Lawmakers OK $40M cut in economic development aid

Chad Livengood
Detroit News Lansing Bureau
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A Republican-led conference committee approved Tuesday a $40 million reduction in the Michigan Economic Development Corp. to help boost road funding next year as the private-public body and many business groups opposed a larger proposed cut.

The MEDC would be put partially “out of business” and the state’s “Pure Michigan” tourism campaign would face reductions if lawmakers redirect a portion of the agency’s funding to road repairs, MEDC CEO Steve Arwood warned as he addressed the special House Roads and Economic Development Committee.

Arwood lodged his “thoughtful opposition” to Speaker Kevin Cotter’s plan to use $185 million of his agency’s funds for filling Michigan’s potholes. The agency was scheduled to receive a $40 million reduction in the fiscal year that begins Oct. 1. through a $25 million cut in film subsidies and $15 million less in general operating revenue, he said.

“I support that. We can make that work,” Arwood said. “I think if we go further, though, I’m going to have to defund stuff.”

Arwood and business groups put up a united front Tuesday against Cotter’s proposals to tap the state’s economic development funds to help address Michigan’s road funding shortfall.

The Detroit News reported Friday that House Republicans have been under fire from tourism groups and hoteliers for proposal to use the Pure Michigan ad campaign’s revenue source for fixing roads.

Opposition to Cotter’s road funding plan came as a joint Senate and House conference committee approved $33 million for the Pure Michigan campaign next fiscal year, a $4 million increase from current spending.

But Arwood said the Cotter plan could lead to less money available for Michigan’s award-winning TV and radio advertising campaign touting the state’s outdoor havens.

“There’s going to be a tremendous amount of pressure on the remaining budget to come back,” Arwood said. “I would literally have to stop funding something.”

The Detroit Regional Chamber, which is hosting lawmakers this week on Mackinac Island for its annual policy conference, also voiced opposition to using restricted revenue for plugging the $1.2 billion road funding gap.

“Decimating our already underfunded economic development programs to perform basic government functions is an ill-advised idea,” Brad Williams, vice president of government relations, said in written testimony.

In verbal testimony, Detroit Regional Chamber Vice President of Economic Development Maureen Krauss said the business group wanted to help get more road funding, but warned that Michigan still has to compete against 49 other states and the Canadian province of Ontario that offer cash incentives and other economic development programs to attract jobs and projects.

“The one thing we don’t want to do is disarm right now,” Kraus said.

Cotter’s plan would eliminate the remaining $25 million in incentives for film producers and strip the Pure Michigan campaign of its tobacco settlement fund source, while tapping tribal casino gaming revenue for road repairs as well.

Republican lawmakers on the committee defended the Cotter plan, arguing that the Legislature has made many moves to improve the state’s competitiveness, including business tax cuts and a right-to-work law. Rep. Peter Pettalia, R-Presque Isle, prodded many business representatives to agree that the state’s economic situation is far better than it was five years ago.

“We’re not trying to hurt anybody,” Pettalia said. “We’re trying to do what we heard loud and clear on May 5.”

Cotter and House Republicans proposed tapping the MEDC’s funding sources for road repairs in response to voters rejecting the Proposal 1 sales and gas tax increase on May 5.

Arwood treaded carefully throughout the hearing when pressed by Republican legislators on what he would cut to make sure the Pure Michigan campaign remains fully funded.

At the start of his testimony, Arwood said the House Republican plan “does not defund Pure Michigan,” after saying two weeks ago that it “threatens to eliminate the entire Pure Michigan tourism effort.”

“I’m going to caution my answer: I don’t know what I would have to do,” Arwood told lawmakers. “Pure Michigan may still be funded, but it may not be able to be funded to the level that was just agreed to in targets because of how it has to fit in the box with everything else.”

Arwood said the agency would have to scale back its global business attraction efforts to handle the loss of revenue proposed by House Republicans.

“This amount of reduction literally on one side puts us out of business,” Arwood said. “This would certainly totally alter the landscape of not only what we're doing now, but what we would do in the future.”

Pettalia is sponsoring the individual bill to redirect the $75 million 21st Century Jobs Fund to the state’s transportation fund. The 21st Century Jobs Fund, which is supported by tobacco lawsuit settlement revenue, is the sole source of the Pure Michigan ad campaign.

“We have a crisis right now,” Pettalia said of road funding. “We’re trying to do our due diligence by tightening our belts.”

Pettalia defended the GOP majority’s approach of redirecting economic development funds to address a road funding deficit of more than $1 billion annually.

“Just addressing that problem will create economic development, I believe,” Pettalia said. “It would be nice to have the luxury, which we don’t have ... to make sure everyone gets everything they want.”

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