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MI Budget Seeks to Reform Economic Development Incentives

February 23, 2011

With no significant boost in funding for Michigan's economic development efforts proposed in the executive budget, Gov. Rick Snyder outlined steps to reform the way businesses are incentivized and modify the state's approach to job creation by better supporting local and regional initiatives as a means to transform the state's economy.

The governor's budget includes $199.3 million in FY12 and $199.8 million in FY13 in total funds for the Michigan Strategic Fund within the Department of Treasury. Of that amount, $75 million (the same as last year) is slated each year for the 21st Century Jobs Fund, administered by the Michigan Economic Development Corporation (MEDC) to invest in high-tech industries and university research. Most of the funding ($50 million) would be used for business attraction, economic gardening, innovation and entrepreneurship. The remaining $25 million would support Michigan tourism programs. Budget documents note that business attraction and retention efforts would be augmented with an additional $25 million in general funds.

Another $5 million is proposed for “quality of place and talent enhancement,” an effort aimed at stemming the state's brain drain by developing initiatives to encourage immigrants with advanced degrees to move to the state. Programs would be developed by the Department of Civil Rights in Michigan's rural and urban communities.

Much of Gov. Snyder's reforms are focused on restructuring the state's tax programs and establishing statewide performance measures. The governor wants to replace Michigan's Business Tax with a flat Corporate Income Tax of 6 percent and eliminate tax credits for brownfield redevelopment, the Michigan Growth Authority, Next Energy, advanced battery, film, and renaissance zones, among others. Economic development incentives would instead be awarded through the appropriations process, according to the governor's office.

Higher Education funding would be reduced by 15 percent to $1.2 billion under the governor's proposal and a new formula to allocate funding would be enacted in FY13. Under the formula, funding would be tied to graduation rates and university research. Community colleges would receive level funding of $296 million.

Although the state currently operates on an annual budget, Gov. Snyder outlined spending recommendations for the next two years as part of his budget reform proposal. The FY12 budget begins with a budget gap of $1.4 billion. View the budget documents: http://www.michigan.gov/budget.

Michiganstate budget, tax credits, state tbed, capital, higher ed