Will Michigan S&T Emerge Winner in Political Battle?

As the only state to have a net job loss in 2004, Michigan's political leadership recognizes something must change. The state's shifting economy, from one defined principally by its manufacturing sector to one that derives growth equally from knowledge-based industries, is at the center of the matter. Michigan policymakers are challenged to create innovative proposals that preserve one facet of the economy while broadening the other.

Recent proposals put forth by the state's Democratic governor and the Republican-controlled legislature appear to be working toward that end. Gov. Jennifer Granholm has made a $2 billion investment to finance R&D in Michigan's research institutions the centerpiece of her Jobs Today, Jobs Tomorrow plan. The Senate GOP has touted its own legislation to promote research commercialization and increases angel investing. Both proposals are aimed at cultivating a climate for tech-based economic development (TBED).

Gov. Granholm's 21st Century Jobs Initiative, announced during her State of the State address, figures to be the largest component of her plan to boost high tech. The $2 billion investment would be issued in bonds over a 10-year period for the purpose of growing the state's alternative energy research enterprise and increasing biotech and homeland security R&D. Other specifics have not yet been made publicly available; however, the governor's administration has indicated it expects the initiative to yield 72,000 jobs.

Some critics, in response, have said the governor's proposal "sends up some major red flags" that could create legal issues. For their part, Senate Republicans want legislation that would establish a network of state-financed tech-based companies. The Senate GOP has packaged a plan that would establish a $50 million investment fund through the sale of bonds.

Under the Senate proposal, the state could invest in start-up companies and form public-private partnerships, the end result being a drug and life sciences product pipeline in Michigan. The state then would take a share of the profits to repay the fund, in those instances when a company does well. Another part of the plan would afford tech start-up investors a tax credit of up to $5,000 for monetary losses.

Both Republican legislators in Michigan and Gov. Granholm also have detailed proposals involving the state's Single Business Tax (SBT). Legislation proposed last week would continue for companies an SBT exemption on goods sold to their former parent companies. Since being passed in 1999, the SBT has led to capital investments totaling about $1.8 billion, the Associated Press reports.

The governor's proposal would drop the SBT from 1.9 percent to 1.2 percent. Such restructuring would enable 72,000 businesses to pay less but cause 22,000 to pay more, according to the AP. If approved by the Michigan legislature, it would be the lowest rate in the tax's 30-year history.

Restructuring of the tax would be targeted mostly for manufacturers, who would be entitled to a 35 percent personal property tax credit, the AP states. R&D property and labor costs associated with R&D also would receive a credit.

Gov. Granholm's plan includes at least one other major component dedicated to fostering TBED in Michigan -- a $4,000 new Merit Award program to reward students who complete two years of postsecondary education or apprenticeship training. The new scholarship would replace the state's existing $2,500 Merit scholarship, beginning in 2007. Students receiving Pell grants or other federal financial aid would have such federal assistance deducted from their $4,000 Merit awards.

Michigan voters will be asked to approve a ballot measure this November that would authorize Gov. Granholm's 21st Century Jobs Initiative. Further details regarding the governor's 2006 Executive Budget are available at http://www.michigan.gov/gov. For more information on the Senate GOP proposals, visit http://www.senate.michigan.gov/gop/.