Posted by jdehmel

That's the charge levied by two leaders of the House Freshman Bipartisan Caucus.

In a March 3 letter to leadership, State Reps Bill Rogers, R-Brighton, and Tim Bledsoe, D-Grosse Pointe, demand attention to their joint proposals to extend term limits and force legislators to accept payless pay days if they don't pass a budget by July 1.

"We challenge the leadership of our chamber to overcome the inertia resulting from partisanship and timidity and immediately begin moving these Resolutions through the House," according to the Rogers-Bledsoe letter. "These are modest but vital reforms that should be presented to the voters at the earliest opportunity, on the August ballot this year. To succeed, our reforms must be divorced from partisan politics, but they must be divorced from rivalries for higher office as well. Having these efforts closely associated with one party or the other, or one statewide office candidate or another, would surely doom them to failure."

This is the latest example of the Freshman Bipartisan Caucus rising up in unison to attack slow-moving leadership. During last fall's budget stalemate, the freshman called out leaders for lack of action and for declining to give the freshmen a seat at the table in negotiations.

Rogers' budget deadline resolution establishes a deadline of July 1st for the Legislature to submit a balanced budget or lose its pay for each day thereafter. Bledsoe's resolution reforms legislative term limits so that members must leave the legislature after 14 years and may not return, but may spend those 14 years in either chamber. Both resolutions require constitutional amendments that could be placed on the ballot as early as August — if leadership moves forward with hearings and votes to do so. No such committee hearings have been publicly scheduled in the week since the freshmen sent their letter.

But the freshmen have won the support of the state's last three governors. In her state of the state, Gov. Jennifer Granholm endorsed the freshmen no-budget, no pay plan. And in a joint speech in February, former governors James Blanchard and John Engler identified term limits as a major barrier to effective leadership in Lansing.

Term limits' destructive impacts — most notably the erosion of institutional knowledge, policy expertise, and trust in the Capitol — are of deep concern to just about any interest group with any regular contact with legislators. Even the lobbyists who arguably profit most from the constant changeover in Lansing acknowledge they lose because they can rarely accomplish anything for their clients. Likewise, the more than 10,000 citizens participating in the Center for Michigan's "Community Conversations" list term limits reform as a chief concern.

Call or email House leaders today. Tell them to get off their hands and move forward with important budget and term limits reforms. The easiest way is to just click on their names below to automatically send a letter demanding action.

House Speaker Andy Dillon — 517 373 0857

Majority Floor Leader Kathy Angerer –517 373 1792

Minority Leader Kevin Elsenheimer –517 373 0829

Minority Floor Leader Dave Hildenbrand –517 373 0846

Click here for a quick guide to the big issues.

In case you missed it, here are five key takeaways from Wednesday's meeting:

MELTON MAKES NEWS ON SCHOOL FINANCING: State Rep. Tim Melton, D-Auburn Hills, offered the morning's most impassioned presentation. The chair of the school finance committee in the House waged a multi-fronted battle. "The burden we're putting on the future is unsustainable," he said, pointing at the costs of educator health care and pensions which are increasinly dominating school budget talks. "Who will be brave enough to take on the gorilla in the room?" he asked, pointing a finger at teacher unions. Simultaneously, he called it "ridiculous" for Senate Republicans to have signed no-tax pledges at a time when dozens of Michigan school districts are on the edge of the "Kalkaska option" of shutting their doors and shortening their school years. Visibly frustrated at the inability of the Legislature to pass significant policy, Melton said he may push his colleagues to approve a ballot measure in August that would, in effect, ask voters to choose between deep cuts to schools or higher taxes. Click for coverage from the Detroit News and Detroit Free Press

GROWING SUPPORT FOR PRE-K: Less than a year after the Michigan Senate proposed zeroing out funding for state pre-school programs, advocates may be gaining ground in their battle to increase public awareness of the return on investment in early childhood. Wednesday's crowd digested economic studies and expert testimony suggesting pre-school offers a high return on investment. Then, when asked where Michigan should put a fictional $100 million more per year in funding, the crowd chose pre-K over K-12, community colleges, and universities.

IN AN EDUCATION-FRIENDLY CROWD, BENNIES GET SCRUTINY: Wednesday's crowd was generally supportive of future increases in school funding and was willing to raise taxes to provide that funding. But in terms of school personnel changes, insta-polling of the crowd showed highest support for cuts to educator health care and benefits (48 percent) with less support for educator pay for performance (21 percent), reprioritizing school budgets to provide more money for teacher pay and in-classroom expenses (19 percent), and providing nationally competitive pay and benefits to attract the best educators (12 percent).

ONGOING PAY-FOR-PERFORMANCE DEBATE: Representative Melton said he expected local school districts to adopt new pay-for-performance measures for educators in their next labor negotiations. But American Federation of Teachers-Michigan President David Hecker and Michigan Education Association President Iris Salters cast doubt over pay-for-performance as the latest knee-jerk fad in education. They said they'd not seen any research proving that pay-for-performance improves teaching or student learning. And, state schools superintendent Mike Flanagan told the crowd that the Legislature hadn't yet passed what he views as the most-effective mechanism which, in his mind, is to offer performance-based incentives for the full team of educators at individual schools rather than individual educators.

THE FACE OF COLLEGE COSTS: Michigan State University President Lou Anna K. Simon, University of Michigan Vice President Cynthia Wilbanks, and Kalamazoo Valley Community College President Marilyn Schlack offered considerable evidence of how campuses are cutting costs while facing never-ending cuts in state financing, spurring prosperity through research and technology, and straining to handle larger numbers of students who need remedial education. Then Grand Valley University student Nikki Searle, who just lost a Michigan Promise scholarship due to budget cuts, made an elegant and simple plea. First she quoted the Michigan Constitution… "… religion, morality and KNOWLEDGE being necessary to good government and the happiness of mankind, SCHOOLS AND THE MEANS OF EDUCATION SHALL FOREVER BE ENCOURAGED." Then she outlined for the crowd her costs for one semester…

Tuition: $4,315
Rent: $1,700
Groceries: $100
Textbooks: $235
Total Costs: $6,650

It's that time of year again when the governor and lawmakers slog through next year's budget due on Oct. 1. Given the fact that the federal stimulus money has run dry, the budget hole is pegged to be at least $1.7 billion even after a decade of deficits. And it's an election year — no one is expecting smooth sailing.

Lawmakers, lobbyists and policy analysts are already handicapping what areas are most likely to get the axe and what revenue could possibly be raised. So the Center for Michigan has compiled top 10 lists for both as an initial guide to the unfolding budget process.

It should be noted that there’s near-universal agreement that spending cuts are far more likely than tax and fee increases to get approval from lawmakers.

"There seems to be more will to do cuts than raise taxes," observed Business Leaders for Michigan President Doug Rothwell. "The odds are against general tax changes because they're all so nervous to touch that issue in an election year."

House Appropriations Chair George Cushingberry (D-Detroit), however, warns that after more than $1 billion in cuts last year, "I don’t think we can do anything to hurt the basic safety net."

Craig Thiel, director of state affairs for the nonpartisan Citizens Research Council, said that resolving a more than $1 billion General Fund deficit will mean cuts to the "big four" – higher education, Corrections, revenue sharing to local governments and Medicaid.

"You really can’t escape the reality of targeting those areas," Thiel said. "What specifically happens to program X or program Y, it’s hard to say at this point."

Governor's plan

The starting point for negotiations is Gov. Jennifer Granholm's $47.1 billion fiscal 2011 budget proposal that she laid out on Feb. 11. The General Fund budget, which encompasses Corrections, Higher Education, the Legislature, revenue sharing and more, is $8.1 billion. The School Aid Fund for K-12 education is budgeted at $12.7 billion.

The governor proposed $566 million in budget cuts and $400 million in reforms primarily through an early-out program for teachers and state employees. Granholm also is counting on $514 million in a second federal stimulus plan. And she crafted a $550 million tax increase by expanding the sales tax to services.

Mike Boulus, executive director of the Presidents Council, State Universities of Michigan, called the proposal a "prudent and balanced budget solution."

But Sharon Parks, president of the Michigan League for Human Services (MLHS), was less charitable.

"This budget has a $2.6 billion tax cut for businesses and no additional help for families," Parks said. "There's a real imbalance."

At the onset, Granholm threatened to veto a continuation budget or one that slashed K-12 or higher education, a threat that didn't play well with some Republicans. Senate Appropriations Chair Ron Jelinek (R-Three Oaks) said Granholm was "trying to bully us a little."

It's early in the process, with Appropriations meetings now under way. Right now, Republican and Democratic caucuses in both chambers are working their way through the budget and deciding what cuts they want to see and where they stand on revenues.

"Everything, everything that isn't regulated by maintenance of effort has to be looked at if we don't want to raise taxes – and we don't," said Rep. Chuck Moss (R-Birmingham), the ranking Republican on House Appropriations.

Reforms have been put forward by Granholm, House Speaker Andy Dillon and Senate Majority Leader Mike Bishop that could potentially save more than $1 billion, although much of those savings would be achieved by local governments and schools. The state could cut funding correspondingly, but lawmakers must adhere to constitutional requirements.

"Maybe we don't have to look at as many cuts and can keep things at their present levels if we enact reforms," Jelinek said.

The Michigan Chamber of Commerce backs the Senate GOP’s reform plan, which includes a 5 percent pay cut for public employees, higher public employee health care costs and Medicaid cuts.

"We believe that in welfare and Corrections, our fiscal priorities are out of balance," said President and CEO Rich Studley. "We've been very clear that we need to invest more wisely in transportation and higher education."

Rothwell said that if no structural reforms are adopted, higher ed and revenue sharing will get hit "just because they're the easiest place in the General Fund."

Cutting away

With a structural budget deficit and tax revenue continuing to slide as part of Michigan's decade-long recession, almost everyone believes cuts are inevitable in fiscal 2011. Across-the-board budget cuts could be adopted, although it's likely that some areas will be whacked harder than others.

Here’s a look at the most likely areas on the chopping block:

1. Higher education

At $1.61 billion, aid to Michigan's 15 public universities is almost 20 percent of the General Fund. Funding for schools was held harmless in the governor's proposal.

"The governor has stated emphatically that she'd veto any budgets with cuts to education," said Boulus. "That doesn't mean they won't cut us. We know we’re on both the Senate and House leadership’s hit list."

But he said that Michigan would need to apply for a federal waiver from maintenance of effort requirements attached to stimulus money. Budget Director Bob Emerson said that would be necessary if more than $50 million was cut.

Lawmakers know that universities can raise tuition to compensate for cuts, Boulus said. Universities have been sliced 14 percent since 2000, he added, while enrollment has risen by 13 percent.

2. Revenue sharing

After deep cuts of 11 percent in fiscal 2010, Granholm has kept statutory funding for cities, villages and townships frozen at $311 million. County funding is up $59 million, as part of a previous budget agreement that had delayed payments.

Although Cushingberry insists revenue sharing is "off limits," it could be cut if reforms are passed and even if they're not.

3. Corrections

At almost $2 billion, prisons eat up the biggest share of the General Fund. Granholm has marked $130 million in savings via proposed changes to truth-in-sentencing laws to allow "good time" for prisoners. That would reduce the prison population by another 7,500 and close four to five facilities.

However, Senate Corrections Appropriations Subcommittee Chair Alan Cropsey (R-DeWitt) has said the plan is D.O.A.

"She's coming up with things that she knows won't fly," he said.

The Michigan Chamber, Business Leaders for Michigan and other business groups back Corrections reforms. But Rothwell thinks significant cuts there are unlikely, noting that prisons were whacked in the fiscal 2010 budget. But he said if more federal stimulus money isn't on the way, the likelihood of Corrections reforms goes up.

The Department of Corrections has been identifying savings in food service, transportation, warehousing and other areas. Many lawmakers, particularly Republicans, would like to see privatization to cut costs.

4. Medicaid provider cut

Granholm has proposed a physician's tax, or Quality Assurance Assessment Program (QAAP), that would generate $133 million. If that doesn't pass, there’s a $133 million hole in the Department of Community Health budget. That would equate to an 11 percent provider cut on top of the 8 percent cut they took in fiscal 2010.

5. K-12

The $165 per-pupil cut in fiscal 2010 will stand, but Granholm has insisted that there be no further cuts. Dillon said he supports "keeping it level," and House Education Committee Chair Tim Melton (D-Pontiac), who also sits on Appropriations, is looking for efficiencies to close the $425 million School Aid Fund gap.

"That’s 3 percent of the budget," Melton said. "If we can't find that in savings, we’re not doing our jobs."

However, Senate Republicans are not married to the idea of holding K-12 harmless, especially when schools only saw a 3 percent cut last year, far less than other areas were slashed.

Emerson said that there are maintenance of effort requirements attached to federal stimulus dollars, making cuts potentially problematic. Moss agrees. The administration is in contact with the U.S. Department of Education to see what amount of cuts is acceptable, but Emerson stressed that it will be difficult for Michigan to attain a waiver.

6. College grants and scholarships

Granholm has frequently targeted the Michigan Tuition Grant, which provides private college scholarships — and this year is no exception. The $31.7 million was wiped from her fiscal 2011 proposal, as she restored $6.8 million of the Michigan Promise grant through a $4,000 tax credit. The $75 million Promise started by the governor was eliminated to balance the fiscal 2010 budget.

This move could spark a fight with lawmakers on both sides of the aisle. Cushingberry said that the Michigan Tuition Grants are critical for low-income students in his district. He also took a swipe at the Promise, which had been awarded to all college students.

"We can't do that, especially when we're giving money to families in Bloomfield Hills," he said.

7. Medicaid recipient cuts

Senate Republicans are eyeing cuts here by eliminating optional services and kicking some groups off the rolls.

Parks, of the Michigan League for Human Services, said the state has to meet stimulus requirements and can't cut too much. Some optional groups, like 19- and 20-year-olds, can be taken off the rolls. Optional services can also go, although many, like dental and podiatry services have already been axed. Mental health, substance abuse, pharmaceutical, adult home health and medical supply services could be on the chopping block, Parks said.

The governor has proposed axing a $3.7 million program that provides transitional health insurance designed to help the poor who are coming off Medicaid.

Granholm last week also issued an Executive Order creating a Health Services Inspector General to oversee waste, fraud and abuse in Medicaid and other health care programs. It’s estimated it will save $3.7 million.

8. Department of Human Services and welfare

Granholm cut $39 million in her budget, but the Michigan Chamber and some Republicans want to see more welfare cuts. But Parks argues that's trying to get blood from a turnip.

"Human Services has just been cut to bare bones," she said. "There's just not room in that tattered safety net to get very much out of it."

However, there are about 400 new child protective services workers added, as the state has to comply with a legal settlement.

"That takes a large proportion of that budget off the table," said Thiel of the Citizens Research Council.

But with historic caseloads for Medicaid, food and public assistance, DHS has asked Appropriations Committee members for 800 new caseworkers. That seems highly unlikely, however.

9. Libraries

They've been chopped for years and last year, Granholm eliminated the History, Arts and Libraries Department. In fiscal 2011, the governor cut the Library of Michigan by another $1.1 million, down to $4.6 million. State aid to libraries is down $150,000 to $6 million.

10. Michigan State Police

While the governor hasn;t proposed cutting any state troopers this year, after a bitter fight over eliminating 100 last year, the idea is not off the table. Senate Appropriations State Police Subcommittee Chair Valde Garcia (R-Howell) said he's trying to look for efficiencies to prevent that scenario.

However, the MSP's Capitol security guard program could get the axe. Seven officers would be eliminated under Granholm’s proposal at a savings of $543,000.

Revenue battle

The Vegas odds on a tax increase this year appear to be a longshot right now.

"If it didn't happen last year, it's harder to get it now in an election year. So it doesn't seem likely even to get small things – which won't add up to ($1.7) billion anyway," said Sen. Mickey Switalski (D-Roseville), the ranking Democrat on Appropriations.

Just to be sure, the Michigan Chamber, Tea Party organizations and other business groups have been vocal against any general tax increase.

Although Granholm backs a general tax hike, she has yet to see significant support from Democrats in either chamber. House Speaker Dillon said he supports tax reform, but only after the Legislature passes a budget.

"I support reforms first," Dillon said. "A tax increase should be the last resort after we make all the cuts we can stomach."

Switalski said even the Senate Democrats, who have been more likely than their House counterparts to back the governor's agenda, aren't on board.

"It's a tough sell to sell any kind of tax," he said. "But the idea makes perfect sense to modernize the sales tax. . . . Being realistic, it's an election year, and it's an uphill climb even in my caucus."

But not all Democrats have given up on revenue. Rep. Shanelle Jackson (D-Detroit), who sits on Appropriations, told Granholm at her budget presentation that her constituents want to see the state raise revenue.

"The most important thing for us as a state, as the late (Sen.) Bill Ryan used to say, is meeting the basic human needs of all of the residents," said Cushingberry. "I'll introduce whatever they (House leadership) ask, whatever the Senate might move."

There could be some minor tax increases so that lawmakers "won't have exposure to 'raising taxes,'" Rothwell said, but he warned that this won't do much to solve Michigan's longer-term budget woes. "It just gets us through the current year."

Thiel agreed that targeted tax hikes like the physician's tax or a beer tax hike will produce a "relatively small pot" of revenue.

"But with $100 million here and there, pretty soon, you’re looking at real money," he added.

Switalski said the picture could look different after Nov. 2.

"Up until the election, it will be very difficult for any Republican to vote for a tax increase," he said. "But I think they’ll warm to it. The first one inevitably will be transportation."

Here are the revenues that are in the mix right now:

1. Sales tax on services

In 2007, the Legislature passed a 6 percent tax on a hodgepodge of some services as part of an 11th hour budget deal. After clamoring from the business community, lawmakers quickly repealed it, replacing it with the Michigan Business Tax (MBT) surcharge.

This year, Granholm has a new plan. The governor would raise $555 million for the School Aid Fund by dropping the sales tax rate from 6 percent to 5.5 percent and extending it to most services. Business-to-business, health care and education services would be exempt. That would create a $235 million surplus in the SAF this year, according to the Senate Fiscal Agency.

"It's unlikely to see any action, but if so, the service tax is at the top of the list," Rothwell said.

"We've been talking about this for how long?" Boulus added rhetorically.

Parks said the MLHS is concerned is that 5.5 percent won't yield enough money for critical programs.

Granholm has tied this proposal to a business tax cut. She wants to eliminate the MBT surcharge over two years starting in 2011 and reduce the gross receipts tax from 0.8 percent to 0.6 percent over three years. The proposal would bring in $330 million in fiscal 2012 and be revenue neutral by 2014.

This is opposed by all business groups, even BLM, which came up with a revenue-neutral version of the service tax. Studley calls it "laughable" and "lunacy."

2. QAAP

The physician’s tax would raise $133 million, which Parks said is the way to "salvage" Medicaid. Emerson said that as long as a physician had 4 percent of his patients on Medicaid, he would receive a higher government reimbursement.

But while Cushingberry said the "pressure is finally building," many doctors and the Michigan State Medical Society remain opposed. Jelinek said he'd be "very surprised" if it went through. Even Switalski, the architect of last year's plan in the Senate along with Sen. Roger Kahn (R-Saginaw), called it an "uphill battle."

3. Roads funding

Granholm backs shifting the gas tax from a flat rate to a percentage of the wholesale price to raise more money for roads.

Lawmakers also are on the transportation funding case. Rep. Pam Byrnes (D-Chelsea) and Rep. Dick Ball (R-Laingsburg) have proposed a 4-cent-a-gallon gas tax hike for this year. It would rise to 8 cents by 2013. Sen. Jud Gilbert (R-Algonac) has a so-called "diesel parity" bill that would raise the diesel tax. It passed a Senate committee last year and would generate $5.3 million for repairing bridges.

This won't balance the budget, but Michigan is primed to leave $500 million in federal dollars on the table because the state road fund is down, something Studley called "unconscionable."

"After years of being told the sky is falling, now it's falling," Thiel said.

4. Tax loopholes or expenditures

According to the Treasury Department, Michigan shells out $36 billion on tax credits every year including church property exemptions; income tax exemptions; tax credits for historic preservation, the film industry and advanced battery technology; and the Earned Income Tax Credit for low-income workers.
Expenditures are growing at a faster rate than state tax revenue. The MLHS estimates that between 2005 and 2008, expenditures jumped by about 15 percent compared to 8.8 percent for state tax revenue.

"The only thing we get excited about is movie credits," Boulus said. "We should look at all of it."

Rothwell said that it's "hard to get your arms around that quickly" but expenditures should be examined. Parks agreed that this might not yield much immediate savings, although the MLHS strongly supports loophole closures.

5. Federal stimulus II

Granholm allots $514 million in federal aid in her fiscal 2011 budget. Senate Fiscal Agency Director Gary Olson notes that this is not unprecedented; former Gov. John Engler made assumptions of federal funds in the budget process.

Legislation has passed the U.S. House and there appears to be hope in the upper chamber, although it's not clear how much states would see.

"That may just be a fantasy," Moss warned.

Olson points out that "other states are in the same boat" and Michigan will know within the month if help is forthcoming.

"If it's there, it's there. If it's not, there will be a $514 million problem in the budget to deal with," Olson told lawmakers this week at a joint House and Senate Fiscal Appropriations subcommittee meeting.

Parks thinks it's likely to come through and Granholm "wasn't wrong to put it in." She said this is probably the "best shot" for revenue this year.

"The flip side is that it delays the pain even further," she said. "It's a bailout for us – which we definitely need – but it delays the inevitable."

6. Fees

Rothwell says there's a "grab bag" of options in terms of fee increases, but "nothing brings in a lot of money."

Granholm has proposed $8.6 million in increases for fiscal 2011. There's $500,000 for migrant labor housing inspection fees, $500,000 for dairy inspection, $2.6 million for state fire services, $3.2 million for fingerprint services and $1.8 million for name-based criminal history lookup.

Jelinek said the Agriculture fees have a good shot, but Garcia is skeptical about the state police fee increases.

Other options are on the table. Cushingberry has just introduced a bill raising vehicle registration fees. The way Michigan funds its state parks will likely change. There’s a bipartisan, bicameral agreement for a $10 fee people can opt into when they renew their vehicle registration with the Secretary of State. Park fees currently generate $11.7 million. If 25 percent of people participate in the "parks passport" plan, that would be $17.5 million.

Hunting and fishing license increases could win the support of the Michigan Chamber, Studley said, if they're "within reason." He notes the concern about Asian carp and said that an increase could help fund environmental protection.

7. Earned Income Tax Credit

The Michigan Earned Income Tax Credit for low-income workers was enacted in 2006 and went into effect in 2008. It is 20 percent of the amount a person is allowed to claim for the federal EITC amount for tax year 2009.

Many Republicans have been interested in rolling back or eliminating the tax credit even before it could be claimed. Rep. Bill Caul (R-Mt. Pleasant) inquired at the budget presentation if it wasn't too late to do so for tax year 2009, but state Treasurer Bob Kleine warned people have already filed their taxes and that would "create an administrative nightmare."

The MLHS is concerned that the EITC will take fire again this year.

"We give everyone else a tax credit," Parks argued. "We don't think it should be a place to go. It would be grossly unfair and counterproductive."

8. Beer and wine taxes

It's been decades since either the beer or wine tax saw an increase, but this doesn't appear to be on the radar of the House, Senate or governor at the moment. Granholm briefly floated a plan last year that met with heavy opposition from the Michigan Beer and Wine Wholesalers. The current beer tax is 2 cents per can. Raising it to 6 cents would generate $100 million more annually.

9. Rental car tax

Slapping a $2.50 per-day rental car fee would mean $13 million for tourism funding. It's in the governor’s budget, but the idea already died in both the House and the Senate last year, so this idea doesn’t appear to have legs at the moment.

Both chambers are looking at alternative funding mechanisms. A one-time $9.5 million appropriation for Pure Michigan has passed a Senate committee.

10. Graduated income tax

The fact that this would take a constitutional amendment makes a graduated income tax highly unlikely. "We booby-trapped ourselves" with the constitutional provision against graduated rates not just for personal income taxes, but for business income taxes, as well, Thiel said. But Boulus said there's an alternative. The Legislature could pass tax credits based on income to make it more progressive – which would not take an amendment.

The MLHS is one of graduated tax's biggest supporters, although business groups are strongly opposed.

"The graduated income tax is dead," Rothwell said. "I don't see any willingness to take it on."

Laurie Moncrieff was working at IBM back in the early 80s when she watched the number of employees drop from 15,000 to 1,500.

she saw the same thing happen to the textile and furniture industries. So when she moved back to Michigan in the early 90s to join her family's tool and die business, she was shocked by what others failed to see.

"I said, 'What are you guys thinking? You can't just sit back and rely on auto!'" recalled Moncrieff, owner of Schmald Tool & Die Inc. in Burton. "They thought I was crazy. People always want to resort back to old habits. And that's not a good thing to do in this market. It’s all about change."

In 2007, Moncrieff formed Adaptive Manufacturing Solutions (AMS), a group of 16 small businesses with Michigan headquarters that offers clients one-stop shopping for manufacturing and tooling needs, and works together to bid on large projects.

Last fall, her efforts paid off in a big way.

AMS and one of its partner companies, Burton Industries, a tool and die manufacturer in Genesee County, won a $6.8 million defense contract to build assembly equipment for U.S. Army smoke grenade production at Pine Bluff Arsenal in Arkansas.

"It's a very positive step in the right direction for us," said Greg Johnson vice president of business development at Burton Industries. "We're a company that's been doing largely automotive work for the last couple of decades, and there just isn't the volume of work in the industry that there used to be. So like many people, we're trying to diversify our customer base."

Applying for large contracts requires extensive time and work that small businesses acting alone may not be prepared to handle, said Moncrieff, who tried it on her own for five years without success.

In addition, she said, a conglomerate allows smaller companies to act as one large company and go after non-automotive markets such as medical equipment, alternative energy, aerospace and military.

"The reason for the success with AMS is that a lot of the significant contracts take five or six companies working together to bid on," said Moncrieff, who is hoping for success securing several other multi-million dollar contracts.

Moncrieff believes small companies must get past that fear of working together, and realize that their competition is from out of state – and the country.

"It's a different mindset to think you're working with folks you may have competed against in the past," she said. "It's a difficult thing for people to get past. They're used to keeping to themselves and not wanting anyone else to know what they're doing."

"You don’t have to worry about your neighbor across the street. The bigger competition comes from other countries and states that are looking at creative ways to get the work to their state."

AMS has won other government contracts, but the Bluff Arsenal award is its largest. Burton Industries will be the lead company on the new defense contract, and Sterling Heights-based Indicon Corp. will provide electrical components and services as a partner in the project.

Burton Industries' Johnson had to lay off a handful of workers last summer. He hopes that when the design stage is finished and the company is ready to build the assembly line for those smoke grenades, he'll be able to hire everyone back.

The contract proved to him that there are more opportunities than he once realized.

"You don't have to be 100 percent committed to the automotive industry if you don't want to," he said. "We chose to diversify. We had the opportunity to get a real nice contract with the government, and we’re definitely hopeful it leads to more."

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

But even if you're not among the more than 300 people have registered for the morning-long discussion, you can quickly get up to speed on the big-picture issues faced by today's students, educators, parents, and taxpayers.

CLICK HERE FOR AN EASY-TO-READ GUIDE outlining many major issues in pre-school, K-12, and higher education.

CLICK HERE FOR FOR NEXT WEDNESDAY'S AGENDA.

This is another in a continuing series of policy town halls produced by the Center for Michigan in cooperation with Public Sector Consultants, Inc. These events are designed to help citizens get more involved in statewide issues, mingle with decision makers, and help set a solutions-oriented policy agenda in Lansing.

Our speakers will discuss school finance, and additional best options for education innovation in the wake of Race to the Top legislation passed by the Michigan Legislature last December.

Our last event in November drew wide media coverage and more than 200 statewide participants to talk about long-term budget and tax policy solutions. In effect, the November meeting previewed some of the "grand bargain" reform discussions now underway at the Capitol.

The March 10 event will feature The Center's interactive "clicker" voting technology and will focus audience members on the kinds of long-term education policy choices 10,000 people have deliberated in nearly 500 statewide Community Conversations since fall 2007, including:

Performance: What is the return for Michigan's investments in pre-school, K-12, and higher education?

Funding & Affordability: How much should Michigan invest in pre-school, K-12, and higher education programs? What more can be done to assure affordable access to all levels of education?

Innovation: What additional innovative steps can Michigan take to best prepare students to participate in Michigan's transforming economy?

Our list of confirmed speakers includes some of the most influential and experienced education minds in the state, including Michigan State University President Lou Anna K. Simon, State Superintendent of Public Instruction Mike Flanagan, Kalamazoo Valley Community College President Marilyn Schlack, American Federation of Teachers-Michigan President David Hecker, Utica Schools Superintendent Christine Johns, University of Michigan Vice President Cynthia Wilbanks, as well as early childhood policy experts Judy Samelson and Jack Kresnak.

As always, this Town Hall features a free lunch afterward — but you have to earn it with provocative questions during the morning discussions!

Nohemi Leake of Kalamazoo believes we should be sprinting in the Race to the Top. Maria Martinez of Wyoming, near Grand Rapids, wants to put a stop to this Race.

Think there's a consensus over President Barack Obama's Race to the Top education reform plan, which emphasizes performance-based pay for teachers and school officials?

Hardly. It's not just education experts and school employees who are all over the board in how they feel about it.

The same disparate views are echoed by everyday people whose lives don't revolve around the latest education theory. They just want to know that their kids are learning what they need to.

"I personally think it's a good idea," Leake, 35, said of basing pay on how students perform. "In any other job that's how it would work."

Leake has four kids, ages 1 to 8, including a kindergartner and third grader. She's a PTO officer at Kalamazoo's El Sol Elementary School and is hardly down on teachers. She thinks most are doing a good job, but remembers seeing teachers while growing up who seemed to stay on the job forever, no matter how they were doing.

Martinez, though, worries that her 9-year-old son – who struggles with reading – will get overlooked as teachers focus on stronger students in order to boost test scores and class performance measures. She's already not happy with the attention he's getting in his class of 35 children at Wyoming's West Elementary.

"If they are ignoring him now, they are going to ignore him more," Martinez said. "… My personal opinion is instead of giving bonuses, use that money to get more teachers."

Race to the Top offers $4.3 billion in federal funds through competitive grants to states that commit to roughly 20 education priorities. Those priorities, as set out by the Obama administration, include performance pay, more room for charter schools, and better efforts to turn around failing schools.

Everyone, it seems, has his or her own thoughts on improving our education system and whether Race to the Top will do it.

Critics say it's a formless grab bag of ideas that dangles millions of dollars in federal funding in front of cash-starved states.

"Instead of Race to the Top, it became Dash for the Cash," said Doug Pratt, spokesman for the Michigan Education Association, a leading critic of the effort.

Proponents say at least it represents something, anything, being done to improve our schools and keep up with the rest of the world.

"Instead of sitting here wringing our hands, let's take some leadership," said Jim Ballard, of the Michigan Association of Secondary School Principals.

Michigan: Millions at Stake

At the heart of the plan is performance pay and evaluating school staff based on student achievement.

Michigan is competing for up to $400 million in Race to the Top money, but there are a lot of hoops in order for state officials to get their hands on some of the cash.

Gov. Jennifer Granholm in January signed a five-bill package approved by the state Legislature that echoes the administration's key measures. The reforms require annual evaluation of teachers and administrators by using data on student growth; requires administrators to be certified (like teachers); permits more charter schools to open; and allows the state to intervene in low-performing schools.

Nearly all local school districts signed memos of understanding agreeing to participate in the changes, a factor the administration takes into account in its decision on who gets funds. But few union locals signed on, discouraged by MEA leaders.

The MEA said that Race to the Top didn't tackle real priorities such as class size and early childhood education and that locals were being asked to agree to a plan that wasn't even finalized. Many of the day-to-day details will have to be worked out at local bargaining tables, promising a complicated and hectic summer and fall for contract negotiations.

And, in perhaps the highest-profile issue, the MEA said research doesn't back up linking teacher evaluation to student growth and warns that in the end there will be an over-reliance on high-stakes tests.

That's where the real debate begins.

Measuring Teacher Achievement

"It worries me," education expert Kevin Hollenbeck, vice president of the Upjohn Institute, said of performance pay.

As an economist, Hollenbeck generally believes in incentives. But "as always the devil's in the details," he said.

Hollenbeck, former president of the Michigan Association of School Boards, worries about tying too much to test scores and whether teachers will tailor their work to whatever will drive up their evaluations. That won't necessarily lead to better student learning, he said.

Coming up with a good assessment tool for teachers is complicated, he said. For instance, how do you account for the overall makeup of a class and the notion that the best teachers are assigned the worst students?

"What concerns me is that teaching is a team process and so what makes the most sense to me, particularly in the elementary grades, is (school) building incentives rather than individual incentives," Hollenbeck said.

Playing Favorites

Larry Christopher, a social studies teacher in Hastings, southeast of Grand Rapids, thinks merit pay will fall victim to a huge "buddy system" in which administrators reward their favorite teachers.

Christopher, 51, is head of the district's teachers union, so Race to the Top is going to be a big part of his life.

He’s not looking forward to it.

There's no evidence that tying salary to performance increases student achievement, he said, and Christopher shares Hollenbeck's concerns over how to make sure certain teachers aren’t penalized for having more difficult students.

"My thought is it's a lot like so many grandiose ideas, ideas that on the surface seem to have some merit," he said. "As you begin to look at the practicality of trying to implement, the policy it's fraught with problems."

Still, Christopher concedes, teachers are in a "no-win situation" with the public over the issue.

"If this comes to a vote, if this comes to a public relations battle, teachers are going to lose it across the board," he said.

That's because, as Leake attests, many people seem to like the notion of evaluating performance on something measurable.

But critics say a model that works in, say, manufacturing, doesn't fit in education.

"We're not creating widgets, we’re not creating brake pedals, where it's much more quantifiable," counters Pam Schultz, president of the Jackson County Education Association.

Teachers are concerned that any evaluation measure won't accurately reflect the full picture of their work, only a snapshot of test scores and other numbers, Schultz said.

"The way we deliver education, everything has changed so much," she said. "I think we're a little behind on changing. (But) we're going gung ho and trying to change everything so much, we’re almost overstepping, almost going too fast."

That's a good thing, proponents say: The education system needs an overhaul, and change must come swiftly and sharply.

"I think there’s a very important need," said Sharif Shakrani, an expert on accountability in education and co-director of the Education Policy Center at Michigan State University.

"What the U.S. Department of Education is saying is we want to be able to provide this huge amount of money to the states. We don't want this money to simply be added to the budget, we want it to be targeted to improving achievement."

Will Money Buy Results?

Shakrani calls Race to the Top "drop-from-the-sky-type funds" that should greatly help states in dire need of school money.

He likes the program's emphasis on helping chronically failing schools, saying, "If something is not done, these schools will be where they are five years from now."

He's not as high on broadly judging teacher pay on student performance. For instance, how can a teacher be held accountable for the scores of a 7th grader who may not have been taught well in previous grades, he said.

"To say that the student's performance and achievement is only a function of the teacher who taught him the last time is really far-fetched," said Shakrani.

But performance evaluations are just one component of Race to the Top, he said, and may not be as stark as some think. Teachers won't be fired if their students don't do well but may instead get professional development, Shakrani said.

At its heart, the new system allows educators to use data to dig deeper into why some students learn and some don’t, he said.

Ballard, executive director of the secondary principals group, admits "people are scared to death because there are more unknowns than knowns" over performance evaluation.

But Ballard is among those who think Race to the Top is pushing the education envelope and it's about time.

"In this day and age of testing and numbers, performance has become a reality, so let's not fight it, let's embrace it and deal with it in a constructive manner," he said. "We can't go on doing what we're doing. Michigan doesn't have the time."

Educators just need to look to major businesses to see how setting performance measures can boost results, he said. Education may not be the same as business but Ballard said it still has to be accountable.

"How can you justify schools where none of the students in that school meet minimum expectations?" he asked.

"This is not a one-year thing. … If we can say over three-year period, kids in your class come out behind other teachers, maybe that's about your teaching ability."

Jack Jennings, who heads the Center on Education Policy in Washington D.C., agrees that student performance has to be used in some way to evaluate teachers, though the specifics need to be worked out.

"When you judge cars you judge performance, it's just the way things are," Jennings said.

"If you go to a doctor you want to know if the doctor has a good rate of care … you want to know about the survival of their patients. What happens to student s and their achievement has to be an element (of an evaluation system)."

Comprehensive Reform?

Jennings said he's most excited about Race to the Top because it marks a coherent national education strategy and a consistency that's been missing.

Frederick Hess of Washington's American Enterprise Institute isn't buying it. He's especially perturbed by the notion that something, anything, must be done to overhaul America's education system.

"I find that ludicrous. We’ve been hearing this for 45 years," Hess said. "The notion that it is OK to behave incoherently or in a slapdash fashion because something is change is nuts."

A prime example, he said, is No Child Left Behind, the Bush Administration education strategy that set unobtainable goals that didn't mesh with what some states were already pursuing.

He fears Race to the Top is already leading to what happened with No Child Left Behind: states turning to pricey consultants crafting policy aimed at appeasing the feds or getting a slice of the pie.

Hess likens it to a "new laundry list of best practices for the moment from Washington."

Yong Zhao, an education expert and researcher at MSU, says there's not enough evidence to show teacher performance is the sole contributor of student performance.

"In my perspective, I'm not sure the system is not working," Zhao said. "It's not working for some people and it's working for others. It's like the U.S. democracy. You could say the democracy is not working in some ways but you don't say forget the Constitution."

OKEMOS — Miniature houses line the walls of the classroom one week, complete with electric circuitry that the teacher's young engineering students have designed, tested, revised and re-revised before the lights went on and they earned their electrical permits.

A week later, students walk through a huge tunnel to enter the class and discover they're in outer space.
Welcome to the third grade in Robb Stephenson's classroom, a classroom of extreme makeovers, of song and science, of passion and learning.

"It's a little bit over the top as far as the lessons I do and the units I do," Stephenson said in a recent interview in his Wardcliff Elementary School classroom. "I have really high expectations for kids, but at the same time, I also believe that students can handle very rigorous content as long as it's presented in a meaningful way."

Stephenson is Michigan's teacher of the year, and it's possible that before long he will be America's teacher of the year. And why not? His students — his third grade students — are doing the work of electrical and mechanical engineers, crafting a classroom Constitution, building windmills, writing personification stories about Superturkeys. This spring they'll present their own spring parent conferences, with Stephenson as a witness sharing their learning.

Stephenson, who was named the state's top teacher last May, is one of four finalists for national Teacher of the Year. The winner will be announced in April.

Tara Lulich, whose son Nick is in Stephenson's class, said Stephenson has "a remarkable ability to making everything fun and interesting."

"He doesn't stand up at a blackboard and teach them about space. His entire room is the space unit," said Lulich. "It brings it alive for the kids when they can see it, feel it, touch it, smell it."

School principal Noelle Palasty says Stephenson builds relationships with students that encourage them to do their best. "He connects with kids in a way that they are excited about learning," she says.

Attached to the door , is the Class Constitution, which each new group of third graders adopts on its first day of class in an effort to "create a more perfect classroom." This year's Bill of Rights: "Be Safe, Be a Kind All-Star, Be Respectful." In fact, students rarely act out, because they're having too much fun.

"I tell the kids from the get-go a couple of things. I want you to always try your best, always treat others with respect, and you will have the greatest year ever," he said. "It's that simple."

Stephenson has a special passion for innovation and creativity — especially when it comes to science and engineering, which is in the deep end of his passion pool. Thanks in large part to a voter-approved technology bond, his classroom has a Smartboard, hand-held clickers for pupils, and a document camera that allows him and his students to zoom in on materials during classroom projects.

He has been awarded a couple of grants to support his engineering program. He has been recognized as an elementary school teacher of the year by the Michigan Science Teachers Association and won the Presidential Award for Excellence in Math and Science.

In the back of his classroom stands his engineering cabinet chock full of materials students can use to build windmills, design rubber-band-propelled paddleboats or construct electrical circuitry for miniature houses. "They not only get turned on to engineering, they actually understand the field of engineering." he said.

Stephenson's undergraduate degree is in theater, and he once had visions of a career on stage. His career path veered off toward woodworking and eventually to education — after he was helping his landlord's daughter with some math problems. Her mother, staring down from the balcony, said, 'You'd make a pretty good teacher.'"

In the classroom, he is both educator and entertainer. He rewrites and performs songs — The "Johnny B. Good" refrain becomes "Go Tom. Tom Edison, Go Tom" in a multi-media presentation to kick off the electrical engineering project (The kids join in with their air guitars.) "Two-and-a-half minutes, and all of a sudden the kids are completely engaged, they've already got some content, and then I can go on with the rest of the assignment."

Lulich says one of Stephenson's strengths is his ability to support children in their own interests — in her son Nick's case, his love of computers, movie-making and guitars.

"Nick comes home every day and his chest is puffed up because Mr. Stephenson had something great to say about him," she says.

Stephenson said he truly believes that every individual has unique strengths. "The best part of my job is discovering what those aspects are and to make the child more aware of them."

He recalled one student that he had heard would be a handful. He quickly learned the boy's passion was "a naturalist" with a fascination for living things. And, especially, insects.

"He was fascinated with insects, let's have him read about insects. He is fascinated about insects and living things, let's have him write about it," Stephenson recalled. "Let's have him do authentic math investigation that is investigating right in his area of interest.

"All of a sudden, he realized maybe I haven't been the best traditional student up until now, but I'm a smart kid, and I have got very special interests and areas where I can shine and excel," Stephenson said. "It changed the way he viewed himself, and suddenly he starts realizing he is quite competent in many academic areas where he didn't think he was."

As teacher of the year, Stephenson attends Michigan State Board of Education meetings and is on top of the education issues of the day, including Obama's Race to the Top educational reform plan and Gov. Jennifer Granholm's early-retirement plan that could lead to an exodus of up to 39,000 school employees at the end of the school year.

He's a strong supporter of universal preschool, and says research clearly shows the investment will pay off many times over. He's a strong believer in the need for good data on student performance — not to punish teachers, but to help students, and to learn from what works.

He's not sure whether merit pay would be helpful, though he says his wife sometimes asks him, "How long can you afford to keep teaching?"

"Would I mind being paid more? No I wouldn't," he said. "I wouldn't want to be the one to have to make the decision to say, I'll pay you less. That would be troubling for me."

He recognizes the early retirement plan will lead to the departure of many good teachers, but believes it will open the door for many others, including his permanent substitute who fills in when he's engaged in Teacher-of-the-Year activities. He points out that Michigan exports thousands of talented teaching graduates every year, including many who would rather stay in the state.

"We are truly in financial crisis in the state, and I understand the governor's reason for offering this because it's just a matter of trying to get less expensive employees to survive through this uncertainty in these economic times," he said. "I think it could really alleviate a lot of the problems that we're facing in this state."

Despite the financial woes, Stephenson remains excited about teaching, and the learning that goes on every day.

"There are many educators who are doing amazing things in the classroom," he says. "That needs to be shared."

I'm attaching a copy of a short study I completed for Delhi Charter Township (Ingham County) a couple of years ago on the costs/benefits of contracting with the county sheriff versus having their own department. Studies dating back to the mid-1970s have demonstrated the economic and policing benefits of contracting versus self-production so I'm not surprised by the Macomb case that I followed closely since their early discussions. Having been a proponent of contracting for four decades I'm pleased to see "The Center" focus on the topic in your e-newsletters.
Best wishes.

Lynn R. Harvey
Professor Emeritus
State and Local Government
Michigan State University

EDITOR'S NOTE: Read Harvey's Delhi Township study here. It concludes that taxpayers' total costs of township government would have been 5 percent higher if the township had its own police department.

The Legislative Commission on Unfunded Mandates established by the Michigan legislature in 2007 by Public Act 98, as amended, MCL 4.1781 et seq., and charged with the task of identifying the costs of complying with funded and unfunded mandates imposed by the state on local units of government, and to make determinations and recommendations relating to those mandates, issued its final report on December 31, 2009.

The cornerstone of the Commission's work revolved around Article IX, §§25 through 34 of the Michigan Constitution of 1963, the so called Headlee Amendment (Headlee), adopted by a referendum of the voters in 1978. Article IX, §25 states: "The state is prohibited from requiring any new or expanded activities by local governments without full state financing, from reducing the proportion of state spending in the form of aid to local governments, or from shifting the tax burden to local government." Article IX, §30 states: "The proportion of total state spending paid to all units of Local Government, taken as a group, shall not be reduced below that proportion in effect in fiscal year 1978-79."

The Commission found it impossible to determine the base year 1978-1979 proportion of total state spending paid to local units of government as records did not exist. Therefore, there is no way to determine the amount of underfunding which has occurred since the passage of Headlee. The Commission was able to estimate, however, that the underfunding for 2009 mandates on local units of government fell between $2.5 billion and $2.9 billion. This figure gives one an idea of the enormity of the issue.

Asking the state to reimburse local units for costs associated with unfunded mandates imposed since the passage of Headlee may not be feasible but mandating future legislatures and executives to begin to comply with Headlee seems not only reasonable but absolutely necessary!

A mechanism for compliance already exists: 1979 PA 101. This statute was passed by the legislature in response to the passage of the Headlee amendment and is known as the "State Disbursements to Local Units of Government" law.

The Commission points out that 1979 PA 101 details how state government was supposed to implement Headlee, the key requirements being:

• requiring annual appropriations for each mandate imposed on a local unit of government,
• requiring the governor to include in the budget all amounts needed to make disbursements to the locals for each state requirement, and
• requiring supplemental appropriations to fully fund any state requirement imposed on the locals.
• The list goes on and on. Unfortunately, this law has not been followed in any of the intervening years since passage of Headlee.

The Commission offered a series of recommendations, including:
• repealing 1979 PA 101 since it has been ineffective and ignored for some 30 years and replacing it with new legislation to implement §29 of Headlee and to make it clear that state funds must be appropriated before any new or increased activity can be imposed on a local unit of government;
• amending the Administrative Procedures Act to prohibit any rule being promulgated which would impose any new or increased activity on a local unit of government unless state funding is forthcoming,
• amending the Revised Judicature Act to provide that the Court of Appeals has jurisdiction over all suits brought under Headlee,
• providing for legislation which would shift the burden of proof to the state in suits brought under Headlee,
• providing for legislation which would establish an on going process to monitor the state's compliance with Headlee,
• providing for legislation which would require the state to examine all existing statutes and regulations which impose requirements on local units of government to determine their necessity, and
• providing for a new court rule to be adopted by the Supreme Court consistent with the Commission’s legislative recommendations.

During February 2010, House Bills 5797 through 5802, House Bill 5836, and Senate Bills 1141 through 1143, were introduced to implement the Commission’s recommendations. The legislature is interested and concerned about this issue. The time is ripe for concerned citizens to communicate their support to their legislators.

The impact of the Commission's report is wholly dependent upon the legislature's actions during the remainder of this legislative session. If the recommendations are adopted, local units will be spared unfunded mandates. Furthermore, the state will be required to examine all legislation requiring an appropriation prior to implementation, a requirement that should prove helpful to minimize spending. Savings to taxpayers and relief to local units of government are Headlee mandates and may also prove to be government’s most effective aid to communities suffering from the current recession.

Note: Ron Basso is a partner in Basso & Basso Consulting Services in Iron River in the Upper Peninsula.

Posted by Larry the Biker

Oakland County Undersheriff Michael McCabe recently added four more folders to a drawer full of 'contracted policing' inquiries.

Each new file represents a cash-strapped Oakland County city or township that's contacted McCabe to talk about hiring the sheriff's office to do its community police work. Currently, his department provides contracted services for 14 municipalities, from burgeoning Rochester Hills to tiny Royal Oak Township.

"It's the nature of the beast right now," said McCabe, a 30-plus year veteran. "We've had a lot more inquiries lately than in the past."

As Michigan's fiscal crisis continues to ripple out to municipalities, with no end in sight to shrinking revenue-sharing, a gridlocked real estate market and other economic woes, more local governments statewide are faced with tough choices when it comes to funding essential public services.

Over the past 10 years, local income from state revenue sharing has plunged by $4 billion, said Tony Minghine, associate executive director for the Michigan Municipal League. In mid-2009, the league reported that the shortfall had cost the state some 2,400 police officer jobs, along with 1,800 fire fighters.
And with public safety costs making up half or more of many municipal budgets, the cost-benefit analysis increasingly is directed toward police departments. While there's not been a huge upsurge in police outsourcing since the recession, government and law enforcement leaders say interest is growing.

"We're underfunded by $500 million this year alone," compared to past levels of revenue sharing, Minghine said. "These are staggering amounts. Everyone is hurting and communities are looking at things they hadn't before."

The Mount Clemens Experience

Contracted policing is not a new phenomenon in Michigan; observers say it's been fairly common for decades in more rural counties where low population density provides little impetus – or funding – for local governments to form their own police departments.

Less prevalent, but not unheard of, is when troubled cities and townships actually disband an existing public safety department and farm out the duties to their county sheriffs. Mount Clemens, which five years ago eliminated its 24-person police department in favor of outsourcing, is among the most recent and dramatic examples.

No state entity, professional organization, union or other group tracks contracted policing activity in Michigan, so it's unclear how many other agencies have been shuttered and how many sheriffs' departments are providing local service in addition to county-level enforcement. The lack of data also makes it difficult to compare cost savings with service levels, any effect on crime rates and other quality metrics.

Anecdotally, however, the outsourcing trend is anticipated to grow. Prompted in part by that expectation, the Michigan Sheriffs Association this month e-mailed a survey to its 83 members, requesting, for the first time, statistics about the number of existing policing contracts in 2009 compared to 2005.

Terry Jungel, executive director of the sheriffs' association, said much of the impetus for the survey is economic.

Currently, when being considered for financial grants from the U.S. Department of Justice, sheriffs aren't allowed to include in their workload any policing they do within cities, townships and other local jurisdictions – even if they're under contract. They only get credit for law enforcement activity in unincorporated areas, and the result, Jungel said, is that only one of Michigan's 83 sheriffs was eligible for a federal Community Oriented Policing grant in 2009.

With interest in outsourcing on the upswing, Jungel wants to get an accurate picture of just how much workload deputies are taking on within municipal boundaries.

"According to the preliminary data, I see that a lot of communities are looking at their options," Jungel said. "We see quite a bit of interest, though not yet an uptick in actual contracts."

Controlling Costs

Proponents say outsourced policing works well.

McCabe says Oakland County, for example, can pare 15 percent to 20 percent of a municipality's policing costs through economies of scale.

"And that's at a break-even level for us," McCabe said. "We aren't in the business of contracted policing to make money. They save because they don't have to maintain a records bureau, car operations, administrative staff and other overhead."

Another factor behind the savings: "Our legacy costs aren't as great,” McCabe said. "Our costs have been driven down compared to some of the older suburbs who are tied to contracts that are killing them."

For example, he said, deputies in Oakland County pay a share of their own health insurance premiums and participate in a defined contribution retirement plan – one where workers contribute pre-tax money, like a 401(k) – compared to communities that are still funding traditional pensions and retiree health care.

Those were pressures facing Mount Clemens officials in 2005 when their labor agreements with the local police force were expiring. They sought a competitive bid, and now city officials credit their outsourcing contract with the Macomb County Sheriff's Office with saving the city from fiscal collapse.

The $2.5-million-a-year contract with the sheriff calls for four deputies per shift to patrol the 4.2 square mile county seat, replacing the city's former 26-person police department.

"The cost savings is $1 million a year," said Mount Clemens City Manager Doug Anderson. "The city was going broke, (and) the police couldn't match those savings. We would have been in receivership within six months if we hadn't done this."

With the sheriff's headquarters located within Mount Clemens, Anderson said, the move to reduce redundancies made plenty of sense. Twenty-four of the Mount Clemens police staff were absorbed into the sheriff's office, though most had to start out in lower-wage positions at the county jail. And the city was able to shutter its police offices, car operations and other costly overhead.

Built into the four-page contract with Macomb County is a 4 percent cap on increases, contingent on labor pacts negotiated between the sheriff's office and its unions.

Anderson and Mount Clemens Treasurer Marilyn Dluge have nothing but praise for the contract, which they say has maintained public safety service levels while easing the cash-strapped city's current budget and moving pension obligations, liability and insurance costs and other overhead to the sheriff’s office.

"It's a huge benefit," said Dluge, who now is pondering ways to consolidate the city's $1.6 million-a-year fire department with a nearby community such as Clinton Township. "We need to do things like this statewide," she said.

"Otherwise," added Anderson, "there is going to be a long line of people in Lansing handing over the keys to their cities and saying ‘good luck.'"

A Loss of Control?

Some critics of outsourced policing fear that larger, more impersonal departments aren't able to provide community policing that reflects the character and tenor of a given city or township, and that members of a large force won't get to know residents the way a local cop might.

Capt. Tony Wickersham, chief of staff for the Macomb County Sheriff's Office, said that his 187 deputies bid for shifts at the start of each year and the Mount Clemens substation is staffed for the most part by the same deputies year-round. "We have stability out there," he said.

Kim Lubinski, who manages Big G's Party Store in downtown Mount Clemens, says there is no question the outsourcing was necessary, economically. But she has mixed feelings about the results.

"When the changeover first happened, I was managing a Coney Island and called 911 on some rowdy teens," she said. "I had six sheriffs cars here in three minutes. That never would’ve happened with Mount Clemens police – their attitude was ‘we'll get to you when we get to you.'"

However, Lubinski says, despite the increased professionalism, she does feel that the sheriff’s deputies are more impersonal and often more harsh than necessary when dealing with non-violent crime, such as disturbances during community festivals.

"There are definitely pros and cons to the whole thing," she said. "And now we really don't have any options. They've got us by the throat."

Cheboygan Plan Nixed

Sometimes residents have swayed officials against outsourcing.

Last year, council members in the city of Cheboygan approached their county sheriff to request a bid for replacing the then-eight-person force, which was costing the city about $900,000 a year.

A council task force recommended proceeding, but the county eventually withdrew from contention, said City Manager Scott McNeil. A double-digit hike to health insurance costs and other variables made it difficult for both parties to commit to a long-term agreement.

"There would have been some savings, but it was all about duplicative administration," he said. "And it didn't give us the 24-7, two-person coverage we had been trying to deliver all these years."

Meanwhile, public sentiment was strongly against the move.

"The overwhelming commentary I heard at meetings was 'Don't take away our police department' and 'we don’t want to lose control,'" McNeil said. "That intangible as much as anything affected the outcome."

Cheboygan opted instead to continue operating its own force within a reduced budget; the $750,000 now allocated to police allows for six officers instead of eight. "The department now has to make tougher prioritizing decisions about what cases to take," McNeil said.

Paying their Fair Share

Proponents of contracted policing say sheriffs and counties are increasingly put on the spot when it comes to prioritizing – and funding — safety needs because some growing communities have simply failed to address public safety at all.

"Thirteen townships in Ingham County don't have any police departments or contracts, and they just mooch off of everyone else," said Mark Grebner, a longtime Ingham County commissioner and a political consultant in Lansing. He points out that nothing in current state law requires a municipality to organize public safety and that the failure of some to do so, while others voluntarily pay for contracted services, creates an unfair disparity.

"Some counties subsidize their contracts. In Ingham County, we pay part out of the general fund because we are so pleased we aren't stuck with the entire thing," Grebner said.

Hendrickson agreed. "You’ll get townships that are as populous as some cities, who expect the same service without paying for it."

Sheriff response in areas without contracts tends to be limited to life-or-death emergencies, Jungel said.

"The sheriff is going to provide service one way or the other," he said. The question is, to what degree? Without a contract, it’s strictly triage. A breaking-and-entering is just not a priority.

"When communities grow, it's up to the sheriff to say 'this has gone beyond what I can provide at even a basic level,' and initiate discussion about the options."

Considering Consolidation

Minghine of the Michigan Municipal League says such issues of local control, community character and other intangibles make consolidation of services – as when adjacent governments join their police, fire or dispatch departments – a more palatable option.

"Consolidation is the issue of the day," said Minghine. "Everyone is establishing how they can do things more cost effectively, without changing the essential character of their town. Every community has a different feel, a different philosophy about service levels. You don't want to change those dynamics unless you absolutely have to."

Tom Hendrickson, executive director of the Michigan Association of Chiefs of Police, said he hears more about consolidation than about abolishing entire departments. And it's becoming more common for municipalities to request competitive bids from sheriffs when labor negotiations loom, he said.

"Normally when a government entity collapses, they'll contract with the sheriff for a lesser amount of money," he said. "But people have to remember that when they do that, the sheriff now is the sole source in the future. There is no one to get into a bidding war with. And once a police force is disbanded, it's extremely expensive to replace."

Both Hendrickson and Minghine point out that there are less drastic ways to achieve economies of scale, and that many indeed are common throughout Michigan, such as joint task forces on narcotics, auto theft and other issues that cross many jurisdictional boundaries.

"You might have a deputy, a DEA agent and officers from various cities already cooperating," said Hendrickson. "At the local level, the police chiefs and various other officers frequently meet formally and informally."

Whatever model a community chooses, all of the observers worry about the extra pressure on public safety funding as declining real estate values erode property tax revenue in Michigan, even as jobless and fearful residents give thumbs down to public safety millages and other stopgap measures.

"We've already had cutbacks in some of our contracted municipalities," said Oakland County’s McCabe. "We're down from 254 deputies in 2009 to 244 this year."

"We're all frightened of what next year is going to bring with the state budget and the 'no new taxes' sentiment of voters," added Hendrickson. "That double whammy is coming."

Small businesses employ half of the private workforce and generate about 70 percent of the country's new jobs each year.

But about 40 percent of native Michigan college graduates are now leaving the state to find work.

Hoping to put a plug in that brain drain, Michigan colleges and universities now offer classes and majors in entrepreneurship, as well as conferences, competitions, and programs devoted to the independent spirit.

A prominent University of Michigan economist thinks this is a very good idea.

"I fear that most people who have lost their jobs are going to need to create their own new jobs, and not wait for some business to hire them," said Donald R. Grimes, senior research associate at U-M's Institute for Research on Labor, Employment and the Economy.

Grimes believes students in many fields should take entrepreneurship courses, and he says the focus on re-training at all community colleges should be broadened to include entrepreneurship.

"(The focus on re-training) seems to have ignored the need to teach people how to start their own business, in any field, from cutting hair to cutting lawns or even writing software for the I-phone, or even figuring out how to make money as a news blogger," he said. "People need help in understanding regulations, taxes, writing up funding proposals, and even thinking through ideas."

Eastern Michigan University started a major in entrepreneurship in 1998-99, and its College of Business recently held its annual entrepreneurship conference to show students how to get started in a variety of fields.

EMU junior Melissa Heatlie hopes to eventually earn an MBA with a concentration in entrepreneurship at EMU. She's not sure if she'll stay in Michigan.

"But one thing is certain," she said. "I have faith that the economy in Michigan will rebound from this tough economic time and come out on top. During this rough patch, I think the citizens are really learning how to become innovative again."

We couldn't find a single institute of higher learning in Michigan that does not offer something for students considering going into business for themselves.

Michigan State University offers a specialization in entrepreneurship, for instance, while both Washtenaw Community College and Hope College offer entrepreneurship certificates. Cleary University's BBA in entrepreneurship requires courses in entrepreneurship; creativity and innovation; marketing the new business; new business finance; and negotiations. Central Michigan University also offers a major in entrepreneurship that prepares students to begin or take over a business or work in a not-for-profit organization. Kettering University last month received a national award from the Kern Entrepreneurship Education Network (KEEN) for teaching students how to become innovators. Kettering's "Entrepreneurship Across the Curriculum" program will eventually expose all students to entrepreneurship and innovation concepts multiple times during their college years.

Each fall, U-M's MPowered Entrepreneur Club holds 1,000 Pitches, a campus-wide entrepreneurship competition where students can pitch their ideas for new inventions, businesses and non-profit organizations. The winning pitches in each category received $1,000.

"MPowered's goal for the 1000 Pitches competition was to get Michigan students thinking entrepreneurially, and to prove to them that you don't have to be an engineering or business student to start a business," said club president Lauren Leland.

Winners included a group of six graduate engineering students who want to create a device that removes the clots that become lodged in the blood vessels of stroke patients; a student who pitched the idea of a vibrating metronome that would attach to a musician's arm so he or she could keep beat individually without the distraction of trying to hear a traditional metronome; and a student who pitched the establishment of a Renewable Energy Science Foundation in the state that would promote renewable energy research.

Students want to stay in Michigan.

"They just don't know where they can go," said Doug Neal, director of The University of Michigan College of Engineering Center for Entrepreneurship (CEF), which was formed two years ago to facilitate an entrepreneurial mindset within U-M.. "Our small businesses in the area – which are the economic driving force of the future – can't seem to get access to this talent."

So U-M recently held its third annual MPowered Career Fair, where about 2,000 students across all majors learned about getting jobs and internships with 80 small companies and start-up firms.

"That was just one example of the many programs we have to stop the brain drain and increase economic development and entrepreneurship," Neal said.

Neal is a self-described "serial entrepreneur" who moved back to Michigan from California to raise his family. He said the center's 30 programs have helped more than 3,000 students and helped facilitate hundreds of student ideas into more than 30 student companies in Michigan.

As an example, he cited Mobiata, an Ann Arbor company founded in December of 2008 that creates top-selling mobile travel applications. Mobiata was founded by Ben Kazez, a Minnesotan who heard about all the exciting things happening in Ann Arbor. He moved here, connected with students in the U-M Business Accelerator (TechArb), and hired several of them to take his company to the next level, Neal said.

U-M has experienced tremendous growth in research over the last 10 years, Neal said.

"So the level of innovation is rising consistently, yet the opportunities to innovate and create and effect change locally have never been greater," he said. "In many ways our efforts to foster entrepreneurship within the university are to address both those needs. To help take advantage of the tremendous technology and innovation that’s happening. And to stimulate economic growth in the area."

Heatlie has discovered lots of organizations willing to help the new entrepreneur get started, including SPARK; Bizdom; the SBTDC (Small Business & Technology Development Center); and B Side: The Business Side of Youth.

"I think if citizens learn to utilize these resources to harness their innovations and ideas, then the future of Michigan is brighter than most may think," she said.

Rich Studley, president of the Michigan Chamber of Commerce, says it's time for Michigan residents "to accept seriously the duty and obligation to get informed."

And, when it comes to directly helping the Michigan economy, actor Jeff Daniels advices all of us that "when you have some money, spend it locally."

What three things can you, or any other Michigan resident do to help our state? Each Monday morning, Michigan Public Radio poses that question to a new luminary. Their ideas provide an inspiring jumpstart to every workweek. Listen to "Three Things" online here.

But this whole saga also offers some significant insight into how government works … and doesn't work.

The outlines of the story are well known. The carp were brought years ago to fish farms along the lower Mississippi River. Then, however, they got into the Mississippi, apparently as a result of flooding. Since then, they've been traveling steadily north.

Years ago, nature would have stopped them before Chicago. But since then man has gone to work, and the Mississippi River system is now artificially connected to the Great Lakes, via something called the Chicago Sanitary and Ship Canal. Late last year, for the first time ever, DNA from Asian carp was discovered in Lake Michigan. That finally got everyone's attention.

The carp have been on their way for years, both the giant Bighead variety, which can easily get over 100 pounds, and the Silver carp, which get only half that size — but which have a tendency to jump, resulting in serious injuries to swimmers and boaters.

For years, environmentalists have been sounding the alarm about possible disaster if the carp got into Lake Michigan. That’s because they vacuum up food supplies, wiping out all the other fish. Eventually, the government did run electric cables under the canal to deter the fish, thanks in large part to Congressman Vern Ehlers of Grand Rapids, who fought for the funding. But the feds fooled around exploring and testing the cables — and listening to pleas not to turn them on full strength. Then late last year evidence of carp were discovered in the Chicago canals past the electric fence, and all hell broke loose.

Michigan Attorney General Mike Cox asked the state of Illinois to immediately close the shipping canals and locks connecting the Mississippi and Lake Michigan. But the local barge industry complained they’d lose too much money, and Illinois Gov. Pat Quinn said no. Cox then went directly to the U.S. Supreme Court.

But the Obama Administration backed Illinois, and the nation's highest court refused to order the locks shut immediately — though it is still considering Michigan’s demand for long-term closure.

Governor Jennifer Granholm then demanded, and got, a White House-led "Carp Summit." Prior to the Feb. 8 meeting, there was certainly a lot of carping. Governors, environmentalists, fishing writers and fishermen all, um, spawned opinions.

Illinois officials and the shipping industry claimed that shutting the locks to barge traffic would
"devastate" the economies of Chicago and the entire region, costing more than $190 million annually. Two Wayne State University economists rebutted the claim by producing evidence that the total burden would be less than $70 million a year.

I spoke with Andy Buchsbaum, head of the National Wildlife Federation’s Midwest office in Ann Arbor. He
s an old friend, a very able lawyer and the major environmental figure in the carp fight. He offered some perspectives not often seen.

"The danger is not that an isolated carp or two get into Lake Michigan. The danger is that some number – 200-400 is the figure most often used – would make up a breeding population," he said. "But the only way of finding out for sure is when it's too late."

Moreover, there is a big dispute about the effectiveness of shutting the O’Brien, Wilmette and Chicago locks to barge traffic. Michigan officials seem to have an all-or-nothing attitude, but the locks are not watertight, and thinking about closing the locks needs to be done as part of a management strategy that uses other tools as well.

Buchsbaum says these should include poisoning (using biodegradable Rotenone), electrofishing (shocking and killing live carp) and temporary lock closures. "Taking all these elements together is a rational plan," says Buchsbaum.

"But the Corps of Engineers … (have) got to get off their butts to do it and quit listening only to the barge owners."

The real question: how over the long run to save the Great Lakes from these invasive carp. "We've got to have a complete ecologic and hydrological separation of the Chicago River and Lake Michigan," Buchsbaum said. He reports that the Corps of Engineers says it will take two years to study how to do that. But he thinks it could be done by the end of this year.

"This is a crisis staring us in the face … at heart the problem is a political and institutional one: The desire to avoid making tough decisions that upset the status quo, and the overall lack of accountability for failing to make those tough decisions," he said.

Which says a lot about how government does … and doesn't … work:

1)To work, governments have to be convinced there is both an urgent crisis and a lot of money involved. Michigan lawmakers passed big school reforms when they realized Michigan might get a big piece of the "Race To The Top" money. A $7 billion fishing industry on the one hand and a $200 million barge industry on the other represent enough money to grab government attention.

2) All politics is still local. Center for Michigan Executive Director John Bebow, who has worked for the Chicago Tribune, says there is no way Michigan and its environmentalists can trump Chicago Mayor Richard Daley or President Obama, who is from Chicago. So much for the largest fresh water system on the globe.

3)Democracies seem constitutionally unable to act timely to anticipate problems and solve them at a point when it is easy and cheap to do so. Instead, they wait until everybody recognizes a crisis, at which time fixing the problem is much harder and far more expensive. It took years to overcome governmental inertia about the carp, even though everybody knew they were coming.

So governments at all levels these days can be counted on to do the right thing … but only if there is no other option.

They don't seem able to "seize the day" to take action. Ironically enough, that’s "carpe diem" in Latin.
***
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 light of the potential ecological disaster at our doorstep, a group of MSU students has put together what we call the 'Why I Love the Great Lakes' essay contest to raise awareness and inspire action to stop the carp," O'Connor wrote to Fresh Thoughts. "The contest is catered towards third graders, and the classrooms of winning students will get pizza parties sponsored by Little Caesars. Not only will the contest provide an opportunity for youth to learn about a participatory democracy and ecological principles, we can share their essays and artwork with policymakers."

Here's a flyer explaining how kids in your local school can compete for those pizza pies before the March 31 submission deadline.

"The final product will be hundreds of essays and drawings that can be disseminated to persuade and inspire lawmakers at all levels of government to work urgently, cooperatively, and effectively to stop the Asian Carp invasive species," according to contest organizers.

1. PRISON PAY IS UP WHILE THE ECONOMY IS DOWN: What the prison system deems as "economics" have grown at a 3 percent pace in the past decade, despite the deep state recession and constant state budget trouble. Economics include "bargained salary and wage increases, actuarial increases to insurance and retirement costs, inflationary adjustments for prisoner food, fuel, and utilities, workers compensation, and rent and building occupancy increases." Total tab for "economics" since 2003 is $518 million.

2. STATE HAS MADE BIG STRIDES TO REDUCE PRIONER POPULATION: The report also outlines how the Department of Corrections has reduced the prison population by 6,000 inmates in the past three years, thereby saving many millions off dollars per year. The reduction is apparently occurring without a corresponding increase in crime out in society – the annual number of felony court dispositions in Michigan has been declining for the past two years. Corrections officials attribute these positive trends to the state's beefed up prisoner re-entry initiative to help parolees re-adjust to society upon their release from prison.

3. MORE CAN BE DONE: Bills currently under review in the Michigan Senate could reduce prison populations further and save tens of millions more per year. The bills would:

To offer support for these and other efforts to reduce the overall slice of the state budget pie going to prisons, contact the Senate Appropriations Subcommittee on Judiciary and Corrections.

CLICK HERE OR READ BELOW FOR THE FULL PRESS RELEASE.

CLICK HERE FOR THE GREAT DEBATES' SAMPLE INVITATION TO GUBERNATORIAL CANDIDATES…

Great Debates 2010 launched by large coalition of Michigan interest groups; Seeks gubernatorial & legislative debates on public TV & online

LANSING, MI — Michigan citizens will get an in-depth, issues-oriented look at the candidates for governor and dozens of important Michigan House and Senate seats through a new bipartisan initiative called Great
Debates 2010.

An unprecedented partnership of 19 leading trade organizations and numerous public broadcasters across the state, Great Debates 2010 aims to provide:

• Three, one-hour gubernatorial debates (one in each major party primary and one during the general election cycle).

• 50, half-hour legislative debates (during the general election cycle);

• Several multi-candidate legislative forums in both the primary and general cycles.

Altogether, the Great Debates program is expected to run from July thru Election Day (November 2).

The Debates will be broadcast on public television and freely distributed in video format for "on demand" online viewing across the state. For example, the Great Debates videos will air, free of charge to viewers, on MiVote.org, a co-production of UM-Dearborn and Detroit Public Television. MiVote.org uses candidate interviews and person-on-the-street interviews to engage and educate Michigan voters.

"This is the most important Michigan election in a generation," said Rich Homberg, president and general manager of Detroit Public Television which conceived Great Debates 2010 with the nonpartisan think-and-do tank, The Center for Michigan. "We think we can provide a crucial service by helping the citizens
understand the crucial issues."

Those crucial issues include: 1) economic growth; 2) talent & education; and 3) efficient, effective, and accountable government. Those are among the issues the 19 Great Debates underwriters outlined in an invitation provided to all gubernatorial campaigns. The invitation was emailed and postal mailed on
Tuesday.

"These issues are not partisan," said Iris K. Salters, President of the Michigan Education Association.
These issues are central to Michigan's survival and we have to engage in meaningful conversations about them in order to move our state forward."

Legislative candidates will be invited immediately following the candidate filing deadline in early May.

Collectively, the diverse Great Debates underwriters listed on this press release represent literally millions of Michigan residents, including corporations and business owners, educators, medical professionals, local government leaders, organized labor, attorneys, retirees, and arts and cultural leaders. Individually, we
bring distinctly different perspectives to the public discourse. But, collectively, we agree that greater public participation in this year’s important electoral process is good for the entire state.

We are working with WTVS (Metro Detroit), WGVU (West Michigan), WCMU (Central Michigan and tri-cities), and WKAR (Lansing/East Lansing) to televise the Great Debates. In addition, we are working with Interlochen Public Radio to provide radio coverage of candidate forums in northern Michigan. Collectively, those five stations are available to the vast majority of the Michigan population.

Additional online access to debate videos will assure that any Michigan resident can enjoy "on demand" viewing of the debates throughout the election season.

"WGVU is pleased to play a part in bringing The Great Debates 2010 to the voters of Michigan," said Michael T. Walenta, general manager of WGVU, which provides public television to the Muskegon area south to the state line. "This dialogue will likely shape the future of our State. We're proud to join with The Center for Michigan and our public broadcasting partners in providing this important service."

We recognize there will be intense competition for candidates' time throughout the campaign season. That is why we have developed such a diverse and far-reaching coalition of Great Debates sponsors. We believe the diversity and bipartisanship represented on this letterhead assures a fair and credible atmosphere for debates this year.

"This is how democracy should work," said Rob Fowler, President & CEO of the Small Business Association of Michigan. "Sometimes, organizations in Lansing get accused of being 'special interests.' We think this effort dispels that notion. We represent many different perspectives. We give voice to many parts of the
Michigan economy. We’ve joined together to offer the Great Debates because we want to make sure the people of Michigan get to hear candidates’ perspectives on the major issues in this very important election year."

Jennifer H. Goulet, president of ArtServe Michigan, agreed, saying, "This is a great opportunity to reach across our special interests to define the issues that must be 'on the table' as voters consider the best qualified candidates to lead our state forward."

In school finance terms in Michigan, "Kalkaska" is the nuclear option.

The question is: How many school districts are ready to push the button?

"Kalkaska" is when districts do the unthinkable and throw up their hands over money problems and shut their doors, putting the "Closed for summer" sign up early. After numerous failed millage attempts, the Kalkaska School District famously took that tact in 1993, helping lead to the statewide Proposal A school overhaul plan the following year.

With declining enrollment, a mid-year cut in school aid and a further slice projected next year, educators and funding experts say there could be a lot of Kalkaskas in Michigan unless there's a wholesale change in how we fund education.

"I think that's exactly what the train wreck is heading for," said Jeffry Morgan, superintendent of the Kearsley Community Schools near Flint. "Unless the fundamental structure of how public schools are funded changes, I just don't see a lot of districts surviving in two years."

And Morgan speaks from a position of relative strength. His 3,400-student district has a fund balance of about $4 million, though it has taken layoffs, consolidations, and a switch in employee health care to maintain it.

There were 21 districts in deficit at the end of the 2007-08 school year; by some accounts, that's now at 30, with dozens more with dangerously low fund balances.

And some wonder where that number will stand after the potential $268-per-student cut in aid that could happen in the next fiscal year according to Senate Fiscal Agency projections.

Early Closing Considered

Mark Titus, a member of the Clintondale Board of Education in Macomb County, says his district broached the idea of closing in April, rather than June, ala Kalkaska, though it's unlikely to happen.

Clintondale is a relatively small district, with 2,800 students, but has a $4.5-million deficit. That's about 15 percent of its general fund budget.

"I believe every school district in the state will be in deficit," Titus says. "We've cut everything we can. We’ve cut everything to the bone."

After eliminating or reducing instructional aides and maintenance staff and increasing class size, Clintondale school board President Jason Davidson agrees, "We're at the point, what else can you cut?"

And, yes, Davidson sees districts shutting their doors early, too. The problem, he says, is "the state doesn't have the capability to take receivership of 200 or 300 school districts."

Titus, Davidson and other grassroots people involved in the education debate reflect growing unrest with the powers-that-be in Lansing, namely the state Legislature. They contend lawmakers are dawdling while Rome – in this case, the state education system – is burning.

"They have no idea what they're doing," fumes Titus.

Says Davidson: "It's frustrating watching people in Lansing collecting their paychecks and not doing their jobs."

Calls for Action

In fact, Lansing is girding for a huge battle this year over school funding. Expect to see lots of proposals, Capitol lawn rallies, and opinion page columns on how best to overhaul the system.

One coalition, SOS Michigan (Save Our Students, Schools and State), is drafting reform plans. SOS includes school administrators, principals, business officials and numerous other groups. It's plans include cuts to school employee benefits and retirement plans in return for tax restructuring to provide long-term funding stability for schools. (See the SOS proposal outline here.)

Business Leaders for Michigan, composed of dozens of top execs, and A Better Michigan Future (including the AFL-CIO and Michigan Education Association) already are touting broader plans to remakes state finances.

All either have endorsed, or are expected to, broadening the state sales tax to include services, on everything from haircuts to legal advice. There are varying components to the rest of their plans, such as eliminating the Michigan Business Tax or having a graduated income tax.

"People say there will be some kind of reform package that will be considered in the next few months," said Tom White, who heads SOS. "Whether it's a political game or a public policy game, it's hard to say right now."

Proposal A of 1994 de-emphasized local property taxes – trying to eliminate inequities between rich and poor communities – and instead put more onus on an increased sales tax by raising it from percent to 6 percent. Supporters say the finance plan did what it was supposed to, but sales tax funding – and thus school aid money — plummeted when the economy went in the tank.

Services are a growing part of the economy, and implementing a sales tax on them promises steady revenue, proponents say.

Battles over Taxes

There's going to be a political war over anything that smacks of new or broader taxes, though.

"I'm not so sure there's anyone in Lansing that's going to vote to raise taxes," said state Sen. Ron Jelinek, R-Three Oaks, chair of the Senate Appropriations Committee and its K-12 school aid subcommittee.

" … Do you reach deeper into people’s pockets? I don't think that's what people want."

Jelinek says Proposal A should be left alone and challenges anyone to come up with a better tax structure.

"Proposal A has worked really well," he says. "When times are good, money rolls in. When times are tough, money slows down."

Instead, districts simply have to cut back on their expenses, namely salaries and benefits, he said. Jelinek doesn't think schools have pushed as hard as the private sector for pay cuts from employees or less expensive health care and other benefits.

"That's what’s happening across the state, people are having to give concessions," he said. "It's a matter of giving concessions or losing jobs."

Former state Senate Majority Leader Ken Sikkema, now a senior policy fellow at Lansing’s Public Sector Consultants, doesn't take as hard a line as Jelinek. But he agrees increased revenue for schools won't come unless districts change their spending habits.

Sikkema – who was involved in the Proposal A negotiations in the Legislature – thinks it's possible there will be more Kalkaskas, given the number of districts facing deficits and declining enrollment after having cut staff and programs.

"A school district in that situation is suffering from a thousand cuts, which is a little different from Kalkaska, which couldn't get a millage passed," he said.

But Sikkema said districts also are going to have to get much more aggressive about consolidating and merging services with other communities and cutting compensation packages for employees.

"I think it's very, very naïve, politically naïve, for people to say if we just have a school district close its doors, like Kalkaska, and the response from legislators and the public is, 'Let's put more funding in the schools.'"

Containing Costs

Consolidation historically has sounded obvious but is difficult to pull off because schools are so much part of a community's identity. Sikkema acknowledges that but says, "I think there's a sense among the Michigan public that schools can do a lot more on the expense side to stretch the taxpayer dollar, more than they've done in the past."

Not so, says Doug Pratt, spokesman for the MEA.

Pratt says districts already have been cutting for a decade and the funding crisis isn't about spending.

"The problem is, over the last three years school employees have given up almost $1 billion in concessions," he says. "How much more are they supposed to give?"

Pratt says public opinion polls show taxpayers don't want a "cuts-only solution anymore" and are tired of a "let's take it out of the hide of school employees" attitude.

Parent Valerie Stone of Superior Township agrees she's sick of cuts. But she also thinks consolidating with another district might be the only remedy for Willow Run Community Schools, where her three elementary-age children attend.

Willow Run, in the Ypsilanti area, faces a $5-million budget deficit and agreed in December to nearly $2 million in cuts. Those reductions drew a huge community outcry and will directly affect nearly every student; two band instructors were cut, 10 teachers were laid off and funding for many sports will be affected.

And that was just the first of two rounds of cuts in 2010, district officials said.

A Parent's Perspective

"My fears are it's directly affecting my kids' education right now on a daily basis," said Stone, president of one of Willow Run's parent teacher organizations.

The layoffs meant her 6th grade son's teacher was shifted to another class and her 4th grader daughter was put in a merged class filled to the brim with 36 students. Some of her children's friends haven't handled the changes well, Stone said.

The biggest complaint from the community is that the moves had to come in the middle of the school year, she said.

Still, she admits she doesn't have answers, and she doesn't seem to blame anyone in particular for what's happening.

"What they can do about it I have no idea," Stone said. "They are in so deep and they're so small (Willow Run has about 2,000 students). If the money is not there, what else can the schools do but cut, cut, cut."

Stone, a homemaker whose husband is director of an Ann Arbor finance company, has only been in Willow Run for five years and admits she doesn't have the emotional ties some longtime residents might.

As a result, she says she's open to Willow Run consolidating with another district and being no more. Stone sees no other option.

"Realistically, you have to do what you have to do and consolidating is probably going to be it. The longer you wait and put if off, the worse things are going to get."

GET FULL EVENT DETAILS HERE.

This is another in a continuing series of policy town halls produced by the Center for Michigan in cooperation with Public Sector Consultants, Inc. These events are designed to help citizens get more involved in statewide issues, mingle with decision makers, and help set a solutions-oriented policy agenda in Lansing.

Our speakers will discuss school finance, and additional best options for education innovation in the wake of Race to the Top legislation passed by the Michigan Legislature last December.

Our last event in November drew wide media coverage and more than 200 statewide participants to talk about long-term budget and tax policy solutions. In effect, the November meeting previewed some of the "grand bargain" reform discussions now underway at the Capitol.

The March 10 event will feature The Center's interactive "clicker" voting technology and will focus audience members on the kinds of long-term education policy choices 10,000 people have deliberated in nearly 500 statewide Community Conversations since fall 2007, including:

Our list of confirmed speakers includes some of the most influential and experienced education minds in the state, including Michigan State University President Lou Anna K. Simon, State Superintendent of Public Instruction Mike Flanagan, Kalamazoo Valley Community College President Marilyn Schlack, American Federation of Teachers-Michigan President David Hecker, Utica Schools Superintendent Christine Johns, University of Michigan Vice President Cynthia Wilbanks, and University Prep Academy Superintendent Doug Ross, as well as early childhood policy experts Judy Samelson and Jack Kresnak.

As always, this Town Hall features a free lunch afterward — but you have to earn it with provocative questions during the morning discussions!

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.

Seth Samuels would like to stay in the state when he graduates from the University of Michigan in 2013.

But he knows the economy must improve for that to happen.

So the West Bloomfield resident has entered a new online competition for students with ideas to improve the Michigan economy.

"Motivate Michigan" will award scholarships and internships to the winning teams and individual students enrolled in Michigan's colleges and universities, and high school seniors who are at least 18. The deadline for submission is 11:59 p.m. March 12.

The idea began a year ago when Armen Kabodian, a vice president of CIBER Inc. in Southfield, was brainstorming with colleagues about how to stop the exodus of Michigan college graduates.

"We wanted to figure out what we could do to leverage these great minds to help us come up with a breakthrough big idea for the Michigan economy," said Kabodian, a co-leader of Motivate Michigan's organizing team.

Judges will evaluate ideas on creativity, originality, practicality, and the potential economic impact to Michigan. The winning idea will be developed into a project plan and presented to the most logical business leader for funding and support with the hope that the idea will become a reality.

Motivate Michigan has raised half of its $100,000 scholarship goal, and is looking for more sponsoring companies and organizations.. The winner will receive 40 percent of the total amount raised. Second place will receive 25 percent. All top 10 winners will receive scholarship dollars on a graduated scale.

So far, about 70 entries have been received.

"There is quite a variety of ideas that run the gamut from marketing concepts, alternative energy ideas, ideas for tax modifications, innovative land use, agriculture, health care infrastructure ideas," Kabodian said. "It's really interesting. There are 70 different ideas, and I don’t think there’s an overlap at all."

Samuels' idea is a new statewide brand – I Am Michigan – with the slogan: Raise your hand.

"It's all with the goal of showing what's great about Michigan right now, and what the state has to offer to create greater flows of commerce with incentives for businesses, and get stuff flowing again in the state," he said. "It's not going to be one thing that will help Michigan, but it's going to be an amalgamation of different efforts. The brand has the potential to encompass a lot of different efforts and really make a difference."

And what of the Pure Michigan brand?

"If we look at society now, it’s a lot more empowered, and people have a greater voice, so I think that makes the 'I am Michigan' brand a lot different,” he said.

Phill Bavers, a senior accounting major at Lake Superior State University, submitted an idea on improving the employment environment for Michigan graduates by giving tax credits to companies doing research and development in Michigan, and including a tax credit for hiring Michigan graduates.

"Michigan invests a lot of money in our college students," said Bavers, 22, "and it seems like a big waste of money if the first thing they do is move out of the state after they graduate because they can't find a job here."

Bavers said he and virtually every one of his fellow students are planning to leave the state – possibly for Chicago – to find work. But he said he'd rather stay here.

Samuels, who hopes to be an entrepreneur one day, said he has faith that the state can turn its economy around.

"We have so much potential," he said, reflecting on the state's former prominence. "Now the question is what its new role will be as we enter this new century. I'd like to play a part in figuring out what that role is, and trying to bring Michigan back to what it once was."

CIBER Inc. is the contest's initiator, project manager, and facilitator. The four sponsors are Comerica Bank, Meijer, the Michigan Economic Development Corporation, and the Presidents Council State Universities of Michigan.

For more information on Motivate Michigan, go to http://www.motivatemichigan.org/.

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.

But, on first appearances, Governor Jennifer Granholm's new state budget plan seems to be a product of keen listening to the many business and reform-minded groups who have long demanded change in Lansing.

A year ago, the Center for Michigan published a list of more than $1.5 billion in possible reform choices. Then we were sharply critical when the governor pretty much ignored the list. But this year's budget looks like she borrowed directly from that year-old, dog-eared spreadsheet of ours.

Prison sentencing reforms and state worker pay and benefits accounted for much of the potential cost savings in the list we published last year. The governor's budget address adopts both of those strategies to the tune of hundreds of millions of dollars in savings in the next year and, according to the governor's initial estimates, nearly $8 billion in savings over the next decade.

The governor this week also took big steps toward significant tax reform. The devil is always in the details and there are many details yet to be discovered and debated. But the governor's plan to lower the sales tax rate and broaden the base of services taxed has considerable potential to modernize the state tax structure. It phases out the much-maligned Michigan Business Tax surcharge and, over the next several years, results in a revenue-neutral tax shift, according to the governor and state Budget Director Bob Emerson.

A coalition of nearly 20 business groups didn't see it that way Thursday.

"Unfortunately, this plan addresses only one third of the deficit through proposed reform and fills the rest with tax hikes and stimulus money," the business groups said in a prepared statement. "Once again, we have a short-term solution to a long-term problem that puts off necessary spending reforms for future policy makers to address."

So, there's danger of another standoff in the capitol. No surprise there.

To the many political and financial questions floating through the cold, dry air of downtown Lansing, we'll add three more…

Did the business community really expect something better from the governor? Granholm has crossed over numerous traditional political boundaries to get to some of the reform concepts she has proposed this year. Business groups and other reform-minded organizations have done a tremendous job of relentlessly pushing for big-time transformational changes. Finally, the big-picture issues are on the table in separate but often-complimentary proposals coming out of the governor's office and leadership of both parties and both chambers of the legislature. Is it now time for a little less saber-rattling and a little more negotiation?

What about the next labor contract? The Granholm Administration has exacted tens of millions of dollars in labor concessions in recent months and her budget takes away a planned 3 percent pay increase for a quarter of the state workforce that is not unionized. But new contracts are under negotiation on the Granholm Administration's watch. The next round of three-year contracts will have considerable effect on the state budgets for much of the next governor’s first term. Significant pay raises would have one impact. Expanding recent health care co-pay increases to all workers (instead of just future hires) would have another. (NOTE: In last week’s newsletter, the Center stated that state workers had received three years of pay increases during the 2007 budget meltdown. That is incorrect. Contracts for many state workers included pay raises for two of the past three years, but not all three years. The Center regrets the error.)

What’s the backup plan? Granholm's budget relies on more than a half-billion dollars in new, one-time stimulus money from the federal government. But there's no guarantee that money is coming and Granholm's budget doesn’t outline a contingency plan if the federal tap runs dry. Likewise, Granholm's prison budget includes more than $100 million in savings assuming she’ll push through bills for good-time provisions that would release several thousand prisoners. Corrections officials confirmed to us Thursday that there is no backup plan to passing those bills (which would seem to have a snowball’s chance in the largely law-and-order Senate.)

Faced with a nearly unanimous House package for long-term, sustainable funding for Michigan’s can't-miss tourism promotion campaign, Senate Finance Committee Chairwoman Nancy Cassis, R-Novi, balked, and instead steered through $9.5 million in patchwork funding that allows Pure Michigan to limp along for the rest of 2010 at half its requested funding with no clear plan for 2011 and beyond.

"I don't think this goes far enough," said Sen. Gretchen Whitmer, D-East Lansing. "To me (full-funding as requested by the state's tourism promotion team) is a no-brainer. "But reasonable people choose amputation over death, so I’ll vote for amputation."

The funding proposal now moves to the Senate floor where there is still some hope of additional horse trading to provide full funding as requested by a standing-room-only crowd of tourism industry leaders who pleaded their case.

According to studies performed for the Pure Michigan campaign, state spending on the Pure Michigan ads return nearly three bucks in increased sales tax revenues for every dollar invested in ads.

The state's market research indicates that the 2009 national Pure Michigan ad campaign – the first national ad campaign Michigan has ever executed – resulted in 1.2 million tourists who would not have visited the state if they hadn't first seen the Pure Michigan ads.

"We can become a top summer tourism destination state," proclaimed state tourism czar George Zimmerman in asking for a full $33 million in new Pure Michigan funding. "We will attract millions of new visitors and they will spend billions of dollars here."

The anecdotal results of last year’s $30 million Pure Michigan ad buy were glaringly obvious to many in the audience, including Grand Hotel President Daniel Musser III, who told the Finance Committee that half the customers who booked the Grand Hotel’s top packages last year were from out of state, a dramatic turnaround from past years in which in-state tourists accounted for 70 percent of such package business.

Pure Michigan has won awards and plaudits across the globe as one of the best tourism advertising campaigns ever.

Without such sustainable funding, "many tourism businesses that once profitably served the needs of Michigan residents will cease to exist," said Homestead Resort owner Bob Kuras in written testimony. "Tourism employment will slip further. Tax revenues to the state will decrease and Michigan's recession will deepen.

Cassis denied the full Pure Michigan funding request as she and Senate staffers offered a tortuous lecture on state budget woes. Their argument… more money for tourism means less money for other state spending priorities like education and health care for the poor. But the lecture largely ignored evidence that the tourism campaign brings in more in sales revenue than it costs and thereby helps the state budget. There was considerable bickering over the extent of the return on investment, but the clear conclusion was that it's positive ROI no matter how you slice it.

Even at the full request of $30 million, the wildly successful and hugely strategic Pure Michigan campaign would have accounted for three cents out of every ten dollars in the state general fund budget. Or, think of it this way… the $9.5 million in Pure Michigan funding approved by the Senate Finance Committee will have to last Pure Michigan the rest of 2010. But the Michigan prison system will spend more than $9.5 million in the next couple of DAYS.

As George Moroz, special assistant to the president at The Henry Ford stated softly but clearly in Thursday's hearing…

To not pass full funding "simply makes no sense."

Folks like Michigan Future's Lou Glazer have spent years trying to inspire culture change as Michigan shifts from manufacturing brawn-based economies to 21st Century advanced manufacturing and service economies. The Grand Rapids Press has just published an excellent illustration of this shift in a profile of the changes afoot at Bissell, the Michigan-headquartered manufacture of vaccuum cleaners. As the Press reported…

Bissell Inc. shed hundreds of factory workers when its production moved offshore, but he now employs 350 "knowledge workers" to push the innovation envelope… The company has invested $9 million in its new Bissell Innovation Center at 2345 Walker Ave. NW. Officially opened in November, it is located in renovated factory space where 10,000 more square feet were added… In 2003, before the move to Mexico, the site had more than 500 workers, most hourly. Now the head count is about 400, of which 350 are salaried. According to state tax-incentive documents, the average pay is more than $1,200 a week.

2. SEE HUNGRY ENTREPRENEURS IN ACTION AT PITCH CORNER.COM

More than a decade ago, longtime business journalist Mike Brennan left the Detroit Free Press newsroom and struck out on his own to create new, tech-focused, Michigan-based online publications. His latest brainwave is PitchCorner.com, where Michigan entrepreneurs have thru March 31 to post their video elevator pitches for a chance to win up to $5,000 in funding to grow their businesses. Post your pitch today!

3. DRIVING PAST DISTANT FIRST IMPRESSIONS

As recently published in Crain's, Chrysler exec Gualberto Ranieri is pleasantly surpised by his new home in Michigan…

Detroiters' shyness is at odds with the extroversion of Chicagoans who proudly publicize their city's beauties. I wish to be clear: Chicago is simply gorgeous and living there is absolutely pleasant. But Detroit's northern "burbs, the web of lakes, the sumptuous mansions and estates hidden like precious jewels in hardwoods (one has to wait for the winter to discover them) and, more in general, Michigan's multifaceted landscape offer captivating opportunities to newcomers… Being Italian, I can't neglect a reference to restaurants. Once again, a pleasant discovery, especially if one loves fish (high quality of meat is a given in the U.S.). I can count at least 10 well-above-average restaurants worth a visit to enjoy both their cuisine and decor. For the benefit of my friend who recently called me from London (certainly not a capital for gourmet) to wish me good fortune with my dining out, I can assure that I do not miss any of the many restaurants in Chicago I used to go to.

We've seen that kind of free advertising time and again in recent years from folks fed up with the crowds and costs of the coasts. It's nice to feel the overseas love, too.

Likewise, Grand Rapids Mayor George Heartwell is now openly calling for a a half-dozen surrounding suburbs to formally consolidate into one much larger city to, you guessed it, save big taxpayer bucks. Heartwell made his strongest remarks on the topic yesterday… "I'm talking about one city in the place of the many units of government that make up our region."

For Heartwell's dreams to be fully realized, state laws regarding binding arbitration for labor contracts and combining of services between communities would have to change. Supposedly to that end, the Michigan Senate passed, by nearly unanimous bipartisan votes, a package of local government reform bills this week.

But the single largest voice pushing for these local government reforms — the Michigan Municipal League — basically calls the Senate's efforts a farce. Lansing insider Bill Rustem, president of Public Sector Consultants and a trusted advisor to former Republican Governor William Milliken, puts it like this… "Republican President Teddy Roosevelt once said 'Speak softly and carry a big stick.' Well, with these bills, the Michigan Senate is shouting loudly and carrying a toothpick."

Here's MML's letter to the Senate before the vote this week…

February 10, 2010

Dear Senators,

We appreciate the Senate's focus on reforms in 2010. However, the bills being taken up today, SBs 1072, 1085 and 1086 do not represent real reform for local units of government. These bills deal with two distinct issues, so allow me handle each briefly.

SB 1072 amends PA 312 of 1969, a law requiring binding arbitration in disputes between local units of government and police and fire unions. Local units of government have been seeking amendments to this law for more than 40 years. While we welcome the discussions in the last few weeks regarding SB 1072, this bill does not amend the Act in a meaningful way.

SB 1072 fails to address a crucial piece of PA 312 — the local unit of government’s ability to pay. Nothing in this bill requires an arbitrator to consider first and foremost whether a community can pay an award. An arbitrator can say a community does not have the money to pay and yet still hand down an unaffordable award. In the last 40 years exorbitant awards have pushed cities into receivership and resulted in layoffs of police officers and firefighters. In addition these awards have pushed the personnel cost of public safety to a place that is unsustainable leaving cities with no other options than layoffs of police officers and firefighters, employees critical for the safety of our communities.

In the second issue, communities have a giant roadblock standing in the way of cooperation and consolidation — the Urban Cooperation Act. As revenue sharing continues to be cut and property tax revenue is plummeting, communities are looking to share services as a way to cut costs at the local level.
The Urban Cooperation Act contains language that says no employee can be placed “in any worse position” when an employee is transferred to an authority. The result is all employees are raised up to the highest level of salary and benefits, actually creating a disincentive to cooperate. SBs 1085 and 1086 amend the Urban Cooperation Act and Intergovernmental Transfers Act but do not remove this language and remain barriers to cooperation. As passed these bills will do nothing more to encourage cooperation than existing law. Put simply the same barriers still exist.

Local units of government are struggling. Substantively amending these bills is a way help communities with tools to help their long term efficiency and sustainability. These bills do not get us there nor do they represent real reform that will provide relief to cities. Continuing to disinvest and failure to help cities in their time of need will only make Michigan's economic condition worse as we will continue struggling to attract and retain residents and businesses.

Sincerely,

Samantha Harkins
Legislative Associate
Michigan Municipal League