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Thinking Beyond the Current Crisis

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Consulting firm headquartered in East Lansing, with offices in Chicago and Los Angeles. ... Helping MSU win federal funding for the FRIB ... – PowerPoint PPT presentation

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Title: Thinking Beyond the Current Crisis


1
Thinking Beyond the Current Crisis
Prepared forState of Michigan Board of
Education October 26th, 2009Lansing,
MI Patrick L. Anderson, PrincipalAnderson
Economic Group, LLC
2
Outline
  1. Introduction
  2. Michigan The 8-year recession
  3. Michigan No coherent strategy The price of
    negligence
  4. Re-thinking Michigan Avoiding senseless
    debates Elements of a success plan

3
I. Introduction Anderson Economic Group LLC
  • Consulting firm headquartered in East Lansing,
    with offices in Chicago and Los Angeles. Clients
    include businesses, associations, non-profits,
    state and local governments throughout the United
    States.
  • Recent AEG projects include
  • Assessing the technology and life sciences
    industries in Michigan and in West Virginia
  • Estimate the economic impact of Michigans
    University Research Corridor and benchmarking it
    against competitors in NC, CA, IL, and MA
  • Helping MSU win federal funding for the FRIB
  • Surveying business tax incentives in Michigan for
    the Michigan Education Association
  • Completing the third annual 50-state business tax
    burden study published in the State Economic
    Handbook
  • Extensive business tax reform analyses for
    Detroit Renaissance
  • Past efforts have resulted in change in sales
    tax law (1998) reform of laws on reversion
    (1999) creation of an IPPT credit (2005) repeal
    of the SBT (2006) the creation of a Michigan
    EITC (2008).

4
II. Michigan The 8-year Recession
  • The United States emerged from brief recession in
    2001, and grew steadily until the Great
    Recession began in early 2008.
  • Michigan never emerged from the 2001 recession.
  • Michigans unemployment was already at 7 when
    the Great Recession began it has now exceeded
    15 for months.
  • Numerous Michigan cities have unemployment rates
    over 20, and at least two have unemployment over
    30.
  • By comparison, other Midwestern cities with
    manufacturing industries (Milwaukee, Cleveland,
    Chicago, Indianapolis) have unemployment rates
    near 9.

5
Historical Unemployment Rate Trend
Mid 1990s MI gets better than the US
6
III. Michigan No Coherent Economic Strategy
  • We have no coherent economic development
    strategy.
  • Our tax policies are confusing, and actively
    discourage business investment.
  • Since 2005 repeal SBT repeal create new MBT
    increasing tax burdens impose bizarre excise
    tax repeal that and impose MBT surcharge
    increase individual income taxes but create
    film-industry-only tax credit.
  • Our base tax revenue has been declining even as
    we increased business and personal tax rates.
  • Hard to squeeze more tax revenue from a shrinking
    stone.
  • Structural deficit, but no structural reforms,
    means no sustainable spending priorities.

7
No Coherent Strategy, continuedThe price of
negligence
  • We are paying the price for our negligence
  • We cannot assume that K-12 education funding,
    organization structure, or pay and benefits can
    be sustained over the next few years...or even
    the current fiscal year.
  • The 2000-2009 period for the state represents a
    lost decade during which we failed to address
    structural problems.
  • Unfortunately, no sector can escape the damage
    from this negligence...including K-12 education,
    which has historically been the states top
    funding priority.

8
No Coherent Strategy, continuedThe old order is
gone
  • The Old Order is irrevocably gone.
  • No Big 3 anymore we are trying to hold on to a
    Detroit 2 and currently have only one
    unencumbered OEM.
  • Huge drop in manufacturing employment.
  • Losing valuable professional technical
    employees.
  • Need to re-think
  • Tax policy
  • Education policy
  • Spending priorities

9
IV. Re-thinking Michigan1. Avoid Senseless
Debates
  • No benefit to arguing that taxes dont matter.
  • Everyone that hires workers and pays taxes thinks
    they do...and they are the ones that really
    matter.
  • No truth to the claim that Michigans tax burden
    is the worst in the country.
  • Business tax burden is about 26th in most recent
    50-state survey but perception of business
    investors is much worse.
  • No advantage in saying that discussing reforms is
    education bashing.
  • When your ship is sinking, you dont shoot those
    that are bailing fast.
  • Reality we are losing tax base, and need to
    reform.
  • Hold the senseless debates for a future date.

10
IV. Re-Thinking Michigan2. Identifying a
Success Plan
  • Emphasize valuable assets
  • Technical knowledge for manufacturing, life
    sciences, chemicals, electronics, defense, other
    high-tech industries...
  • Excellent colleges and universities, starting
    with University Research Corridor and extending
    to other private and public colleges
  • Excellent quality of life outstanding beauty
    incredible natural assets
  • Michigan is really good at certain things...start
    with those.

11
2. Success plan elements--continued
  • Must reform to survive
  • Tax revenue of the past will not return any time
    in near future must choose path or have disaster
    thrust upon us.
  • Need to re-think redundancies in the school
    system need to reconsider governance
    maintenance of 500 units contracts unfunded
    liabilities accountability measures.
  • Need to continue effort to create, maintain, and
    enforce performance standards.
  • No coherent success plan avoids reform ignores
    K-12 education or treats education as primarily
    a funding question.

12
2. Success plan elements--continued
  • Thoughtful reform plans have been proposed by
    experts outside of government...but ignored
  • Governors emergency financial panel
  • Center for Michigan
  • Detroit Renaissance (Business Leaders for
    Michigan)
  • Other reform plans have concentrated on tax
    policy, education governance structure, economic
    strategy...those mostly ignored, too.
  • Much better to pick a coherent plan than to watch
    ship sink further.

13
2. Success plan elements--continued
  • Any success plan must develop an educated
    workforce because the 21st century economy
    demands it.
  • Without improving its education system, Michigan
    will decline.
  • By the way, the 21st century is already
    here........and weve not been doing very well
    in it.

14
Contact Information
  • Patrick AndersonPrincipal CEO, Anderson
    Economic Group, LLC
  • East Lansing Chicago Los Angeles
  • Reports and company information may be found at
  • www.AndersonEconomicGroup.com
  • Reports Cited in Presentation
  • 2008 State Business Tax Burden Rankings, 3rd
    Annual Report (Mar. 2009)
  • Michigans University Research Corridor (Sept.
    2008)
  • Automation Alleys 4th Annual Technology
    Industry Report (Nov. 2008)
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