Pushing back on accusations from Michigan's tourism lobby
Recent numbers indicate the Pure Michigan campaign doesn't deliver the return on investment suggested by organizations like the MEDC -- in fact, Director of Fiscal Policy Michael D. LaFaive suggests the hotel and motel industry sees $0.01 of increased business for every $1.00 spent on Pure Michigan.
LaFaive published an editorial in the June 7 edition of the Times Herald to explain the numbers and rebut accusations made by the Michigan Lodging and Tourism Industry Association.
Missouri may become 26th right-to-work state
Last month, the Missouri General Assembly passed right-to-work legislation. Although Gov. Jay Nixon vetoed the bill earlier in June, the General Assembly is poised for a possible override this fall to make Missouri the 26th right-to-work state in the union.
Mackinac Center Director of Labor Policy F. Vincent Vernuccio co-authored an op-ed for The Washington Times with Missouri Lt. Gov. Peter Kinder, discussing what right-to-work would mean for the state of Missouri and the country as a whole.
Gov. Rick Snyder's recommendations for reform reflect Mackinac Center recommendations
A joint study released earlier this year by the Mackinac Center and the Manhattan Institute discusses the problem of overcriminalization in Michigan. Michigan has more than 3,000 criminal statutes, making it difficult for the average citizen to know if their actions are illegal.
Gov. Rick Snyder recently introduced new plans to help reduce overcriminalization in Michigan, based on the Overcriminalization study. The Detroit News discussed these plans, as well as the study's role, in a recent editorial.
Higher education funding returns little to the state
Michigan spends $1.5 billion per year on public universities, with most of the money coming out of the general fund. These funds are appropriated to the state’s 15 public universities in an arbitrary way, with huge disparities in the amount handed out per pupil.
Evidence suggests that state taxpayers are getting little bang for their buck for these subsidies. Higher education spending does not necessarily lead to a better educated public. For example, federal funding for higher education increased 10 fold from 1970 to 2010, but a smaller portion of low-income people have college degrees today than they did in 1970. Subsidizing universities also doesn't necessarily lead to more college graduates overall, reduce the so-called “brain drain” or produce economic growth.
And government spending on universities causes distorted effects, likely contributing to skyrocketing tuition prices. Paul Campos, a law professor at the University of Colorado, notes in a recent article in the Atlantic that “despite spiraling tuition, government subsidies for higher education are – contrary to popular belief – at an all-time high.”
Campos shows that tuition has nearly quadrupled at public universities, adjusted for inflation, since 1980. And states have upped their appropriations nearly 50 percent in real dollars. And that's only half the story: The federal government almost matches the total spending by the states by spending another $80 billion on higher education in the form of direct subsidies, tax credits and tax breaks.
In all, Campos calculates that in real dollars total state and federal subsidies have more than doubled, while funding per pupil has increased almost 30 percent (see image).
Few areas have seen the growth of government funding and involvement like higher education. This money has been a driver of higher costs for students and created other distorted incentives. Michigan should lessen its contribution to this bubble by shifting funds to more important areas.
Civil asset forfeiture, state spending and more
Senate Bill 133, Adopt state budget for next year: Passed 22 to 16 in the Senate
The non-education portion of the state government budget for the fiscal year that begins on Oct. 1, 2015. This would appropriate $38.6 billion, compared to $37.3 billion this year. Of this, $17.4 billion comes from state tax and fee revenue (compared to $17.5 billion this year) and the rest is federal money. With education spending (next bill) this comes to $54.4 billion, up from $53.1 this year.
House Bill 4115, Adopt state education budget for next year: Passed 24 to 14 in the Senate
The K-12 school aid, community college and university budgets for the fiscal year that begins Oct. 1, 2015. This would appropriate $13.9 billion for K-12 public schools, $1.5 billion for state universities, and $388 million for community colleges.
Senate Bill 133, Adopt state budget for next year: Passed 70 to 39 in the House
The House vote on the bill described above.
House Bill 4115, Adopt state education budget for next year: Passed 99 to 10 in the House
The House vote on the bill described above.
House Bill 4522, Expand legislative subpoena power: Passed 69 to 39 in the House
To give certain committees of the legislature the explicit authority to subpoena and investigate records of local governments, authorities, school districts and community colleges. At least one member of the minority party would have to agree. Under current law committees can subpoena state agency personnel and private citizens.
Senate Bill 329, Authorize correction of Flint mayor election error: Passed 95 to 14 in the House
To revise the state election law to allow several candidates for the mayor of Flint to be placed on the ballot even though they missed the candidate filing deadline, reportedly because the Flint city clerk office posted a wrong filing deadline on the city website.
House Bill 4458, Repeal “complete streets” advisory council: Passed 90 to 18 in the House
To eliminate a government “complete streets” advisory council comprised of representatives of various pro-sidewalk interest groups that was created by a 2010 law mandating local governments adopt “complete-streets" policies that promote more sidewalks and bike paths.
House Bill 4508, Limit civil asset forfeiture in minor marijuana crime: Passed 81 to 28 in the House
To establish that a vehicle used to transport one ounce or less of marijuana purchased for personal use is not subject to civil asset forfeiture provisions that give police agencies the power to seize and sell a person’s property even if the person is not charged or convicted of a crime.
House Bill 4505, Increase civil asset forfeiture burden of proof: Passed 103 to 6 in the House
To require a more rigorous “clear and convincing” burden of proof standard in the law that gives police agencies the power to seize and sell a person’s property if it may be connected with an illegal drug crime, even if the person is not charged or convicted. Under current law property may be taken under the least rigorous "preponderance of the evidence" standard.
House Bill 4504, Require police civil asset forfeiture disclosures: Passed 107 to 2 in the House
To require law enforcement agencies to file annual reports on their of civil asset forfeitures, which would disclose the alleged violation; whether anyone was charged or convicted; a description of the property; its value; how much the agency realized from the sale of the forfeited property; and more. The State Police would be required to compile these disclosures and post a report on the internet.
SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.
Reluctant school administrators often greatest barriers to reform
According to Bridge Magazine, some teacher accountability advocates are upset at a proposal to give school districts more control over how teachers are evaluated. The issue, reports Bridge writer Ron French, is that legislation put forward by Sen. Phil Pavlov, R-St. Clair, would not impose statewide criteria for districts to use when evaluating teachers.
However, it appears that what Bridge Magazine characterizes as "a single, powerful senator kill[ing] serious reform of teacher evaluation" amounts to Pavlov refusing to prescribe a list of particular “evaluation models” to local school districts.
The legislation proposed by Pavlov would require by 2018-19, broadly:
— Up to 40 percent of a teacher's total evaluation would be based on student academic growth: This would be split between academic growth as measured on state tests and academic growth as measured by the district. The split prescribed in the legislation would require at least 16 percent of a teacher's total evaluation to depend on state tests, and the remaining portion of a teacher's evaluation that depends on student growth (up to 24 percent) would depend on a measure chosen by the local school district.
— Another 60 percent of a teacher's evaluation would depend on a method chosen by the district. The evaluation method would have to be used consistently across a district's schools, with information about the tool posted on the district's website, including research backing its use and the qualifications of the person who created it, among other things.
In comparison, the legislation that French describes as a “tougher teacher evaluation bill” is very similar. Student academic growth would account for a significant portion (40 percent) of a teacher's evaluation: As with the Pavlov legislation, this portion is split between academic growth as measured by state assessments and academic growth as determined by the district. An earlier version of this proposal in 2014 had this split at 50-50, but would also have allowed districts to opt out of using state test data entirely, and instead use local information to measure teachers.
The key difference between Pavlov's legislation and earlier teacher evaluation legislation is that Pavlov's bill does not specify which teacher evaluation models local school districts must use. The earlier bill did.
The rejected legislation spelled out specific evaluation tools a district could use, including the "Charlotte Danielson Framework for Teaching," the "R. Marzano Teacher Evaluation Model," the "Thoughtful Classroom," and the "5 Dimensions for Teaching and Learning." It also gave the Michigan Department of Education the power to determine other acceptable evaluation tools.
It is understandable for some to want to micromanage school districts to this degree. After all, even though the Michigan Legislature empowered school officials to evaluate teachers and to make hiring and firing decisions on the basis of performance, many districts have preserved the status quo.
This is especially clear in Hazel Park, where Hazel Park High School Principal Don Vogt told Bridge that he had to lay off some of the school's best teachers because an agreement with the union required that new teachers be laid off first.
Making layoff decisions solely on the basis of seniority is against the law in Michigan. It is also against the law to negotiate layoff procedures with the union. And yet, a school official felt the practice was so commonplace that he had no problem discussing it with a reporter.
It is easy to forget that until recently teachers union contracts severely limited when and how teachers could be evaluated. That wasn't changed until 2011, when Michigan legislators (including Pavlov) passed major teacher tenure reform legislation.
The top priority should be that teacher evaluations are administered, that school officials actually distinguish among a district's best and worst teachers using student academic performance, and that teacher hiring and layoff decisions be based on keeping the best teachers in the classroom. In any case, motivating reluctant administrators to tie teacher evaluation to an objective measure of student achievement will be a major improvement.
Editor's note: This story has been modified since it was originally posted.
Michigan taxpayers are paying for something private businesses normally pay for themselves
The Michigan Lodging and Tourism Industry Association has issued a statement disagreeing with the Mackinac Center for Public Policy over an argument that the center did not make. The association says it is responding to a new Mackinac Center analysis that finds government tourism promotion an ineffective use of taxpayers dollars.
However, the association’s response does not address the evidence or methodology presented in the Mackinac Center analysis, presents no evidence of its own to rebut the findings, and makes no argument relevant to the issue of government funding PR campaigns that benefit a particular industry.
The trade group's statement instead attempts to distract policymakers and the public with a diversion, erecting and then knocking down an absurd straw man argument.
The Mackinac Center report was released on June 1 and is part of a larger study coming out in the fall. It uses a statistical analysis to separate out all the different factors that increase tourism industry activity in a state with the goal of answering this question: How much more tourism and lodging business exists in Michigan because state government spends money promoting the industry, compared to the amount that would exist without this government spending?
The analysis indicates that a $1 increase in government tourism spending generates a 1 penny increase in business for the state's motel and hotel industry. So if next year the state spends an additional $4 million on "Pure Michigan" ads and related promotions, the statewide industry can expect to collect an additional $40,000 from customers.
The Legislature appropriated $29 million for the Pure Michigan tourism advertising campaign in 2015, and $33 million has been proposed for next year. The question for policymakers is whether those dollars could add more value for taxpayers and Michigan's economy if they were spent on something different, like roads, or a tax cut that lets families and small businesses keep more of their money.
There is no question that hotel and motel owners appreciate the extra business generated by the indirect government subsidies – so much so that the president of their trade group has shown himself willing to engage in rhetorical mischief to keep them coming. In his rejoinder to the Mackinac Center's finding, Steve Yencich, president and CEO of the Michigan Lodging and Tourism Association, conflated private- and public-sector advertising, pointing to the GEICO insurance company ads as evidence that advertising works.
Clearly a well-executed private advertising campaign promoting a particular firm can boost the company's revenues and profits. GEICO would not spend a dollar on ads unless it expected to get back more than a dollar in additional profit.
But that is a completely different issue from whether a generic government ad campaign promoting a particular industry is a good deal for taxpayers. The proper analogy would be a government ad campaign promoting the concept of car insurance. GEICO would surely appreciate the modest amount of extra business this might send its way, but few taxpayers would consider this a good use of their hard-earned money.
Similarly, Mackinac Center analysts found that state tourism promotion does benefit the motel and hotel industry, even if the benefit is embarrassingly small. The net effect for taxpayers, however, was very, very negative. Those advertising dollars have to come from somewhere, and the cost of funding the ads outweigh the net benefits derived from them.
If generic tourism promotion were as effective as the industry claims we would expect to see its members eager to buy lots of it. Instead, a few years ago they discussed the idea and rejected it. In a 2007-2011 “Michigan Tourism Strategic Plan” authored by the Michigan Tourism Industry Planning Council with help from Travel Michigan and Michigan State University, the authors wrote:
“There is absolutely no industry support for a broad-based industry self-assessment approach to generate sufficient monies to fund Travel Michigan. Last year, TICOM created a special task force to explore such an approach. Without exception, representatives from a variety of tourism industry segments indicated their members and/or Boards would strongly oppose such an approach.” (See page 40.)
In other words, members of the tourism industry like free money, and although they don’t think it’s worth spending their own money on, welcome any crumbs that may drop into their own laps from someone else paying for generic ads promoting their industry.
Similarly, given their frequency, GEICO clearly finds it worthwhile to spend its own money running GEICO ads. The insurer would probably be less willing to spend its own money running ads for the industry in general — but wouldn’t mind if someone else’s money were used.
It is worth noting here that the Mackinac Center’s model is completely transparent, and its authors are happy to explain how it works in detail. The Mackinac Center will make the model’s computer code available when the study is published, and the data is already publicly available. We only wish that Travel Michigan (the state's tourism arm), the Michigan Economic Development Corporation or any other institution that purports a positive return from taxpayer funded tourism promotion would be as transparent.
Editor's note: This story has been modified since it was originally posted.
The program has been a repeated failure
Michigan House Republicans are advancing a road funding plan that partially relies on cutting $185 million in corporate welfare. The Michigan Economic Development Corp. oversees about $400 million – mostly going to select subsidies for businesses and industries – and does not want to see that cut.
But the governor and the agency are pushing back.
Job creators "want certainty and consistency,” said Gov. Rick Snyder.
"While we understand that roads are an important issue to the state, this reduction in FY16 funding severely limits the state's ability to have an economic development strategy moving forward," said MEDC CEO Steve Arwood.
Much of the cut to the MEDC would be by eliminating the “21st Century Jobs Fund” – former Gov. Jennifer Granholm’s “blown away” program. As a reminder: The 21CJF repeatedly missed job projections, subsidized failed companies, and received bad marks from the Auditor General.
Employees and supporters of the MEDC claim the entity is different today. But that’s what they have always said – even while the entity presided over the worst economic collapse in Michigan history and repeatedly failed in its objectives.
The MEDC and its allies, from beginning to end, also supported the agency’s MEGA program. But over its lifetime, only 3.9 percent of the projects given credits met or exceeded job projections and less than 19 percent of job promises ever came to be. The program was ended in 2012, but tax credits handed out by the MEDC mean taxpayers are still on the hook for hundreds of millions of dollars this year and up to $9 billion over the next few decades.
The Legislature and taxpayers should keep that in mind: No matter how bad a government program fails, those overseeing will always argue to keep it around. The state should get out of the game of picking winners and losers and spend the money on something that benefits everyone.
Average Gini coefficient is lowest in states with no income tax
Michigan has a flat income tax — where everyone pays the same rate (4.25 percent) — but there is a movement afoot to change that. One argument used by proponents of establishing a graduated income tax (different rates for different incomes) is that doing so would help alleviate income inequality. But the data doesn’t back this up.
Rep. Jim Townsend (D-Royal Oak) is supporting a constitutional amendment that would change Michigan’s flat income tax to a system with eight different rates. The plan is supported by most legislative Democrats and the state Democratic party.
MLive notes that past proposals for a graduated income tax have been voted down by Michigan voters by wide margins. (The last one got only 28 percent of voters’ support back in 1976.)
“But supporters say income inequality has grown significantly in Michigan over the past four decades, making the case for a graduated income tax more apparent to the public,” the news site adds.
The most prominent measure of income inequality used by economists is the “Gini coefficient.” A Gini coefficient of 0 means absolute income equality (everyone has the same income) while a rating of a 1 means absolute inequality (one person has all of the income).
According to information from the U.S. Census Bureau, states with a graduated income tax system have more income inequality. The Gini coefficient rating for each set of states below is from 2013, the latest numbers available.
There are nine states with no general income tax: Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming. Their average Gini coefficient is 0.45.
There are eight other states with a flat income tax: Colorado, Illinois, Indiana, Massachusetts, Michigan, North Carolina, Pennsylvania and Utah. Their average Gini coefficient is 0.46.
The other 33 states have a graduated income tax. Their average Gini coefficient is 0.47.
In other words, states with no income tax have less income inequality than states with a flat tax, and both sets of states have less income inequality than states with a graduated income tax. Proponents of a graduated income tax cannot claim that it will by itself reduce income inequality.
Of course, income inequality can be a poor measure of what actually matters in an economy. Job creation, economic growth, and where people choose to live are more important. The bulk of the research finds that higher taxes have a negative impact on economic growth — pursuing changes that lead to higher tax rates would be bad for Michigan’s economy as a whole.
The two debated repealing the law on the Art Lewis Show on WSGW
Michiganders may soon have the opportunity to repeal the state's prevailing wage law, which mandates that government projects pay union wages to all laborers, regardless of market wages.