The MC: The Mackinac Center Blog

Frank Beckmann Show Highlights Mackinac Center/Michigan Chamber Poll

66 percent of respondents support redirecting $50 million from films to roads

A Mackinac Center/Michigan Chamber of Commerce poll, showing overwhelming support to redirect film subsidies to roads, was highlighted by WJR's Frank Beckmann May 21.

The poll, conducted by Mitchell Research and Communications, shows 66 percent of respondents supported the idea of using the $50 million in annual film subsidies to fix the roads.

This week Gov. Rick Snyder released a broad, ambitious plan for criminal justice reform, seeking to enhance public safety while improving effective policing and the management of the state’s corrections efforts, including the Michigan Department of Corrections. Several of his recommendations draw from Mackinac Center research, including this section of his address, which discussed overcriminalization: 

Michigan’s criminal code is one of the longest in the nation with more than 3,000 separate crimes in statute. Most of these crimes have not undergone review since their enactment. The result is a steady increase in the number of criminal laws that impact Michigan’s residents and the penalties that can result. Between 2008 and 2013, Michigan enacted an average of 45 new laws each year, and the average minimum prison sentence increased 8.5 months between 2006 and 2014. These trends cost taxpayers tens of millions of dollars per year and have resulted in nearly 1 percent of Michigan’s residents being under the supervision of the MDOC at any given time.

Discussions have already begun in the Legislature about eliminating redundant and outdated crimes. The initial recommendations include many laws that have not been enforced in decades. Under our criminal code today, accepting a challenge to a duel is punishable by up to one year in jail. Posting reproachful or contemptuous language 11 about a person who refuses a duel, on the other hand, is a six-month misdemeanor. Other Michigan crimes include singing the Star Spangled Banner with “embellishments,” and promoting walkathons that last more than 12 hours. The work to clean up Michigan’s criminal code must continue. Consideration should also be given to the penalties currently in place for a number of laws that are being routinely enforced. Low-level felonies should be reviewed to determine if they are more appropriately classified as misdemeanors and misdemeanors should be reviewed to determine if they should be civil infractions that would not result in a criminal record.

The governor also proposed sentencing and probation reforms, building on research conducted by the Council for State Government in 2014. These ideas merit careful consideration by the Legislature.

Mackinac Center Event Featured in Media

Topic of civil asset forfeiture attracts media and various ideologies

The Mackinac Center's May 20 event "Civil Asset Forfeiture: How Government Private Property from Innocent Citizens" attracted a panel and a crowd of various idiologies.

The panel included Lee McGrath, an attorney with the public interest law firm Institute for Justice, Democrat State Representative Jeff Irwin and ACLU of Michigan Attorney Dan Korobkin.

The audience included attendees that described themselves as progressives, conservatives and libertarians.

The Detroit Free Press published an article about the event as well as Michigan Public Radio.

The complete video replay of the event can be viewed here.

As Michigan continues its economic recovery that has led to more jobs, higher real estate values and more government tax revenue, one might wonder what’s driving the state’s recent economic growth. Some point to the booming auto industry, praising the bailouts and speedy bankruptcies. Yet, while some pieces of the state economy are improving more than others, it’s all of them together that makes the difference.

Michigan’s recent economic growth is substantial. From the end of the recession in 2009 to March 2015, Michigan added 407,800 jobs, a 10.6 percent gain — seventh highest among the states. Michigan continues to add jobs and will soon have fully replaced all of the jobs lost during the recession.

Auto industry jobs rebounded even more. Jobs in auto and auto-part manufacturing are up 67 percent from their recessionary trough. Yet, compared to their peak in 2000, the state has fewer than half of the auto and auto-parts manufacturing jobs than it did 15 years ago.

Michigan’s growth in auto-manufacturing employment is a reflection of national trends. From 2000 to 2009, auto and auto-part manufacturing jobs fell nationally, with Michigan losing a greater proportion of jobs than the nation as a whole. Since then, these jobs have rebounded nationally, and Michigan, having lost more jobs, had more to gain. Subsequently, the state’s auto jobs growth has outpaced the national trend since the recession ended.

Michigan’s economy is a much different state than it was in 2000. Back then, one out of 14 jobs were in auto and auto-parts manufacturing. Even with the recovery of the auto industry, it’s currently one out of 24 jobs. Motor vehicle and parts manufacturing accounted for 12.8 percent of state GDP in 2000, but just 7.6 percent in 2012, the most recent breakdown available. And while not strictly comparable due to changing industrial classifications, motor vehicles and equipment manufacturing used to account for more than 20 percent of state GDP in the 1960s.

Michigan produces other things than cars and trucks. And this is where Michigan has seen some unexpected growth. Non-auto manufacturing jobs in Michigan have fully rebounded from the recession, bucking national trends. Nationally, these jobs have stayed at their ratcheted-down levels since the recession.

According to the most recent state gross domestic product release, which unfortunately only reports detailed industry information for 2012, the largest manufacturing growth in Michigan during the recovery is in chemical products, textile products and the ambiguous “miscellaneous manufacturing.” The value of products in these three industrial categories increased by more than 60 percent from just 2009 to 2012.

Michigan’s auto jobs recovery is great news for the state. But it is much more than just auto-related industries that have come back. In many ways, the state’s economy is more economically diverse than it has been in decades.

Residents should be grateful for this rebound. But these statistics also show how hard it is for anyone to predict the future and centrally plan a state economy. Yes, the heavily subsidized auto industry has rebounded, but so have many other industries that received no taxpayer support.

Policymakers should keep this in mind when designing policies that affect businesses. Business taxes and regulations should be fair and broad, applying equally to all, rather than to just a select few. A state economy is too diverse and complicated to nudge forward by subsidizing one or a few preferred industries.

In a recent Mlive column, Tim Skubick says critics of the House Republican road funding plan think it violates accounting principles. “If you are a respectable bean-counter you are loathed to predicate any budget on revenue that may or may not materialize,” he writes.

If this criticism were valid, Michigan’s and every other state’s budget process would be impossible. Budgets are always forward-looking and rely on estimates of future revenue. As the months pass, policymakers adjust the budget to reflect actual tax income. The state revised its budget per updated revenue estimates just four months ago, for example.

Critics also misread the House plan. The legislation earmarks set dollar amounts to roads from the state’s personal income tax. These earmarks on not contingent on growth in state tax revenues.

Nevertheless, projecting such growth is hardly wild-eyed. In just the past four years, state tax revenues (and spending) have increased by $3.5 billion. Recent fiscal agency reports project continued growth.

If critics find budgeting based on future revenue projections unsettling, they should be far more concerned by a much larger threat to future state spending: the grossly underfunded school employee pension system. The state is supposed to contribute $1.9 billion this year to begin catching up on $25.8 of unfunded pension liabilities. The long term plan is to increase this amount by 3.5 percent annually until the underfunding is erased. Every penny is money that won’t be available for other spending needs and desires, so the only way to meet this future cost without impacting current budgets is through new revenue growth.

Maybe the state will get caught up someday, but the only guaranteed method to avoid racking up even larger unfunded liabilities going forward is to close the system right now to new employees. Eventually, the current liabilities would be paid off.

Management of state finances requires making projections of an uncertain future. If that exercise worries those looking for more road funding, they should be tearing their hair out over pension underfunding, which is a far greater fiscal threat than unfilled potholes.

Schools of Choice Program Causes Greater Competition

Mackinac Center research cited on WILX News

Schools of Choice research conducted by Mackinac Center Director of Education Policy Audrey Spalding is cited in a WILX report.

More than 80 percent of Michigan's school districts are accepting students into their boundaries. More than 100,000 Michigan students use Schools of Choice, which is comparable to those students attending charter schools.

Many schools have reacted positively to Schools of Choice, making conscience efforts to be more competitive and attracting higher enrollment by meeting the needs of students and parents.

Mackinac Center Event Panelist on Frank Beckmann Show

IJ's Lee McGrath talks about civil asset forfeiture

Right now in Michigan the government can take the personal property of private citizens even if the citizen has not been charged with a crime. It's called civil asset forfeiture, and it's the topic of a Mackinac Center Issues and Ideas forum.

Lee McGrath, Institute for Justice legislative counsel and managing attorney of the Minnesota office, served as a guest on the Frank Beckmann Show on WJR 760AM Tuesday morning.

McGrath says in the last nine years in Michigan $149 million in property was siezed. He says last year $24 million was taken. It involves cars, cash, homes and other property. The citizen must then go to court and litigate whether the property is guilty of being associated with an alleged crime.

The other panelists joining McGrath for the Wednesday event will be Jeff Irwin (D-Ann Arbor) and ACLU of Michigan Attorney Dan Korobkin.

The event will be live-streamed and available for viewing at the link here.

Prevailing Wage Repeal is Sound Policy

However, not all reforms are cuts

For two decades the Mackinac Center for Public Policy has recommended repealing the state’s prevailing wage law. It is an expensive mandate that artificially raises the cost of state-funded construction projects. Bills to make prevailing wage an artifact of history have been adopted by the state Senate.

Mackinac Center research suggests repeal will eventually free up money for more road, school and other government construction projects. It's an example of how not all reforms that impact the budget are actually "cuts."

State prevailing wage laws mandate that construction projects funded by the state pay fabricated union scale wages. Our 2007 study, “The Effects of Michigan’s Prevailing Wage Law,” by Paul Kersey reported that the law increased construction costs by 10 percent to 15 percent.

With road construction and repair a topical issue some may regard repeal as akin to just cutting one department’s budget and shifting those funds to roads. That is not the case. In fact, savings accrue to new projects going forward.

One important caveat with repeal is that no federal money could be comingled with state dollars on state road projects. Federal dollars bring with them the Davis-Bacon Act wage mandates, which are the federal version of prevailing wage.

Yet repealing the prevailing wage law can still make road projects less expensive. Unlike state road projects that include federal dollars, only one third of roads managed by counties, cities and villages are eligible for federal funding. Those roads also are in need of repair, with around 47 percent rated in poor condition. Getting rid of prevailing wage mandates will help local road managers stretch tax dollars further.

School infrastructure funding does not have Davis-Bacon mandates hanging over it. If prevailing wage is successfully repealed, the cost of future school projects could fall by as much as $224 million annually, according to the Anderson Economic Group.

Editor's note: This story has been modified since it was originally posted.

Mackinac Expert Talks Film Incentives on NPR

No full-time jobs were created as a result of this corporate welfare

Michigan once had the most generous film incentive program in the nation, but economic realities caused legislators to trim back these subsidies. Recently, the state House voted to end the $50 million program altogether.

Policy Analyst Jarrett Skorup was on NPR’s “All Things Considered” to discuss state film incentives. He said work from independent economists show that this is one of the worst things state governments can spend taxpayer money on.

“In Michigan, a lot of the money goes to out-of-state producers who come in, film and then leave and then, of course, can go somewhere else the next time they make a film,” Skorup said.

He added, “The Michigan Film Office actually found last - in their latest report that there were no total full-time jobs created from the program.”

Stateline, a project of Pew Charitable Trusts, also recently covered the issue. The publication noted the cut backs to Michigan’s incentive program as well as other states. Some states, such as California and New York, are meanwhile boosting their subsidies.

The report quoted Robert Tannenwald, a retired Federal Reserve Bank economist, who has authored a study on state film incentives for the Center on Budget and Policy Priorities, a liberal think tank in Washington, D.C.:

“Film tax credits don’t pay for themselves, so states have to raise taxes or cut expenditures (to make up the difference),” Tannenwald said. “Those snuff out jobs as fast as film tax credits create them.”

Tannenwald said the competition among states puts them into “perpetual competitive purgatory. If one state backs out, and the other states keep doing it, the state loses an awful lot of film production.”

He said the benefits of the production are quickly visible – working carpenters and electricians and politicians getting calls from the locals saying it’s fun to watch those films take place. The costs are less visible—and spread out over time.

“People get excited about seeing movie stars in local cafes and walking down the street. You can’t do an anecdotal interview with a commuter who is sitting on a train platform with frozen hands because of the lack of money to upgrade public transportation,” Tannenwald said.

Michigan is still handing out credits to filmmakers while the bill to end the program sits in the state Senate.

Pure Michigan Scare Tactics

MEDC deploys 'Washington Monument syndrome'

The House Republicans recently released a proposal that would dedicate an extra $1 billion annually to roads by 2019. A chunk of the extra money comes from redirecting money from the Michigan Economic Development Corporation to the state’s transportation infrastructure.

The MEDC is the state’s corporate welfare arm, which hands out select subsidies to corporations and oversees the film incentive program and the Pure Michigan advertising campaign.

Specifically, the House GOP plan would redirect $185 million of spending on “economic development” programs to road construction and maintenance. The MEDC does not want its funding cut and responded with what is known as the “Washington Monument syndrome.” As noted by MIRS:

Steve Arwood, chief executive officer of the Michigan Economic Development Corporation (MEDC), said the plan "severely limits the state's ability to have an economic development strategy moving forward."

"Furthermore, it threatens to eliminate the entire Pure Michigan tourism effort – an industry which supports 214,333 jobs in our state," he continued. 

Here is a description of the Washington Monument syndrome, via Wikipedia:

The Washington Monument syndrome, also known as the Mount Rushmore syndrome, or the firemen first principle, is a term used to describe the phenomenon of government agencies in the United States cutting the most visible or appreciated service provided by the government when faced with budget cuts. It has been used in reference to cuts in popular services such as national parks and libraries or to valued public employees such as teachers and firefighters. This is done to put pressure on the public and lawmakers to rescind budget cuts.

Sure enough, after the press release from the MEDC, the media reports soon followed. An MLive headline said, “Pure Michigan campaign could disappear under House Republican road plan.”

The Pure Michigan advertising campaign is not nearly as valuable as the MEDC says, but it is undoubtedly more popular among the general public than the other programs the entity oversees. There are many, many MEDC programs that do a very poor job of creating jobs and those are the ones that should see a loss of funding first.

Gideon D’Assandro, spokesman for House Speaker Kevin Cotter, had a good response to the agency’s Washington Monument response: "If the MEDC needs help identifying the right priorities in their own budget, we are more than happy to help walk them through it and show them how."

Tourism marketing through Pure Michigan cost only $21.7 million out of the total “economic development” budget of over $600 million in 2014. There is plenty of room to cut before this program would need to be affected.