By Jack Rogers
From the September/October 2014 issue
Gov. Rick Snyder, who took office as Michigan was digging out of the deep crater left by the Great Recession (and the near-collapse of the U.S. auto industry), decided that terms like “rebuild” and “recover” didn’t fully embody his plans for the Wolverine State. So he chose as his slogan something much bolder and forward-looking: Reinvent Michigan.
So when Gov. Snyder recently sat down for our Governor’s Report interview, we asked him to define the keys to reinventing an entire state.
“One of the keys is restructuring our business climate to be conducive to creating more and better jobs,” Gov. Snyder told BF. “Another key has been to put state government finances on a sound footing, starting by eliminating a $1.5 billion structural deficit.
Under Snyder, the state’s long-term liabilities have been reduced by more than $20 billion, which has helped in rebuilding the state’s reserve fund. The fund once dropped down to $2 million, enough to run state government for about 30 minutes. Today, it holds about $580 million, and there are plans in place to continue adding to it.
The resurgence of the U.S. auto industry has helped fuel Michigan’s remarkable recovery (the state has created nearly 120,000 new manufacturing jobs since the end of 2009). Gov. Snyder exudes confidence that MI’s re-engineered business climate will attract businesses of all stripes. “Our business climate is one in which manufacturers and businesses of all sizes and in every industry can compete, grow and create more and better jobs,” he declared.
Strong bases in manufacturing and R&D, along with leading research universities like Michigan State University, the University of Michigan, Michigan Technical University, and Wayne State University, present significant growth opportunities in other sectors like advanced manufacturing, defense, information technology, water technology, medical devices, food processing, and logistics/supply chain management.
Gov. Snyder has eliminated hundreds of regulations and streamlined the state’s business tax structure, replacing it with a flat rate on corporations that exempts most small businesses.
“My mission over the past three years has been to make Michigan a more business-friendly state—and, we’ve done that,” Snyder told us. “The latest example is the recent voter-passed phase out of personal property taxes that small businesses pay on office equipment and manufacturers pay on industrial equipment. There are a lot of positive indicators that show Michigan is becoming more competitive and a better place to do business.”
Improving Michigan’s educational system is critical to Snyder’s Reinvent Michigan campaign.
“W are revitalizing our educational system to reinvent the way students are prepared for successful careers, reshape how people look for work, and redesign the way employees obtain the skills they need,” the governor explained. “We have invested an additional $1 billion in our kindergarten-through-12th grade schools. We’ve developed accountability measures to help districts meet best practices, reforming teacher tenure to make sure the best educators are in our classrooms. Our state also has expanded educational options, including lifting a cap on charter schools and expanding dual-enrollment opportunities so more students can earn college credits while still in high school.”
The healthcare system in Michigan also is getting a makeover. Snyder pushed through the Healthy Michigan program, which is bringing healthcare coverage to 470,000 people, most of them working and earning less than $15,000 a year. The Medicaid expansion, made possible by the Affordable Care Act, will reduce the $880 million annual cost of uncompensated care that hospitals now bear, yielding lower insurance premiums for individuals and businesses.
‘RELENTLESS’ POSITIVE ACTION
Snyder says his accomplishments resulted from a process that rested first on identifying Michigan’s core problems and then seeking to work together with the state’s key stakeholders on solutions.
“It is what I call ‘relentless positive action,’ he says.
A cornerstone of this effort has been Snyder’s successful campaign to make Michigan the 24th Right-to-Work state in the U.S. “Michigan’s move to [become] a Right-to-Work state is contributing to our economic comeback while preserving the roles of unions and collective bargaining,” Snyder said.
“Before passage of the Right-to-Work law, Michigan was not a state considered by many site selection executives and consultants for major business expansions. We lost out on some deals to competitor states and lost out on business opportunities because we weren’t given an opportunity to make a pitch on deals,” he explained.
Michigan is offering cash incentives in increments of up to $10 million for shovel-ready projects with strong potential for near-term job creation. BF asked the governor if he is convinced these performance-based incentives will yield better results than traditional long-term tax credits?
“The shift away from long-term tax credits is allowing us to better leverage our state’s assets in ways that are simple, fair, efficient and transparent,” Snyder told BF. “Today, our incentive toolkit is more flexible and makes us even more competitive. We can now provide capital at the front end of a project when it is most needed as opposed to the back end.
The shift to cash incentives also makes for more accurate budgeting and forecasting, the governor added. “Cash incentives are paid and accounted for at the time of appropriation, providing more clarity and certainty to businesses that receive the incentive,” he said.
The Michigan Strategic Fund’s successful Capital Access Program was a model for the federal State Small Business Credit Initiative, which helps creditworthy small businesses get financing. Under Gov. Snyder, the state is playing a major role in connecting businesses with capital providers.
“It’s really is about providing great service and saving time for our business customers,” he explained. “Our team at the Michigan Economic Development Corporation can efficiently connect businesses at every stage of development with capital providers—federal grants, venture capitalists, banks, and others—as well as offer programs that can expand the reach of those capital providers. They know what public and private resources are available. They can meet with a business, identify needs or challenges, and quickly connect that business with a solution.”
Gov. Snyder has logged thousands of miles spreading the good news of Michigan’s recovery to overseas markets. He has conducted seven international investment missions since taking office: Germany and Italy in April 2014; China and Japan in September 2013; Israel in June 2013; Canada in November 2012, China in September 2012; Italy and Germany in March 2012; and Japan, China and Korea in September 2011.
“When I meet with companies on these missions, they are impressed with the strength of our economic comeback and our abundant talent,” Snyder told BF. “These investment missions have opened doors that had been previously closed and refreshed long-standing business relationships with business leaders in other countries.”
The results of these trade missions have been impressive: six foreign companies that met with Snyder’s team during visits to China, Italy, Germany and Canada announced expansions in Michigan in July. Combined, the new business investments total $199.4 million and will create 1,875 jobs in Michigan. The expanding companies included Brugola OEB Industriale S.p.A. (Italy), Eissmann Group Automotive (Germany), H.A. Automotive Systems Inc. (China), YanFeng USA Automotive Trim Systems, Inc. (China), Magna Exteriors and Interiors USA Inc. (Canada), and Brembo North America Inc. (Italy).
WORKFORCE TRAINING IS JOB ONE
Snyder recognizes the critical importance of workforce training in today’s highly competitive environment. He has championed innovative training programs like cyber schools and apprenticeships in Michigan?
Career Jump Start is a collaboration of the state and community colleges to promote training opportunities for in-demand careers to Michigan high school students. The initiative educates them about associate degree programs, apprenticeships and other training opportunities. Community colleges in 10 regions around the state house career liaisons who provide resources to high school counselors, administrators, parents and teachers about post-high school training programs that will prepare students for in-demand occupations.
Michigan’s Skilled Trades Training Fund provides competitive awards for the development and implementation of employer-responsive training that enhances talent incomes, productivity and employment retention. It ensures Michigan employers have access to the talent they need to compete and grow, and participants have the skills they need for in-demand jobs.
Gov. Snyder had to confront an unprecedented crisis, one that would have been unthinkable in the past:
during his tenure, Detroit became the largest city in history to declare bankruptcy. Snyder confronted Motown’s fiscal collapse head-on, appointing an emergency state manager to straighten out the city’s finances, which included overwhelming pension obligations.
In our interview, Snyder expressed confidence that Detroit soon will emerge from bankruptcy and make a strong recovery.
“The future of Detroit is bright. There have been many positive things happening in the city for quite some time,” he told us. “[During] the past six years, over $10 billion has been invested in commercial, industrial and residential properties in the city. Investment efforts by corporations, such as Quicken Loans and Blue Cross Blue Shield, have added nearly 12,000 jobs in downtown Detroit.”
Condo, loft and apartment housing in the Downtown and Midtown (university district) areas are essentially sold-out, Snyder noted, reflecting the growing popularity of Detroit as a destination residential locale (an estimated. 97 percent of downtown Detroit’s rental apartments and 95 percent of Midtown’s rental units are occupied).”
It’s a good bet Detroit will clear the last hurdle: “Financial stability of city government is the final barrier to even greater economic growth,” Snyder says.