However lawmakers and Gov. Gretchen Whitmer reach consensus over billions in one-time federal pandemic funds and budget surpluses with investments, tax cuts or a combination of the two, Jeff Donofrio wants Michigan to be far more competitive in the long term.
Given the amount of funding now available, Donofrio sees a unique opportunity to better position the state to compete against others as a new state budget for the next fiscal year comes together.
“We should put everything on the table in terms of what is going to put Michigan and Michiganders in the best possible competitive situation, especially as we see ourselves experiencing high inflation (and) high gas prices. All those things should be considered,” said Donofrio, the CEO of Business Leaders for Michigan. “We have to look at Michigan’s competitiveness against all these other states and we have to look at how we’re going to spend those dollars, too. It may be better off in businesses’ pockets so that they can make those choices. It may be better off in business’s pockets. But we do have to make sure we have a state where we’ve invested in infrastructure, people, our K-12 systems and all of those things at the same time.”
Business Leaders for Michigan, a roundtable of corporate executives and university presidents, released a new plan to elevate Michigan as a top 10 performing state. Among the many suggestions is a need for maintaining a competitive tax climate, although “our organization continues to talk about the things we need to invest in first.”
Business Leaders for Michigan’s Compete to Win plan to become a top 10 state calls for “investments in people” and to “help people overcome barriers,” such as college affordability.
Compete to Win prioritizes investments as Michigan sits in the middle of the pack nationally, ranking 29th in Business Leaders for Michigan’s performance metrics.
That’s a “great leap” from where the state was in 2009, “but just maintaining the middle position or the average position that we’re in today is going to take a lot of work, and getting from average to top 10 that we’ve had as a goal for our state for about a dozen years now is going to be much harder,” Donofrio said.
“It’s going to take more concerted investments (and) more strategies that we execute on for the long term. Things like proactive site development, making sure we have shovel-ready sites and incentives to help create those new jobs, to help with the (electric vehicle) transition and the autonomous transition that’s coming, and to really find ways to make our talent and Michiganders in the marketplace the most competitive,” he said.
K-12 investments needed
Compete to Win particularly targets the latter issue, citing a persistent need in Michigan: Improve and reform K-12 education, where the state compares poorly in the latest annual benchmark report that Business Leaders for Michigan issued earlier this year.
“Michigan has struggled for a number of years to improve K-12 educational outcomes. Other states and many other countries are far ahead of us. Although Michigan has skilled and dedicated teachers and administrators, student test scores are among the lowest in the country,” the Compete to Win plan stated.
The plan describes K-12 education in Michigan as using an “outdated model” that “was built first for an agricultural economy and then transitioned to move students from the classroom to the assembly line” and has “not kept up with the shifting needs of the 21st century economy.”
That has resulted in Michigan ranking 39th in fourth-grade reading and 33rd in eighth-grade math scores, according to Compete to Win.
Business Leaders for Michigan urges the state to enact new performance standards, increase spending to support education, support teacher retention and growth, improve career and technical education, and invest in student support programs.
“A high school diploma in Michigan has to represent a world-class education that puts Michiganders on par with anyone in the world who’s leading, who’s innovating, and creating the next Fords, Googles, Facebooks and drivers of our economy,” Donofrio said. “You cannot overcome a K-12 system that’s failing, a K-12 system that’s not giving people the skills needed to be successful in a college situation (or) in a work environment.”
Part of the barrier to change is a prevailing view among people that education in Michigan is average compared to other states — but their own local schools perform above average.
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“We shouldn’t be surprised that there isn’t an urgency to change the system when people believe there is not a problem,” Donofrio said. “The reality is that we underperform leading states.”
In a recent conversation, Donofrio cited how Tennessee and Kentucky have surpassed Michigan and “are more educated states right now than Michigan.”
“You see a lot of investments and a lot of companies choosing to go to those states because they’ve been doing things for decades to invest in their people, to invest in their economic competitiveness, to improve their systems in ways that Michigan hasn’t yet been able to coalesce around,” he said.
Tennessee and Kentucky, of course, are where Ford Motor Co. last fall selected to partner with SK Innovation Co. to invest $11.4 billion and build facilities that manufacture both electric vehicles and batteries, creating 11,000 jobs.
Ford’s announcement back in September delivered a proverbial kick in the gut for Michigan. Lawmakers and Whitmer responded by creating a $1 billion state fund at the end of 2021 to support massive economic development projects.
The Strategic Outreach and Attraction Reserve Fund enabled the state to land General Motors’ $7 billion initiative in January to convert an Orion Township assembly plant to build electric pickup trucks and a battery plant in Lansing by Ultium Cells LLC, a joint partnership with LG Energy Solution.
The state more recently missed out on a $2.5 billion project planned by Stellantis and South Korea’s Samsung SDI for an electric vehicle battery plant in Kokomo, Ind.
Like education, Donofrio hopes the SOAR fund isn’t just a reaction that generates a view that the problem highlighted by the Ford announcement has been solved.
“We’re really great at silver bullets and trying to solve the problem with one thing,” he said.
The state now has an opportunity to make those investments using one-time money and surpluses in the state budget, as well as the federal money to the states, to accelerate that educational attainment and remove barriers to work, Donofrio said. That opportunity — combined with an urgency from losing big investments to southern states — could finally create an urgency to make the investments needed to raise the state’s performance in the future.
Whether there is the political will and ability is another question entirely.
“These are issues that will hurt us in the future if we don’t address them today, and they’re hurting us now. We don’t want to look back 10 years from now and say, ‘We wish we would have used that money to invest in our future because other states did and they surpassed us and the gap is so wide now that Michigan can never catch up,’” Donofrio said. “If we’re not thinking about strategy and persistence of the strategy for the next 10 to 20 years, we’re way behind other states that have been doing that exact same thing.”