Letter to Gov. Snyder

I wrote this letter to Michigan's Governor Snyder, outlining my concerns about the cuts he has proposed in his 2011 budget. His cuts run counter to the things I believe we need to do to strengthen this state.

Dear Governor Snyder:

While I agree that the fiscal and tax structure in Michigan needs to change to foster business growth in the state, I do not believe that some of your proposed changes to next year’s budget are in the best interest of either business or residents. In particular, I believe that your cuts to education (K-12 and higher education) and to targeted tax credit programs are counterproductive and bring great harm to the state.

I ask you to reconsider these cuts:

K-12 education should be funded at a rate higher than has been the case over the last several years. Your proposed cuts will gut education funding, leading to grossly overcrowded classrooms and lower performance. I believe that K-12 education is the single most important area of concern in the state, and any cuts that reduce the quality of educational opportunity for all students must be avoided.

Similarly, I support continued and expanded funding for higher education. Study after study have shown that increasing the average level of education brings the best return on investment. In particular, in region after region around the U.S. and the world as a whole, the percentage of the population with a college degree has a strong correlation with economic health. We should do everything possible to increase this number and to maintain it.

Brownfield tax credits have become an important tool in the economic redevelopment of our cities and many other areas, as well. As we shift from a heavy manufacturing economy to a knowledge-based economy, we have to deal with the “fallout” left behind by the industries that once fueled our growth. It is too easy to close our eyes to the contamination left behind as these business facilities close. Until another way is found to deal with the abandoned and neglected sites in every corner of our state, these credits offer the one workable solution.

Historic Preservation tax credits have also served as a tool to help reinvigorate older developed areas in Michigan. As the finance and housing industries go through massive upheaval and change, we need to maintain programs that will allow older housing and commercial properties to remain in use. It is doubtful that the ready financing that we’ve enjoyed for the last few decades will be there to support new developments in the way it has in the past. It is vital that we keep our heritage buildings and housing during this transition period, as we move away from mortgage and finance programs that have been the base of our building projects in the past.

Similarly, I am in favor of extending the film and video credits for three more years, then beginning a phase-down in the program. In the short time the production credits have been in place, Michigan has seen an extremely rapid growth in this world-wide industry. Not only have over 3,000 full-time-equivalent jobs emerged (the equivalent to the number of jobs found in one to two auto plants), but business people from inside and outside Michigan have invested millions of dollars in new facilities based on the promise of continued support. Right now, most of the projects that have been produced in Michigan have come from outside companies. But, as this new industry takes root and grows, our own production companies will lead the way. We have to give this investment time to develop.

I believe that public transportation will play a larger role in the state as the cost and demand for fuel increases. I appreciate your support for light rail and other transit programs in Detroit, Grand Rapids, and other cities, and I support your efforts to gain further funds for high-speed rail routes in the state. Further, I encourage continued support for new energy industries, a field that will play increasing importance over the next decade.

Michigan’s business tax system needs to be simplified and reorganized. We should encourage entrepreneurial growth and incubate the start-ups that will fuel our economic growth. However, a blanket transfer of tax burden away from businesses at the expense of individuals is unfair and not good policy. Michigan’s current tax system causes many difficulties for business, to be sure, but our overall tax burden is not excessive—it is not even ranked in the top half of the most burdensome in the country. I believe that claims that the tax burden in Michigan is excessive are incorrect, or at worst, blatantly false.

I do believe that there are many reasons other than financial concerns that should drive decisions on these and many other issues, including quality of life and cultural concerns. However, I realize that the urgent pressures arising from the current deep recession and the massive effects they have had on Michigan make it important to deal with short-term budget issues very quickly. There are certainly many long-term questions that need to be addressed after these current emergencies are solved. I hope you choose to maintain the programs that I feel are so very important to Michigan.

Sincerely,

David A. Legg

A report released yesterday showed that Michigan's University Research Corridor, comprised of Detroit's Wayne State University, the University of Michigan in Ann Arbor, and Michigan State University in East Lansing, accounted for over 68,000 new high-tech jobs in the state last year. That's in the first year of its existence. The three member schools are the major research-level universities in the state. The Detroit Free Press wrote about it here. The URC says on the website for an upcoming conference:

A knowledge-based economy may be the best hope for long-term economic recovery by states like Michigan that were built upon manufacturing as the core industry. To realize this hope, the conference organizers believe that universities can and should play an important role in building such a knowledge-based economy.

Check another article in the Seattle Press-Intelligencer site about jobs added by Microsoft in Seattle:

Microsoft's move bodes well for the city, said Bill McSherry, economic development director of the Puget Sound Regional Council.

"If anything, it reinforces the notion that our economy is going to grow as fast as we can supply well-educated and well-trained people," McSherry said. "If there's one thing we need to continue to work on, it's more and better education" to help companies fill these kinds of jobs.

These two examples underscore the basic truth that more support for education is the best way to build a base for improved economies. The big difference between the two regions is that leaders in the Puget Sound area actually believe it. In Michigan we have the state legislature making power plays and practicing their political posturing for power at the expense of growth.

All we have to do is look at the numbers: we've lost manufacturing jobs by the truckload in Michigan, but thousands of desirable high-tech jobs have begun to replace them, diversifying the economy and building for the future. We educate outstanding scholars here in Michigan, but the status quo continues wallow in an outmoded view of the world... and that is what forces our young people to take their top-notch education to other states, where they are snapped up to build new economies. The legislature needs to support all education, including the institutions that provide basic research, and those that educate people who will work in the new economy. We know what needs to be done; now the Michigan legislature needs to follow through and fund our schools and colleges.

Michigan's Creative Class

I loaned a former student the book, Rise of the Creative Class by Richard Florida. He's been reading it this summer, and sent me an email about a note I wrote in the margin regarding the need to balance social capital and economic growth. Here's part of my reply:

As for Richard Florida-- you have to remember that his ideas reflect trends, not absolutes. When he shows the percentages of workers in each type of career from one era to another, those are drawn in pretty broad strokes. Keep in mind that during the agricultural age, there were still some people working in manufacturing and in creative-class fields-- it was just that the balance among the types of work varied. There will always be manufacturing jobs, it is just that the creative class jobs are expected to have a greater influence in the overall economy than was the case, say, 20 years ago. The creative class will provide what might be called the "value-added" parts to the manufactured goods, like adding sophisticated software to a car to improve performance or add a desired function. (I just talked about that this evening with a neighbor who is an engineer for one of the car companies. He's working on software to adjust the way a prototype car "feels.") And a company like GM or Ford will still have both manufacturing and creative functions, as well as financial and sales-- even if they outsource some of the work. So, even within one company, you'll see technology and creative jobs and human service functions. I think you can have economic growth and growth in social capital from all kinds of jobs. It is just very disruptive when the changes in the current structure come all at once-- like in Michigan right now, where manufacturing is declining and changing very quickly. But, even with all of the manufacturing plants closing down around here, Chrysler and Lear are building new factories in Michigan, plants more suited to new methods. Ford just closed the Wixom plant, which was ranked the highest quality auto plant in the world last year-- perhaps they had to close it because it didn't meet the demands of modern manufacturing. I see Michigan changing to a creative-based economy at a very rapid pace right now, but that change is almost invisible amid the chaos caused by the massive decline in manufacturing jobs. Las Vegas is also having a terrible time right now as a region, but their losses are coming in the service sector instead of manufacturing. Both regions had lopsided economies. Michigan is making solid adjustments, but I'm not so sure about Nevada. I'm confident that Michigan will use the excellent institutions we built up over the last 100 years and the huge pool of creative talent we have (50,000 engineers in southeast Michigan alone) to make the switch. We need to keep the best of our manufacturing, take advantage of and nurture our creative class (engineering AND art!), develop a stronger service industry, and redevelop and diversify our agriculture to have a balanced economy and excellent quality of life.