to young people to explain the Administration’s position in the war. I turned it aside, probably wisely, because I certainly would have been in way over my head.

But I remain indebted to Bob McNamara for the opportunity to go to Camp David, for his tolerance for listening to a 27-year-old criticizing his conduct of the war in the presence of the his Commander-in-Chief, and for the rich store of memories.

As I get older, increasingly I feel whether or not you happen to disagree with somebody is less important than the way you go about it. Bob McNamara’s civility, thoughtfulness and willingness to listen to the other point of view will always remain in my mind as a touchstone of adult, civilized behavior.  We could use more of it today.

***

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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.

One of our traditions was having cherry pie on July 4th. My mother was a good cook, and she felt the red cherries were suitably patriotic for the holiday. My father liked cherry pie, too, in part because his family was one of the first to plant cherries in Michigan.

There are two pictures in our family photo album that were taken around 1900. One shows my great-grandmother, Celestia Power, in a long cotton dress sitting on the front porch of the old family farm in Elk Rapids. The other shows my great-grandfather, Eugene Power, dressed in a dark suit, white shirt and Panama hat, looking proudly at a row of newly planted cherry trees.

He was one of the first farmers around Traverse City to plant Montmorency cherries (called “sours” to distinguish them from the dark red eating cherries or “sweets.”) They became the dominant crop in that part of the state, thriving on the sandy, well-drained soil and the moderating influence of Lake Michigan.

Michigan produces something like 75 percent of the nation’s tart cherries, and much of the land in the region that hasn’t been raped by the developers is still in cherry orchards.

My father used to tell me endlessly of his first job out on the family farm, picking cherries for 10 cents a lug. (That, by the way, was a lot of cherries.)  His father, Glenn, who started out as a surveyor, helped great-grandfather Eugene lay out the cherry trees in long, straight lines.

Together with my cousin, Tom, a circuit judge in northwestern Michigan, I visited the old family farm a few years ago. The house is gone, but there are just a few very, very old cherry trees still standing to remind us of our family heritage.

It wasn’t easy back then to be a pioneering farmer. You couldn’t be sure the trees, once planted, would thrive or bear well. There certainly weren’t any government subsidies. And, as farmers then and now keep learning from time to time, a late frost can kill the flowers and ruin the fruit. But farmers back then were a tough and determined lot. Honoring their hard work seems appropriate …
As does the a chance to share our family recipe for
Montmorency Michigan cherry pie:

***

For the crust:
1 ½ cups all-purpose flour, plus more for rolling the crust
1 teaspoon baking power
½ teaspoon salt
1/3 cup lard
3 tablespoons unsalted butter
2 tablespoons vegetable shortening
2 tablespoons ice water
1 tablespoon white vinegar
2 eggs
For the filling:
4 cups pitted tart cherries
1 cup granulated sugar
1/3 cup brown sugar
3 tablespoons quick-cooking tapioca
½ teaspoon almond extract
1 teaspoon mace
3 tablespoons unsalted butter, cut into small pieces
2 tablespoons Kirsch liquor (optional)

***

To make the crust: Combine the flour, baking powder and salt in a mixing bowl. Add the lard, butter and shortening and mix with your fingers or a pastry cutter until the mixture forms coarse crumbs. Whisk together the ice water, vinegar and one of the eggs. Add to the flour mixture and mix with a fork until just combined; do not overwork the dough. Roll into ball and refrigerate for at least 30 minutes.
***
To make the filling: In a large bowl, combine the pitted cherries, sugars, tapioca, almond extract, mace and Kirsch (if desired). Let stand for 15 minutes.
***
For the pie: Preheat the oven to 425 degrees. Roll out half of the dough on a lightly floured surface. Line a 9-inch pie pan with the dough and trim the edges. Pour the filling in and dot the top with the pieces of butter. Roll out the remaining dough and cover the pie, or (if you’re ambitious) a lattice top. Whisk the remaining egg with two teaspoons of water and brush the egg wash over the top. Bake for 30 minutes, then lower the temperature to 350 degrees and continue baking for 30-40 minute longer, or until the juices are bubbling up from the center of the pie. (You may want to put a baking sheet under the pie pan to catch the juices.)

Cool briefly and eat warm.

My father preferred vanilla ice cream with his pie. I’m more of a purist, and take mine straight. There are even people who eat their pie cold. But no matter how you like it, Michigan cherry pie is a great way to celebrate our state’s history and agriculture.

***
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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.
***

Lt. Governor John Cherry told me he's set up a commission to look at the entire function and structure of state government. Although it's yet not clear who’s on the commission or when it will issue a final report, Cherry obviously is thinking big:

"The organization of Michigan's government was set more than 50 years ago. Any car that’s 50 years old isn’t up to date, and neither is Michigan's government."

Amen to that. In the meantime, there is serious talk about a much-needed, entirely new approach to Michigan's tax structure. The Michigan Business Tax was adopted soon before the jury-rigged budget deal in 2007, but the MBT was soon being severely criticized as just as complex, clunky, and hard to understand as the Single Business Tax it replaced. Whatever remaining good it might have done was then erased by the 20 percent surcharge that was slapped on top of it, as a last-minute move to balance the budget.

That outraged much of the business community, rightfully so. It's now clear to everyone that Michigan's tax structure is unsustainable the way it is. It’s also very unfair to certain kinds of businesses, many of which have seen their tax bill double or triple. And it certainly does not pass the "certainty test."

All businesses have one thing in common: The need to be able to reliably estimate their certain costs, as far as possible. When the legislature constantly changes the tax structure, businesses are bound to find this continued uncertainty about taxes unacceptable. Some may well "vote with their feet," by moving out of state.

Now there are loud calls for wholesale tax reform. The question is, how to do that? Maybe we need a constitutional amendment establishing a graduated income tax, which might be nice if some legislative geniuses could figure out a way to keep wealthy people from moving out of the state upon enactment. Maybe it's broadening the sales tax base to include services and reducing the 6 percent rate.

Whatever the solution, House Speaker Andy Dillon (D-Redford) has been talking for months about putting something "far-reaching" on the ballot next year. Whatever that something is, lawmakers need to keep in mind that there are two vitally important parts to any fair-minded plan for tax and budget reforms.

First, they must result in getting our financial house in order. For the past seven years, Michigan's General Fund budget has suffered from a chronic structural imbalance of more than $1 billion. For the past seven years, both political parties have been wholly complicit in resorting to short-term gimmicks to plug the whole, most recently using close to $ 1 billion in federal stimulus money that should have been invested for longer-term purposes.

Second, regardless of what we do, we must bring what the state takes in into alignment with what it spends, whether by reducing spending and costs, increasing revenues, or both.

But while getting our financial house in order is necessary for our future financial prosperity, it is not sufficient. Wars aren't won by brilliant evacuations. Quite simply, we must develop a long-term proactive strategy for the survival and prosperity of Michigan, and then tailor both taxing and spending to that strategy.

To understand why, look at any company. To survive, it may be necessary to cut costs. But merely cutting costs will not make a company thrive. To do that, it needs to identify its competitive assets, invest in them, and arrive at a strategy that uses those assets to bring new products to market and increase profitability.

For Michigan to prosper, it's vital that we identify our durable, distinctive competitive resources, and invest in them in a way that fits an agreed-upon, overall competitive strategy.

Time after time, Michigan citizens have told us at the Center for Michigan that our assets include our magnificent environment of woods and waters, and the quality of life it’s possible to lead in our great state. They also focus on the institutions that invest in our stock of human capital: Our great universities and our schools.

But with this well-known, what have our leaders been doing? Nothing that makes any sense. They misallocate our resources. Michigan leads the nation in cutting support for higher education. We now spend more on warehousing felons in our state’s prisons than on public colleges and universities. We slash spending for the Department of Natural Resources and close parks.

Now, we are trying to eliminate the pittance we spend on arts and culture and on support for livable, exciting communities.

The problem is not that we spend too much, if we do. The problem is that we don't have a vision. There is a wholesale disconnect between what we are doing and what we should be doing — if we had a tough-minded competitive strategy aimed at the future.

Big plans to change the structure of government and big talk about making big changes in our tax structure aren‘t enough. You can't get anywhere if you don't know where you are trying to go.

What we need to do instead is to start by working out what our competitive strategy ought to be. Once we agree on that, we need to tailor our taxing and spending practices into an alignment with an investment strategy that makes the most of Michigan’s assets.

The Center for Michigan has been holding community conversations around the state for the past 18 months. Those discussions have been calling forth a shared vision for our state's competitive future and calling for action plans to achieve it.

Rather than listen to the narrow claims of innumerable special interests, a strategy that has helped drive us into our current ditch, leaders in Lansing would do much better to listen to the emerging common ground agenda our citizens have for Michigan’s future.

The bars and goodies tables in the lobby weren't quite so lavishly stocked as in years past. People were talking about Chrysler's descent into bankruptcy and looking forward – if that's the right word – to GM's. And nobody had any real idea what would happen to this battered state when two of the three domestic car manufacturers wind up bust. The only bright spot was the cheers that erupted late in the evening when the Red Wings won in overtime against the Black Hawks.

Worse, nobody seemed to have much of an idea about what needed to be done to pull Michigan out of the morass it finds itself in. Various candidates for governor – including Republicans Terry Lynn Land and Mike Cox and Democratic Lt. Gov. John Cherry were working the crowd with an odd mixture of the energetic and the anxious. But none of the so far announced candidates seems to have generated much excitement. Rumors are flying about others entering the fray, including Oakland County Sheriff Mike Bouchard and Domino's Pizza CEO Dave Brandon.

The upshot is a widespread strong sense of frustration.

In the opening session, even usually upbeat Governor Jennifer Granholm seemed a little worn, especially next to keynote speaker T. Boone Pickens, the 81-year oil man and chief advocate for a national policy favoring alternative energy over constant imported oil. Pickens has the slightly rumpled look and easy chuckle that reminded me of Ronald Reagan at his best. And when Granholm tried to cut an economic development deal with him right on the stage, her eager invitation fell to the ground like an expired balloon.

Which was too bad. Because her argument that Michigan's economy was on the verge of a new day of prosperity based on alternative energy actually made some sense.

Citing our abilities in manufacturing, engineering and innovation, Granholm argued that "the best reason for companies to come to Michigan is what's here already."

She cited three sectors of particular interest.

Start with batteries, most of which are manufactured in Asia, but which will be essential for a new generation of automobiles and all kinds of other applications. The state has put up $700 million in public funds to support battery companies in Michigan. Together with a shot at $2 billion in federal stimulus money, that has led to at least five new companies working on batteries in Michigan, with the promise of more to come.

As to wind – "it blows all the time, especially here." as one conference attendee put it – the idea is that our experience in manufacturing puts us at competitive advantage for building the enormous turbines that generate electricity from the wind. Granholm boasted that the federal government ranks Michigan number two in the nation for wind machine manufacturing.

The play in solar energy appears to be limited to making polycrystalline silicon, the necessary feedstock for solar panels. Hemlock Semiconductor and Dow Corning are now into spending billions in expansion. Companies that make solar panels, such as United Solar Ovionics, are also growing.

All of this reminded me of past Michigan history. A quarter century after the great white pine forests were clear cut in the last half of the 19th century and our economy looked flat on its back, an explosion of innovation sowed the seeds of Michigan’s greatness. A 20-year period saw the start of Dow Chemical, Upjohn, Kellogg and the Ford Motor Company – companies that still have an enormous footprint here.

The idea is that history might repeat itself, with triumph following crisis.

But as Pickens put it in the opening session, "There is no substitute for leadership. Either you've got it and you'll be successful, or you don't and you'll fail.”

For most of the people perambulating inside the Grand Hotel – the weather outside was too cool and too wet for much perambulating – where that leadership was going to come from was at the very best an open question.

All across America, newspapers are in crisis.

In Michigan, the Detroit Free Press and Detroit News have cut home delivery to three days a week in an attempt to move advertising and readers to a "virtual newspaper" online. Shrunken "express editions" can be bought at newsstands or taken through the mail on the other days.

The Ann Arbor News will cease publication July 23, while the Flint Journal, Saginaw News and Bay City Times are going to three days a week publication. The Journal Register Company, owner of the Oakland Press, Macomb Daily, Daily Tribune of Royal Oak and many weekly newspapers throughout the tri-county area, is in bankruptcy.

It's the same thing around the country. In Boston, only last-minute concessions by the unions saved the venerable Boston Globe from ceasing publication. The Seattle Post-Intelligencer has shut down, as has the Rocky Mountain News, while the industry buzz is that even the New York Times itself could be in trouble, saddled with too much debt and inadequate earnings to cover it.

This is an industry I know very well. Full disclosure: I spent more than 40 years as a publisher in the community newspaper segment of the industry. I sold the assets of my company, HomeTown Communications Network, Inc., which included the Observer & Eccentric Newspapers, to the Gannett Company in 2005.

So I'm both biased and heartbroken at what's happening to my old business, including the announcement that most of the Eccentrics will be shut down at the end of May.

Why is this happening? Two things have come together in a perfect storm that is crushing what had been one of America's most profitable and stable business models.

The first was the rise of a truly disruptive technology combining the computer, the web and all the companies that took advantage of the revolution in distribution of content. A consequence of this new technology is that the revenue base of the newspaper business model – advertising – has essentially gone away. (Most newspapers have traditionally shown a revenue profile of 75 percent advertising revenue and 25 percent circulation charges.)

The Internet has made it possible to distribute content through the web without having to pay for newsprint, ink and other costs of distribution. Not only that, but the lifeblood of many newspapers – advertising – has largely migrated to the Web, thanks to outfits like Google, which offers customers "pay for click" rates based on actual user activity. Classified advertising which sustained many newspapers for decades has migrated to sites like Craigslist, where ads are free — and some have been sorted into classifications that wouldn't have been appropriate in family newspapers.

Midway through this revolution, the newspaper industry made a fundamental strategic error. It allowed free distribution of its content via the Internet. Instead of charging customers for access to their databases or for any individual news story, newspapers figured they would gain "eyeballs" on their web sites and grow Internet-based advertising revenue. True, but the unintended result was to train former newspaper readers that they could get for free what they used to pay for. And most people under 30 don't care to read newspapers; they prefer getting their information through the Internet.

The other blow has been the catastrophic national recession, which has resulted in the near-collapse of much advertising, period.

Even with newspaper-owned web sites showing substantial increase in reader traffic, the recession has dried up advertising of any sort, whether automobile, real estate, retail.

By the time the country comes out of the downturn, it may be too late for many newspapers.

This presents a danger to our democracy that is so huge it almost can’t be exaggerated. Mark my words. This will lead to a national catastrophe so large as to be … invisible.

Let me explain. For more than a century, there were people we call "reporters" working in every community in America. Their job was to wander around asking impertinent questions, which became in turn the basis for stories published in local newspapers.

Some reporters were good, others not so much. Some newspapers were fair-minded and accurate; some were awful.

But newspapers had two essential functions. First, they were how the local community carried on a dialogue with itself. Whether it was weddings and deaths, the doings of the city council, the exploits of the high school football team – all these things and more represented the substance of a community talking with itself, a process mediated and facilitated through the local newspaper.

Moreover, the newspaper – if it was doing its job – was an institution providing the public with oversight over the conduct of public affairs. Without the tough-minded work of reporters for the Detroit Free Press, Kwame Kilpatrick would still be a corrupt and flashy mayor. Without the work of the Lansing press corps, the outrageous inability of our state's leaders to put our financial house in order would be hidden from public view.

There were 60,000 print reporters and correspondents around the country three years ago, according to government records. But according to PaperCuts, a website that tracks industry job losses, an astounding 23,000 of those jobs have been lost since January 2008.

Five years from now, there may be less than half that number. And worse, they'll mostly be concentrated in the big news centers of New York, Washington, Chicago and Los Angeles.

And then what will happen to places like East Lansing, Traverse City, Livonia and Farmington? No reporters and no local newspapers means no oversight in the public interest. No oversight means a field day for corruption and incompetence.

That will be a catastrophe. But it will be largely invisible. Because nobody will notice what no longer exists.

Now maybe the blogosphere will contribute a kind of citizen journalism that can make up for the death of local papers.

But it's hard to see how the posts from bloggers can be subjected to the kind of fact-checking and professional standards that used to be what newspaper editors used to do.

Far better yet, maybe, just maybe, people in a community will decide that their local newspaper is a fundamentally important public utility that should be sustained by local taxes, like the public library. (Managing the oversight and governance of such an institution might be tricky, but it’s worthwhile taking a careful look.)

Alternatively, as is the case in some communities, perhaps philanthropic foundations will pay for web-based local news content.

Or on the other hand, communities may decide their own local newspaper is so important that they’ll rise to support it.

I was heartened to learn over the weekend that citizens in Birmingham have persuaded the Gannett Company to delay killing their Birmingham Eccentric, giving it a reprieve at least till July, by which time the staff needs to drum up 3,000 additional subscriptions.

Most often we do not notice what we do not know … Which is why people die of cancer. My greatest fear is that the loss of local newspapers will produce an information, oversight and conversational vacuum that will fundamentally change our lives.

And change them, that is, not for the better.

***

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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.

"The urban cooperation act has a poison pill in it that protects any employee of any of the collaborating local governments from a reduction of pay and benefits. As a practical matter it kills any attempt at local collaboration." – Kurt Kimball, Grand Rapids City Manager Emeritus

"We need to think hard about what kind of services people need and want regardless of level of government – state, county, municipal, township. Ontario did a report called Who Does What on exactly that point." – Eric Scorsone, MSU Local Government Professor

"We need to rethink top to bottom at every level of government – state, county, city, township – the functions and the connections of government. And we need to do so in today’s environment – not that of 1837." – Scorsone

"The state is trying to balance its budget deficit on the backs of local government." – Kimball

"We've ignored the history of revenue sharing and distorted its purpose and function. I should know. I wrote the report." – Doug Roberts, former state treasurer and head of MSU's Institute for Public Policy and Social Research

"In considering doing benchmarking, especially when it comes to getting clean, comparable data, let's not fall into the trap of making the perfect the enemy of the good." – Kevin Prokop, co-chair of the Legislative Committee on Government Efficiency.

"Let's quit using the word efficiency. Instead, let's use effectiveness.” – Chuck Fellows, Green Oak Township trustee.

"Here's the only way I know to solve the enormous — $46 billion unfunded pension and health care liability – issue pension bonds at a tax exempt rate and put the receipts into interest-bearing securities. That’s arbitrage. And it’s legal." — Roberts

"I’d be worried if my pension plan was underfunded by $46 billion and the only remedy was arbitrage." – Cynthia Williams, Executive Director of the Michigan Education Special Services Association

"Sure, people deserve a good retirement when they work for years and years in the public sector. But the question is, can we afford to do that?" — Kimball

"If we're going to address structural budget deficits, we simply have to address the cost of of health care. Period. Full stop." – Prokop

"The key point is to understand we are looking at the next Michigan. We need to make fundamental decisions about what we do and how we do it. It cannot be business as usual. – Doug Drake, Director of Health, Human Services, and Philanthropy, Public Policy Associates

"I want it all. I want it now. And I don’t want to pay for it." – an anonymous characterization of the citizenry.

That's something I've been thinking about and trying to figure out for years. I am convinced that part of the explanation has to do with the basic structure of our society. Beginning with Alexis De Tocqueville’s great early 19th century work, Democracy in America, commentators have observed that more than most nations, America is comprised of a myriad of interest groups – people gathered together in solidarity to promote their particular way of life.

Some of these groups are very big – organized labor and the business community. Some are small – apple growers and charter school advocates. But virtually every interest group comes together in the political arena to support its allies and fight off its opponents.

The way they often do that is through devices called Political Action Committees (PACs), which contribute money to like-minded candidates. No one knows exactly how many PACs there are in Michigan, but it must be thousands.

Some are rich and powerful: Our top 150 PACs raised $27.3 million in 2008, the Michigan Campaign Finance Network calculates.

What we do know is that for virtually every issue of public policy and government activity, there is a corresponding PAC – and very often several. Each PAC views the world only through the lens of its own particular interest. And the activities of all these PAC’s tend to divide our political discourse into tiny little segments.

Apart from how they affect individual issues, these political action committees have several effects on our society, all of them bad. PAC culture has helped magnify and justify the role of self-interest, and at the same time, sparks and encourage conflict.

Those aren't things Michigan needs more of right now. This segmented culture has had a corrosive effect, especially when the overall interests of the state – revitalizing our economy, for instance – are at issue. It has become very hard for our politicians to come together in the common interest. To do that, it is necessary to first develop a shared vision of where we want to go in the long run and then work out a strategic action plan to get there.

But that's become harder than ever, given the fact that PACs, vehicles which by definition divide our society, are now the source of most politicians' campaign funding.

This is a problem that has been building for years. In Michigan, a state in desperate need of a shared vision for our long-term transformation, this has created a crisis of the greatest urgency.

Two current examples suggest people are beginning to notice:

An article in last week's issue of the Lansing-based politics and policy newsletter MIRS (Michigan Information and Research Service) dealt with a bill to close failing schools. The advocates of the bill, Reps. Tim Melton (D-Auburn Hills) and Bert Johnson (D-Highland Park), "seem to be trying to do something that only rarely happens in the legislature – they're trying to move measures that are opposed by both sides of an issue." The problem here is that teachers' unions worry that the bill will lead to expanded charter schools, while the charter school interests feel the bill doesn't go far enough.

MIRS concludes, "Attempts to walk between vested interests don't have a particularly good track record in terms of passage in the legislature. Finding the narrow path between opposing doctrines that leads to consensus tends to be very difficult."

That's been all too true. But today, an overwhelming majority of Michigan citizens say that turning around failing schools is essential to our future. The danger is that this shared vision is at risk of being stymied by conflicting interest groups and their PACs.

One encouraging example comes from Republican gubernatorial candidate Rick Snyder, who last week challenged his four primary opponents to turn down campaign contributions from PACs and registered lobbyists. He argued that reducing the influence of interest groups would be good for government in Michigan.

"Time and time again, Michiganders feel elected officials break their promises and cannot be trusted because they owe their election support to special interests," Snyder wrote.

Now, part of this may be self-serving, politically. Snyder is a successful Ann Arbor businessman. Maybe he can more easily afford to turn down PAC money than can his opponents. But his comments do a nice job at illustrating the public skepticism of a politics heavily influenced by special interest groups.

Attempts to develop a shared vision for Michigan's best future are essential, if we are ever to develop a common ground agenda and action plan to transform and revitalize our economy. And to do that, we have to start by understanding how and why our politics get so splintered and our government becomes, in the end, so tragically ineffective.

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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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.

Governor Jennifer Granholm appointed him State Superintendent of Public Instruction in May, 2005, making him the most powerful educator in the state –in principle, anyway. It was one of her very best appointments.

Mike is a very nice guy, thoughtful – almost scholarly. He has a pleasant, modest air about him. Unusual for people of high rank and power, he is a gifted listener. I don't think I've ever heard anyone make a nasty remark about him.

That said, underneath that mild exterior lurks a fierce will … and a well-developed capacity for figuring out how to get very difficult things done. There are lots of examples. Almost exactly three years ago, Governor Granholm signed into law a new high school curriculum that is widely regarded – and highly praised – as one of the most demanding in the country. To graduate, Michigan students need Algebra I and Algebra II, three hard science courses, four years of English and an online learning experience.
Nobody ever thought that public schools, institutions which tend to fiercely resist change – would ever tolerate big-time reform meant to drag their curriculum kicking and screaming into the 21st century.

And nobody EVER imagined that he could stop the Legislature, so often the creature of well-entrenched in special interests, from exercising their instinct to severely water down the new curriculum.

But Mike Flanagan got it done. He did it patiently, almost respectfully, step by step, month by month. And Michigan now has the nation’s leading curriculum to prepare our kids to compete in the economy of today — and tomorrow.

Most recently, he then appointed Robert Bobb, a tough, no-nonsense city manager, to the powerful position of Emergency Financial Manager for Detroit Public Schools, a system legendary for incompetence and near-criminal mismanagement.

As you might imagine, Flanagan took a lot of flack over this one. But he is persevering, and the early reviews of Bobb's performance are overwhelmingly positive.

To find out what's next for our schools, last week I sat in on a State Board of Education meeting in Lansing. There was Mike, patient and responsive as ever, answering questions from members of the State Board about something called "Project Re-Imagine."

Now over the years I've seen a lot of "re-imagining" projects. They tend to crop up with great fanfare and produce little of substance. So I regarded the agenda item with only faint interest.

But then I read the material. The Michigan Department of Education "will select up to 20 school districts to become Demonstration Districts committed to dramatic district-wide reform to significantly improve learning for all students," it said, adding, "While Demonstration Districts would be expected to adopt a set of expected outcomes and required core components, they would have significant latitude in shaping their reform initiative."

Pre-school programs to prepare all young children for school will be required by 2011-12. Kids who do well in high school will be encouraged to get to college early. The phrase "increased learning time" suggests nothing less than a willingness to go beyond 180 days of school — an unofficial national standard almost all Michigan districts fail to meet. Also included is a section calling for "Reconfigured compensation systems, including pay for performance and pay for hardship areas."

Wow!

In short, Mike Flanagan is setting out a radical plan to fundamentally improve our schools. Nor is he doing it by the standard top-down bureaucratic method. He's defining quality improvement outcomes and trusting creative local superintendents. And he's prepared to go where angels fear to tread: Teacher merit pay, more days in school, site-based school management.

Plainly, his plan is to designate a few "Demonstration" school districts and hope they make so much progress others will speedily follow. He's hoping to coax some stimulus Obamabucks from the feds to help fund all this. And he's counting on parents, employers amd us to realize that radically improved schools are in everyone's best interest.

The audacity of all this takes my breath away. I don't know whether it's going to work, but based on Mike Flanagan's performance, I wouldn't bet against it.

***
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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.

French, one of the best journalists remaining in our rapidly shrinking newsrooms, revealed the following:

And if you think the outflow is limited to our two biggest and somewhat "elite" universities, think again. A survey of all 2007 Michigan public university graduates conducted by Michigan Future, Inc. found that half left the state within a year after graduation.

What's happened with the economy and the auto industry since then would suggest that figure may be even higher today.

Five years ago, the governor appointed a special commission on Higher Education and Economic Growth. Led by Lt. Gov. John Cherry, (and usually called the Cherry Commission) it was a high-powered group gathered to study and chart a course for the state’s future. It set one major goal: Doubling the number of college graduates in Michigan within a decade.

Since then, the number of graduates has increased slightly to 41,250, up from 38,615. But it is nowhere near the pace the Cherry Commission hoped. And the swelling numbers of new degree holders fleeing the state has overwhelmed and canceled any gains.

Michigan Future President Lou Glazer has been arguing for years that a state's competitive position is largely determined by the number of college graduates in the population. Study after study has confirmed his thesis. "If we don’t keep those young, highly educated Michiganders," Glazer says, "we'll get poorer and poorer because we simply won't be able to complete with other states."

So how come so many young, newly graduated Michigan kids decide to pull up stakes and leave home? When I ask, most young people simply say, "There's nothing here for me." That's probably true, given our current 12 percent unemployment rate. That will, eventually, turn around.

But the roots of the problem go much deeper.

Partly, our problems stem from the culture that grew up with the automobile industry. For decades, the idea was that all you needed to do was get a high school diploma and catch on with Generous Motors to assure your economic future. That's all over now, but the habit dies hard.

Another part of the problem: The scanty number of exciting, high-tech start-up companies in the state. Comparing the tolerance for risk in Michigan’s business culture with, say, Silicon Valley is illuminating. Aside from the companies in the supply chain, it’s hard to find many technology-driven new companies spinning out of our auto industry. But go to the Stanford University campus in Palo Alto and you'll find lots of entrepreneurs who bear it as a badge of honor that they started two, three, four companies which went bust … and then hit a home run on the last one. And you’ll find lots of young people excited about a career with such an outfit.

So what to do?

Obviously, Michigan needs more people with college degrees. The state does now offer a $4,000 grant toward college graduation. Beginning with high school seniors who graduated in 2007, about 100,000 students received this stipend, which can be used at any post high-school institution, public or private.

But lots of college graduates flee the state, often without even trying to find a job here. The Detroit Regional Chamber of Commerce will put up later this year a site – www.interninmichigan.com – linking college students with internships with Michigan employers.

A high percentage of young people who take internships upon leaving college go on to begin their careers with the same employer, so this site is a good first strategic step.

Another approach comes from the too much derided "Cool Cities" program, launched by Gov. Jennifer Granholm during her first term. So far, the state has handed out $4.6 million to 48 communities around the state. The idea is simple: Many young people decide where they want to live before they start looking around for a job.

Thriving, vibrant, diverse communities are attractive to young people, whether we call them "cool cities" or not.

Another program, MichAgain, is aimed at Michiganders who had left the state but who might be induced to return. Some evidence suggests that many young people figure Michigan is a great place to come home to live and raise a family after sowing their wild oats in Chicago. MichAgain unfunded as yet, but it could prove valuable.

But at the end of the day, Michigan's attractiveness to young people will define the number of college grads who stay. This has as much to do with the quality – and affordability – of life here in Michigan. So our woods and waters, our arts and culture, our cities and our universities are all vital in the competition for brains.

Sadly, you don’t find many policy-makers in Lansing focusing on this. Witness Gov. Granholm's proposal to zero out the pittance — $6.3 million – budgeted for arts and culture.

Our demography, to a great extent, defines our future. The bottom line: If we cannot retain our brightest and most highly educated young people in Michigan, we’ll have a state whose people are poorer, older and increasingly denied the prosperous future we need in the years to come.

***
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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.

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Stimulus Spending Watchdog Needed: California Gov. Arnold Schwarzenegger has appointed an inspector general to sniff out fraud and incompetence in the ways our largest state will be spending stimulus funds. California will get something like $50 billion in stimulus money from the feds. Accordingly, the "Ahrnaald" has asked Laura Chick, the retiring state controller, to take the position.
Governor Jennifer Granholm ought to follow suit. Michigan will be getting around $7 billion in stimulus funds from Washington, and the chances of ineptitude, if not outright skullduggery, are just as great here as on the Pacific Coast. After all, if our governor can create a council to advise on privacy issues and best practices to protect privacy, she certainly can appoint someone to look over the shoulders of folks who are handling and forking out all the dough coming from Uncle Sam.

Budget Crisis? Ho Hum. According to last week's revenue estimating conference, Michigan's tax revenues will come in around $1 billion less than originally forecast. That’s on top of a state general fund budget with another billion in built-in, or structural, deficit. So, how to balance the books? Republicans want an across-the-board 5 percent cut in state spending, which at least has the advantage of not requiring anybody to distinguish between more and less important things to cut.
Democrats admit spending needs to be cut, but are having trouble figuring out where. Various research groups – the Citizens Research Council, Detroit Chamber of Commerce, Detroit Renaissance and The Center for Michigan – have previously issued compilations of targeted cuts that total more than $1.5 billion. Topping the list is prisons. Michigan is one of five states that spends more on warehousing felons than on educating people in public colleges and universities. And the Department of Corrections budget, now $2 billion, has grown faster than any other area of state spending. A coalition of groups, including business, education, municipal government, not-for-profits and Realtors, has called for "hundreds of millions of dollars in reduced spending." The governor has called for $120 million in cuts, which is a good step, but only a first one. Much more needs to be done.

But everybody's left Lansing for a couple of weeks, presumably to think more deeply (ha!) about the impending crisis.

***

We're Not So Bad Off, After All: The Chicago Federal Reserve Bank has issued a report showing nearly all the Great Lakes states are in financial trouble, many of them worse off than Michigan. Illinois is facing a budget deficit ranging from $9 to $11 billion, with another $4.5 in unpaid bills, according to the state comptroller. Wisconsin is looking at a $5.9 billion deficit over a couple of years. Iowa looks better, but legislators there are hacking away at the $6.2 billion budget suggested by Democratic Gov. Chet Culver. And Indiana says it has a $1.5 billion surplus, but unemployment there is edging toward 10 percent. And Republican Gov. Mitch Daniels is proposing an 8 percent cut in the two-year, $28 billion budget.

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Two Bright Spots: Along with the spring flowers, we got two pieces of good news last week.
Robert Bobb, the Detroit Public Schools' emergency financial manager, has bitten the bullet and actually proposed attacking the district’s estimated $300 million-plus deficit. He is suggesting thousands of layoffs; closing more than 50 schools. I knew him years ago when he was a very capable city manager at Kalamazoo. He's a perfect example of the right man in the right place at the right time. And Michigan students are showing gains in math, according to recently released MEAP test results. Sadly, language and reading scores didn’t show much improvement. Much of the progress has to do with gradual phasing-in of the state's tough new school curriculum that requires advanced algebra, among other things. Now if school district officials could actually find ways to get kids in class for the old required standard of 180 days …

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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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.

Mark is one of those treasured few whose brains, competence, experience and common sense help make our state the wonderful place it is. He has made a practice of staying out of the limelight, but his career has been nothing short of dazzling.

He served at the very top of state government, as director of the Department of Management and Budget and as State Treasurer. And he has had, if anything, even more influence on education.

Murray has been vice president for finance at his alma mater, Michigan State University, and was Gov. John Engler’s appointee to the reformed Detroit Board of Education when the state took over the city's public schools. After a widely praised stint as president of Grand Valley State University, he entered the business world with a bang when he was picked to be president of Meijer, Inc.

I got to know Mark's father, John Murray, a long time ago, when I was just starting out in the newspaper business. He had been a key advisor to G. Mennen Williams when Soapy was governor (1949-61) and later taught journalism at MSU. John was one of the wisest men I ever met, and so his son and I fell naturally into a friendship.

The younger Murray is also a member of the Steering Committee of The Center for Michigan, a non-partisan, non-profit outfit I started back in 2006 to try to develop a common ground, common-sense citizen agenda for Michigan's transformation.

The other day, Mark Murray and I had a long and thought-provoking conversation. Part way through, he said: "If we really want to transform Michigan, we'd do well if we figured out ways to get beyond the usual public policy framing that we hear about all the time and get to things that every person can do in their daily life that will result, over time, in a transformed state."

"Like what?" I asked.

"I keep thinking about two," Mark responded. "First, what if every child in Michigan – every child! – was read to by a parent every day? And second, what if every family – parent or parents and kids – ate dinner together every day?

"Just doing those two things would change forever the development of children. They'd make such a difference here – or anywhere. And they’re the kind of things every person can do …without depending on the government doing it for them."

That common sense and wisdom bowled me over.

Every mother knows how important it is to read to little kids, not just for what they learn but for the kind of bonding that takes place when they're little. One of the happiest things I do with my little granddaughters, age three and four, is to sit on the floor in their bedroom and hold them in my lap and read to them just before they go to bed. My son and his wife do that every night when my wife Kathy and I are not visiting, but for us to get to do it is special.

But I know that, sadly, lots of kids go to bed at night without being read to. And every father knows how vital it is for the entire family to get together around the table, sharing not only food but also what it means to be family, not just a collection of individuals, randomly associated. Now I realize that today's way of living is fast-paced and harried, and conflicting schedules often make it impossible for an entire family to eat together every evening.

But I also remember that having dinner with my own parents most nights was what brought me to the conviction that of the things that are most important, family has got to be right at the top.

Now contrast these simple, human things with the sorts of stuff that newspapers (those still publishing) and bloggers, politicians, and so-called experts think are important.

You might have read about them in any number of Lansing-based news services last week. Members of the legislature and the governor are going to take a 10 percent pay cut, a symbolic step in the face of the recession. Seventy-four members of the House of Representatives members have asked the governor to reverse her idea that any proposed new coal-fired power plants get a special environmental review, thereby slowing approval and construction.

And the governor signed into law authorization for Michigan craft breweries to share facilities with wine makers.

All that is important in a way, no doubt. But not significant.

Those of us who worry about our state, its politics and its public policies regularly look at the world through a framing process that confuses what's momentarily important with what's truly significant.
What's worse, many of us tend to assume that to make a change for the better, we’ve got to get government to do something first, to authorize or subsidize it, or outlawing something.

Rubbish.

What people do in the divinity of their ordinary lives is what's truly significant. Making sure that no child goes to bed without being read to by a caring adult. Taking the time and effort to gather the family around a common table to break bread. Mark Murray knows that. It's why he is such a force for common sense and the common good. And it's why I treasure the chance to talk with my old friend from time to time.

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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 centrist think-and-do tank which publishes the Michigan Scorecard. 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.