Michigan Gov. Signs Economic Stimulus Bill; Vetoes Tax Break Package

After several months of debate regarding a number of economic development initiatives, Michigan Gov. Jennifer Granholm signed into law a major economic stimulus bill. However, unhappy with portions of a separate tax break package for businesses, the governor vetoed two of the 10 bills.

Gov. Granholm signed into law a bill creating the 21st Century Jobs Fund, first introduced in her State-of-the-State Speech earlier this year (see the Feb . 21 issue of the Digest). The new initiative appropriates $400 million over fiscal years 2006-07 from tobacco settlement money to provide immediate funds for job creation and to increase Michigan's high-technology economy, according to the governor's press office. Funding for the initiative will be focused in three areas:

• Competitive Edge Commercialization Program - up to $200 million is available to help diversify and grow the economy by investing in basic research and technology transfer at universities and nonprofit research institutions. The four areas of focus include life sciences; alternative energy; advanced automotive, manufacturing and materials; and, homeland defense. This program replaces the Technology Tri-Corridor.
• Capital Investment Program - up to $114 million will be provided to make capital investments in qualified equity, mezzanine, and venture capital funds that will create or retain jobs in Michigan companies.
• Commercial Lending Program - up to $71 million to create commercial loan enhancement programs in situations where a documented growth has been identified. The program also re-establishes the Capital Access Program to help small businesses secure funding.

Additional programs were earmarked to receive $113.5 million of the $400 million investment under the 21st Century Jobs Fund appropriation. Funding for these programs include:

• $26 million to the Michigan Forest Finance Authority to help the forest industry;
• $20 million to business development and marketing expenses;
• $16 million for administrative costs of economic diversification programs;
• $15 million for the Michigan Promotion Program for additional tourism advertising;
• $10 million to develop a program to assist Michigan companies in getting contracts from the U.S. Department of Defense and Homeland Security, up to half could be used for low-interest loans to expand manufacturing operations if needed to fulfill federal contracts;
• $10 million for the agricultural development fund with $5 million grants and loans for specialty crops;
• $6 million for Automation Alley, southeast Michigan's regional technology cluster;
• $3.5 million for the Capital Access Program to increase the availability of credit to small businesses;
• $3 million for the Van Andel Research Institute;
• $2 million for the Michigan Film Initiative to promote the filming of motion pictures in the state; and,
• $2 million to transfer competitive edge technologies from universities to the private sector.

In early November, the governor and lawmakers reached an agreement regarding funding for the $1 billion commitment that reconfigured the structure. Under the agreement, only $400 million of the tobacco settlement funds would be securitized to provide immediate investment in the economy. The remaining $600 million is paid for by committing $75 million per year of the tobacco settlement funds for eight years beginning in fiscal year 2008.

According to an article in the Lansing State Journal, the governor said two of the bills would have created bigger tax loopholes, rather than closed them. In addition, she objected to the decision not to repeal a law that will end the Single Business Tax in 2010 without replacement, the article states. Because the bills were tied together, the vetoes killed the entire package and it was sent back to the legislature.

More information on the 21st Century Jobs Fund is available at: http://www.michigan.gov/gov/0,1607,7-168--130900--,00.html