Turning Around Michigan: The Michigan Turnaround Plan

1. Turning Around Michigan: The Michigan Turnaround Plan

2. Business Leaders for Michigan • 75 of Michigan’s most prominent company CEO’s • Over 300,000 jobs throughout Michigan • Statewide representation – Jobs in every county in Michigan • Over $1 Trillion annual revenue

3. Michigan: A State In Crisis • 1 of every 2 jobs lost in US since 2000 have been in Michigan • Only 25% of Michigan job losses from automotive sector • Companies pay a 3-4 percentage point profit penalty to be in Michigan • Declining population growth • Declining per capita income • A state with no holistic, cohesive approach to foster job growth

4. Result: Relatively Smaller Source: U.S. Census Bureau Population Estimates Program

5. Result: Relatively Poorer Source: U.S. Bureau of Economic Analysis

6. Result:Declining or Flat Tax Revenue Billions TAX INCREASES Source: Michigan Senate Fiscal Agency, “Major Sources of Tax Revenue”

7. Result: Right Spending Priorities? Source: State of Michigan Executive Budget FY 2009, “Historical Expenditures/Appropriations Gross”& U.S. Inflation Calculator.com

8. Cause: Uncompetitive Business Climate

9. Cause: Uncompetitive Business Climate

10. Setting a Goal for Michigan

11. 2007 (BEFORE CURRENT RECESSION) IF WE HAD BEEN IN TOP TEN (in 2007) Top Ten: Where We Could Be Note: Rankings do not include the District of Columbia; See source notes

12. Michigan’s Five-Step Turnaround Plan

13. Step 1: Changing the Way We Manage Our Finances WHERE WE ARE A PATH FORWARD Form an independent council of respected public and private sector economists to complete quarterly revenue and spending estimates Conduct a quarterly survey of a cross-section of Michigan businesses to identify sales & hiring trends Adopt two-year budgets to more accurately project the on-going cost of programs • Constant revenue & spending forecast “surprises”

14. Step 2a: Right-Size Spending Now WHERE WE ARE A PATH FORWARD Reduce state employee compensation to the average compensation of state workers in the US or the average of MI private sector workers (Potential savings: $287 - $1,383M as of FY 2007-08) Reduce the state workforce by 5-10% (Potential savings: $236 - $473M as of FY 2007-08) Adjust state employee health care premium contributions to the national public sector average (Potential savings: $74M) • Most structural reforms have long-term payoffs • Labor & benefits are the state’s largest cost-driver: Average total compensation for state employees was almost $17,000 more than the private sector average in Michigan in 2007 • State employees pay 5%-10% of their health premium costs, compared to 17.8% national average for state workers

15. Step 2b: Structural Reforms To Ensure Sustainability WHERE WE ARE A PATH FORWARD Encourage & enable local government service sharing (Minimum estimated savings: $250M) Encourage & enable local school district service sharing (Minimum estimated savings: $300M) Enact corrections management and sentencing reforms (Estimated savings: $400M) Eliminate optional services that exceed federal standards (e.g. optional Medicaid services) Eliminate duplicate state programs (e.g. MIOSHA vs. OSHA) • Michigan has 1,800 units of local government and over 500 local school districts • Michigan’s incarceration rate is 45% higher than the Great Lakes average

16. Step 3a: Getting Michigan Competitive – Short-term WHERE WE ARE A PATH FORWARD Make Michigan’s business tax system competitive Reduce the MBT to move Michigan significantly toward becoming a “Top Ten” state in lowest tax burden • Michigan ranks between 27th and 35th worst in overall business tax burden • Michigan businesses pay on average 3-4% more of their profits in taxes than the average of the “ten best” business tax and many peer states

17. Step 3b: Getting Michigan Competitive –Long-term A PATH FORWARD Make the overall cost of doing business in Michigan competitive Eliminate the personal property tax Require fiscal notes that identify the compliance costs for all new regulations Create a regulatory report card that tracks responsiveness Prohibit state regulations that exceed federal standards, such as state-based ergonomic standards

18. Step 4: Investing In Our Future WHERE WE ARE A PATH FORWARD The state should make investments that will have the greatest long-term economic impact Investments should focus on: Higher education Infrastructure Great Lakes and cities • When Michigan was a wealthy state it could afford not to set priorities; in today’s economy it cannot • Other states, like North Carolina, prioritized investments

19. Step 4a: Investing In Our Future –Education WHERE WE ARE A PATH FORWARD Improve K-12 performance: Consolidate administration of Michigan’s 500+ school districts by reducing per pupil state funding for districts that fail to share services Ensure “Top Ten” higher education: Rationalize the number of colleges & universities to a number the state can support long-term Increase funding to remaining community colleges & universities to achieve “Top Ten” status • Average K-12 performance must improve to match per capita spending (Spending: 8th; Performance: 34th) • Higher education investment should increase from current status of 38th to “Top Ten”

20. Step 4b: Investing In Our Future -Infrastructure WHERE WE ARE A PATH FORWARD Adopt new funding formulas to ensure Michigan has adequate revenues to support a “Top Ten” transportation infrastructure Improve to “Top Ten” road condition Expand freeway connectivity to adjoining states Expand passenger air service throughout Michigan Support mass transit in dense population corridors • Michigan scores below average in the condition of its highways – a critical need for a peninsula state

21. Step 4c: Investing In Our Future -Great Lakes & Cities WHERE WE ARE A PATH FORWARD Develop a comprehensive Great Lakes strategy Develop an urban agenda • The Great Lakes provide Michigan a defining “place” to attract and retain talent in a global marketplace, yet Michigan lacks a holistic strategy to leverage this unique asset • Michigan needs an “urban strategy” - a critical need for retaining and attracting talent and improving Michigan’s image

22. Step 5: Accelerating Growth WHERE WE ARE A PATH FORWARD Support collaborative regional growth strategies Accelerate growth by supporting innovation and entrepreneurship across all sectors Develop strategies to grow broad business sectors that leverage Michigan’s key assets (e.g.: energy, engineering) • Michigan does not operate cohesively • Michigan’s economic development strategy emphasizes: • Making direct investments in individual companies • Incentivizing site location • Targeting narrow business sectors

23. Turnaround Plan Implementation • Introduce BLM & Plan to media/stakeholders • Endorsements &Support from • 75% of state’s major newspapers • Several major organizations & associations • Democrats & Republicans • Launch Public Information Campaign Track 1: BUILD SUPPORT

24. Convene State Leaders Build a Legislative Coalition Ten Step Agenda for 2010 Turnaround Plan Implementation Track 2: ADVANCE A LEGISLATIVE AGENDA

25. Legislative Agenda • Establish a 2-year budget cycle • Form an independent public-private revenue forecasting • Remove barriers for local municipalities and school districts to increase efficiency • Consolidate school administrative functions • Adjust public employee health care contributions to the national public sector average • Reduce state employee compensation to the average compensation of state workers • Reduce the state workforce by 5%-10% • Enact reforms to Michigan’s Corrections system that bring our costs in line with other mid-west states • Make Michigan more competitive by reforming the Michigan business tax structure • Require all legislation & regulatory change proposals that impact business to include fiscal notes

26. Turnaround Plan Implementation Track 3: EVALUATE & SUPPORT CANDIDATES • Questionnaires • Interviews • PAC • Endorsements

27. MichiganTurnaroundPlan.com