WEST MICHIGAN — Michigan became a little more competitive with other states over the last two years, although it’s still far from the goal of corporate CEOs to become a top 10 state for economic performance, according to an annual report.
After a decade of decline — and despite lagging top states nationally — employment, per-capita GDP and personal income are all now “headed in the right direction” and even outpaced much of the nation, says the benchmarking report from Business Leaders for Michigan.
The benchmarking report on Michigan’s competitiveness, prepared by the Anderson Economic Group, shows the state overall is recovering faster from the recession than most others.
While some measures have yet to show improvement, Michigan is doing better in areas “we care about most,” said Doug Rothwell, CEO of Business Leaders for Michigan. The key now is to sustain those improvements.
Coming out of the recession, Michigan is making the structural changes that are needed, Rothwell said. Changes need to continue to build on the improvements of the last two years and assure the state’s long-term recovery, he said.
“These are all headed in the right direction, but we came off such a low base (that) we have a long way to go,” Rothwell said of the key metrics in the 2012 benchmarking report. “Even though a great deal of progress has been made these last two years, we have got to really sustain the pace of change for another five to eight years in order to get to be a top 10 state, and that’s hard to do. We have not had a history in Michigan of doing that. We tend to get a little complacent when times get better.”
Michigan continues to lag peer states in venture capital investments, college graduates and entrepreneurial activity. As a result, university research and development activity — an area where the state ranks in the top 10 nationally — goes underleveraged, according to the Business Leaders for Michigan report.
The report also shows that poor national perceptions about Michigan’s business climate are improving, albeit slowly, and even with changes last year in the tax structure that significantly improved the business tax climate, the cost of doing business in the state remains comparatively high.
Yet as Michigan continues to lag other states in many categories, the progress of the last two years has created a foundation for further improvements, Rothwell said.
“We have a lot more confidence. We are very bullish on Michigan’s long-term economy and much more optimistic on Michigan’s future than we are in the country’s in terms of economic health,” he said. “The issues are getting addressed in Michigan that have been perplexing us for the last decade. What gives us pause is that we have such a long way to go to be a top 10 state.”
Business Leaders for Michigan issues the benchmarking report annually to gauge progress on the Michigan Turnaround Plan it first put out three years ago that proposed a broad array of reforms for state government.
The report compares Michigan to 12 peer states — six that are considered traditional peers, and six more that are deemed as “new economy” states — plus those that rank in the top 10 in economic, job and income growth.
The regular data comparisons to peers is needed to gauge progress because as Michigan seeks to improve its economic performance, so do other states, Rothwell said.
“For too long, we measured our success by changes that we were making just as a standalone state. We judged our success just by actions that we were taking without regard to actions that competitors and other states were taking,” he said. “In the global world we’re in, you have to measure your success by how you stack up to your competitors, not what progress you’re making on your own.”
Two recent moves by the Legislature — adopting a plan to repeal the personal property tax on industrial property and making Michigan a right-to-work state — can further help the state’s business climate and national reputation, Rothwell said. He cautions, however, not to expect too much too soon from the right-to-work legislation.
Whether a state has a right-to-work law “is one of many factors businesses look at when deciding where to locate,” Rothwell said.
“Just like any change in the business climate, it’s going to take time for businesses to become aware of it,” he said.
Business Leaders for Michigan did not take a stand on the right-to-work legislation.
Two key priorities for the CEO group in 2013 are improving funding to fix Michigan’s deteriorating road system and for higher education.
“Let’s fix our roads, let’s start making an investment for the long term and let’s prioritize what money we do spend in state government by giving kids an opportunity to go to college,” Rothwell said. “These are two things that are going to be long-term predictors of growth. Increasingly, as jobs require some level of college education, businesses are going to want to be in a state that has a level of college graduates, and in a global economy you need to have the infrastructure that connects you to the world.”
Rothwell believes any new revenue the state generates should go to higher education and infrastructure and that legislators should consider higher taxes to fix its roads, although Business Leaders for Michigan is not behind any particular plan.
“We’d accept just about any reasonable proposal that’s put forward,” Rothwell said.
On higher education, Business Leaders for Michigan’s goal is to see funding increased $100 million annually for the next 10 years.
“We just think it would make a tremendous statement and an impact on middle-class families if we make college more affordable at a time we need it most,” Rothwell said.