The Pure Michigan program needs to end

Michael Hicks and Michael LaFaive

This week the Pure Michigan Governor’s Conference on Tourism convenes in Lansing. It will do so as the state prepares to mark the 10th anniversary of the first of many “Pure Michigan” television commercials, which are designed to lure tourists to Michigan.

But our new study of promotional efforts across the nation finds that government tourism advertising is largely ineffective.

Michigan’s efforts cost taxpayers $33 million per year and do more harm than good. Those at the Michigan Economic Development Corp. disagree, but their “evidence” of success is cloaked in secrecy. The Pure Michigan program needs to end. Short of that, it should be made completely transparent.

The Pure Michigan promotion campaign has received $261 million in state appropriations since 2006. Michigan’s tourism industry wants more and has said in writing that one of its goals is to see a $50 million appropriation by 2017. Michigan is not the only state to spend millions of dollars in the state-promotion game.

In an attempt to gauge the impact of states advertising themselves as tourist destinations, we constructed a statistical model to measure the effects of promotional spending on tourism-related industries. They include “accommodations” such as hotels and motels, amusements, recreation and arts. We controlled for many factors that would otherwise influence tourism and affect our measurements, such as elevation or proximity to a large body of water, and did so for 48 states from 1973 through 2012.

We found that advertising has a positive, but microscopic impact on the tourism industry. For the average state —including Michigan — a $1 million increase in state promotion spending resulted in an increase of $20,000 in economic activity shared by the entire accommodations industry.

Advertising might be a good use of businesses’ money, but it is not a good use of taxpayer money.

The MEDC’s bureaucrats will disagree and point to its own evidence for success, which it has purchased on a no-bid basis for $149,000 from a consultant, Longwoods International, that refuses to demonstrate exactly how it reached its credulity-straining claims. In other words, the MEDC, which does not appear troubled by the secrecy of its consultant, is effectively saying, “We know we’re right and you’ll just have to believe us.”

It reports Pure Michigan’s 2014 out-of-state advertising campaign generated $6.87 in state tax dollars for every $1 spent, a 587 percent return on investment. But it at least appears as if Longwoods International is running a cottage industry helping states justify their budgets, and government bureaucrats know it. Recall that this contractor was simply selected by MEDC bureaucrats.

Because there were no other bids involved, MEDC officials were required to fill out a form, which made the agency’s real goal transparent.

As state lawmakers debate the current budget, we suggest they kill the Pure Michigan subsidy outright and let the tourism industry pay for its own advertising.

Michael LaFaive is director of fiscal policy for the Mackinac Center for Public Policy. Michael Hicks is the director of the Center for Business and Economic Research, a professor of economics at Ball State University, and an adjunct scholar with the Mackinac Center.