Michigan Turnaround Plan Turning Around Michigan: The Michigan Turnaround Plan

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

Michigan Turnaround Plan 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 3

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

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

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

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

Michigan Turnaround Plan Cause: Uncompetitive Business Climate 8

Michigan Turnaround Plan Cause: Uncompetitive Business Climate 9

Michigan Turnaround Plan Setting a Goal for Michigan 10 Michigan will be a top ten state for job & economic growth Long-Term Michigan will be an above average state for job & economic growth Short-Term

Michigan Turnaround Plan Top Ten: Where We Could Be $34,423 Rank: 33rd Per Capita Income -1.3% Rank: 50th Job Growth (Private, ) 7.1% Rank: 50th Unemployment (BEFORE CURRENT RECESSION) IF WE HAD BEEN IN TOP TEN (in 2007) $41,203 $6,780 more per person Per Capita Income 2.4% 883,000 more jobs between Job Growth (Private, ) 3.4% 186,447 fewer unemployed people Unemployment Note: Rankings do not include the District of Columbia; See source notes

Michigan Turnaround Plan Michigan’s Five-Step Turnaround Plan STEP 1 Changing the Way We Manage Our Finances STEP 2 Right-sizing & Enacting Structural Budget Reforms STEP 3 Getting Michigan Competitive To Attract & Retain Jobs STEP 4 Making Investments That Create A Great Job Environment STEP 5 Accelerating Job Growth Through Innovation & Entrepreneurship 12

Michigan Turnaround Plan Step 1: Changing the Way We Manage Our Finances WHERE WE ARE Constant revenue & spending forecast “surprises” 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 13

Michigan Turnaround Plan Step 2a: Right-Size Spending Now WHERE WE ARE 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 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 ) Reduce the state workforce by 5-10% (Potential savings: $236 - $473M as of FY ) Adjust state employee health care premium contributions to the national public sector average (Potential savings: $74M) 14

Michigan Turnaround Plan Step 2b: Structural Reforms To Ensure Sustainability WHERE WE ARE 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 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) 15

Michigan Turnaround Plan Step 3a: Getting Michigan Competitive – Short-term WHERE WE ARE Michigan ranks between 27 th and 35 th 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 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 16

Michigan Turnaround Plan 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 17

Michigan Turnaround Plan Step 4: Investing In Our Future WHERE WE ARE 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 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 18

Michigan Turnaround Plan Step 4a: Investing In Our Future – Education WHERE WE ARE Average K-12 performance must improve to match per capita spending (Spending: 8 th; Performance: 34 th ) Higher education investment should increase from current status of 38 th to “Top Ten” 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 19

Michigan Turnaround Plan Step 4b: Investing In Our Future - Infrastructure WHERE WE ARE Michigan scores below average in the condition of its highways – a critical need for a peninsula state 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 20

Michigan Turnaround Plan Step 4c: Investing In Our Future - Great Lakes & Cities WHERE WE ARE 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 A PATH FORWARD Develop a comprehensive Great Lakes strategy Develop an urban agenda 21

Michigan Turnaround Plan Step 5: Accelerating Growth WHERE WE ARE Michigan does not operate cohesively Michigan’s economic development strategy emphasizes: Making direct investments in individual companies Incentivizing site location Targeting narrow business sectors 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) 22

Michigan Turnaround Plan  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 23 Turnaround Plan Implementation Track 1: BUILD SUPPORT

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

Michigan Turnaround Plan Legislative Agenda 1.Establish a 2-year budget cycle 2.Form an independent public-private revenue forecasting 3.Remove barriers for local municipalities and school districts to increase efficiency 4.Consolidate school administrative functions 5.Adjust public employee health care contributions to the national public sector average 6.Reduce state employee compensation to the average compensation of state workers 7.Reduce the state workforce by 5%-10% 8.Enact reforms to Michigan’s Corrections system that bring our costs in line with other mid-west states 9.Make Michigan more competitive by reforming the Michigan business tax structure 10.Require all legislation & regulatory change proposals that impact business to include fiscal notes 25

Michigan Turnaround Plan  Questionnaires  Interviews  PAC  Endorsements 26 Track 3: EVALUATE & SUPPORT CANDIDATES Turnaround Plan Implementation

Michigan Turnaround Plan MichiganTurnaroundPlan.com 27