The MC: The Mackinac Center Blog

Bad Santa: Trump Risks Cronyist Blowout with Carrier Incentives

Draining the swamp by creating new ones

President-elect Donald Trump took a victory lap last week after convincing Carrier to keep more than 700 jobs in Indiana instead of moving them to Mexico. Trump’s unique style of braggadocio and tough-sounding talk lends itself to such exercises.

But Trump should beware of making special corporate “incentive” promises lest he trigger a flight to the border by other companies seeking handouts from Washington — or from Lansing and Michigan taxpayers.

A prominent warning came not from a free-market think tank but from the Vermont socialist who nearly captured the 2016 Democratic presidential nomination. Writing about Trump, Sen. Bernie Sanders said, “He has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives.”

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Sanders is right that America will only be great when state and national policies promote a fair field with no special favors for particular firms or industries.

Moreover, while corporate favors from Washington were the focus of news stories, Carrier itself suggested that state taxpayers would be the ones shelling-out. “The incentives offered by the state were an important consideration,” said the company in a statement. A Fortune report suggests Indiana taxpayers are on the hook for $700,000 a year to Carrier.

No governor or legislature wants to see employers leave. But making them want to stay with across-the-board tax and regulatory reforms is hard work, so too many elected officials instead pursue a self-serving shortcut. They leave the hostile business climate in place and just offer taxpayer-funded handouts to bribe a few high-profile companies to stay.

Corporate executives have become skilled at playing the game. Former auto industry executive Lee Iacocca described it this way, as captured in the book “Poletown: Community Betrayed.” Iacocca said, “We would pit Canada versus the U.S. We’d get outright grants and subsidies in Spain, in Mexico, in Brazil — all kinds of grants. ... I have played the states against each other over here.”

Giveaways, whether granted to Iacocca’s employers in decades past or to companies today, rarely get even the minimal media scrutiny Trump’s involvement in the Carrier deal generated. Yet scholars who have examined such programs find they are largely a waste.

The state of Michigan runs a number of such programs before and it may soon create another for well-connected developers including, but not limited to, Dan Gilbert of Quicken Loans.

One set of newly proposed subsidy bills would transfer $250 million a year or more from Michigan families and small businesses in just 15 deals a year.

One old program still costing us money is called the Michigan Economic Growth Authority. Even after being replaced with a different corporate welfare programs in 2011, it is still shelling out hundreds of millions of dollars annually to a handful of corporations granted long-term subsidies. 

There is no free lunch: The taxpayers from whom the MEGA loot was taken probably would have generated more economic growth and jobs with those resources than the handful of big players who collected the boodle.

The programs are also expensive to run. The agency in charge of granting those huge MEGA subsidies had 31 individuals on its payroll who collected more than $100,000 a year.

Then there’s what Nobel economist Friedrich Hayek dubbed “the fatal conceit,” that government central planners can accurately pick economic winners. Unlike real investors who put their own money at risk, such officials have no skin in the game and their dismal record shows why that fact matters.

Finally, even an unconventional politician like Trump is not immune to trading short-term political gains for long-term economic damage. The risk is even greater for the younger and less affluent political careerists who populate Michigan’s legislature. Approving handouts to a class of potential employers is an attractive nuisance for term-limited pols with an eye out for post-legislative opportunities.

In contrast — and where socialists like Bernie Sanders are utterly wrong — broad-based supply-side tax cuts and regulatory reform would be a boon for every company, worker and aspiring job-seeker. Trump and state politicians alike will see faster economic growth and development if they just leave everyone alone instead of chasing a few corporations with bags of taxpayer cash.

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Related Articles:

So Long Film Subsidies

The State Claims ‘Pure Michigan’ is Worth Tens of Millions. It Isn’t.

Detroit News Exposes MEDC Secrecy

State's Corporate Welfare Agency Tone Deaf to Requests for Transparency

In 20 Years, Only Two Corporate Welfare Recipients Created 1,000+ Jobs

Michigan Senate Passes Sensible Transportation Reforms

Uber, Lyft and taxis to play by the same rules

On December 1, the Michigan Senate passed a package of bills that would dramatically improve the ability of Michiganders to get around.

The package was originally written to provide a statewide regulatory framework for ridesharing companies like Uber and Lyft, which have been operating in Michigan in a legal gray area. Some cities embraced the services, others banned them. The uncertainty has made it difficult for ridesharing companies to expand beyond a handful of areas in Michigan, and has caused major headaches for drivers, who have received tickets for not having commercial licenses.

The latest bills provide not just a solution to this problem, but to another wrinkle the expansion of ridesharing presents: competition with taxis and limousine services. These traditional transportation companies are understandably threatened by the disruptive innovation of Uber and Lyft, but they are right to object to any regulatory advantage state law might have provided ridesharing companies. Because Uber and Lyft are not traditional transportation companies, it doesn’t make sense to force them to operate under the same rules and regulations placed on taxi companies, some of which are onerous and irrelevant to ridesharing.

The bills recently passed by the Michigan Senate address this problem by extending the new rules not just to Uber and Lyft, but to taxis and limousine services as well, significantly lessening their regulatory burden and leveling the playing field.

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The House is expected to pass the package, which will provide reasonable standards for insurance, driver qualifications and vehicle inspections. The standards will apply equally to taxi companies, limousine services and ridesharing companies. Perhaps most importantly, the bills apply these rules evenly across the entire state, which means no municipality will have the option to create more burdensome regulations or restrict choice by banning a company altogether.

For more information, read a recent Mackinac Center Viewpoint on this topic, or visit www.mackinac.org/ridesharing to hear from Uber and Lyft drivers themselves.

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Related Articles:

The Many Benefits of Ridesharing

Ann Arbor Crackdown Illustrates Need for Statewide Ridesharing Framework

Michigan Considers Freeing Up Uber and Taxis

New Study Shows Positive Effects of Ridesharing

An Uber Driver Shares His Story

Michigan Legislature Set to End Union Schemes

Special ‘release time’ and pension spiking arrangements unfair to taxpayers

A free ride for union officials would be ended if the Michigan House passes two bills that are up for consideration this week. Under the bills, union heads could no longer rely on taxpayers to pay for their private release time or pensions.

House Bill 279 would “prohibit public school districts from adopting arrangements in which a school employee goes to work full time for a teachers union but remains a school employee for purposes of collecting a government pension.”

At least the past three presidents of the Michigan Education Association, and a dozen or so other union officials, have been using school districts to spike their taxpayer-guaranteed pension. In these arrangements, the school employee leaves a government job to work for a private union. But the district continues to pay that person and then gets reimbursed by the union. This means union official, who works for a private organization and not the public, receives a taxpayer-provided pension higher than it would have been. In the case of current MEA President Steve Cook, he was a paraprofessional for the Lansing school district making an hourly wage that would have given him an estimated pension for less than $8,000 per year. Instead, the union and district made an agreement that laundered his salary through a public entity to get him a pension estimated at over $100,000 annually for life. Past union presidents Luigi Battaglieri and Iris Salters had similar arrangements with other districts. The bill would end this scam.

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Senate Bill 280 would “prohibit the state and local governments including public schools from carrying union officials on their payroll for doing union work, on either a full time or part time basis.”

Many school districts in Michigan, at least 70 currently, have provisions in their contracts by which they pay the salary and benefits of employees who are “released” to a union. In other words, districts have “ghost” teachers, bus drivers, secretaries, and more on their payroll — former workers who instead do work for the union. This practice directly costs taxpayers $3 million per year in salary and much more in pensions, health benefits, and more.

When taxpayers fund release time for government employees, they are paying them to work for a private entity rather than the public. This scheme costs taxpayers twice — once to pay for the union official’s salary and again to pay for a replacement in the classroom.

Both of these issues were broken by Michigan Capitol Confidential. The bills were submitted by Sen. Marty Knollenberg, R-Troy, and have passed the full Senate. The House is taking them up this week. It should make these unfair deals a thing of history.

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Related Articles:

Senate Acts, House Dallies on Pension Spiking and Union Release Time Bills

Coverage of Steve Cook Pension Spiking in Detroit News

Skorup Quoted on Release Time

MEA Skips Testifying on Bill Ending Its Pension Spiking Arrangements

Clarifying Detroit Schools Release Time Policy

Why School Choice is So Valuable

Detroit Schools doesn’t expect academic progress for a decade

The head of the public school district in Detroit doesn’t expect academic progress for up to 10 years. It’s a good thing students in the city have other options.

The district had to be bailed out by state taxpayers and recently its chief executive testified before legislators. The Detroit News noted the remarks from Alycia Meriweather, interim superintendent for the Detroit Public Schools Community District:

Meriweather said the Legislature’s debt relief for the school system has helped educators turn their attention back to improving academic achievement. But she warned it could be years before lawmakers see progress in test scores and academic growth.

“It will take us eight to 10 years to get there,” she said. “We have a lot of work to do.”

As a colleague noted: “If I'm a parent with a second-grader in DPS, I'm really glad there's plenty of school choice options available so I don't have to accept that decade of failure for my child.”

The traditional public school system in the city has performed the worst in the nation on every one of the “nation’s report card” tests (National Assessment of Education Progress) for about a decade. At one point, the executive director of the council that administered the assessment said this about Detroit Public Schools: “There is no jurisdiction of any kind, at any level, at any time in the 30-year history of NAEP that has ever registered such low numbers. They are barely above what one would expect simply by chance, as if the kids simply guessed at the answers.”

For this reason and others, about half the students in Detroit have fled the traditional public school system, mostly to charters or nearby districts.

Infrastructure Funding Principles

Eight things the governor’s 21st Century Infrastructure Commission should remember

As I write this, Gov. Snyder’s 21st Century Infrastructure Commission is releasing its recommendation at a news conference in Dearborn. I was honored to be invited but am unable to attend. Over the next days and weeks, we will have more to say as we compare the commission’s recommendations with the Mackinac Center’s free-market principles.

Here’s a recap of five road funding principles that we published months ago, plus three more guidelines in light of today’s announcement by the commission. (These principles apply to virtually all public infrastructure, not just roads.)

  1. Advocate for high-quality, well-funded roads as a public good that serves taxpayers’ interests. Taxpayers will pay for poor government roads one way or another — through excessive taxes, vehicle repairs or an impeded economy.
  2. Illuminate and eliminate inefficient road spending practices and recommend reforms within road agencies.
  3. Retain the user-fee principle. Those who drive more should pay more.
  4. Identify and recommend ways to direct more money from current revenues to roads. This means reassigning state spending from lower-priority programs to the roads until they are adequately funded. It isn’t as if people aren’t taxed enough, and it isn’t as if government lacks sufficient revenue to have decent infrastructure. The problem is that government has prioritized relatively low-value things above some of its core priorities like infrastructure. For example, no amount of spending on Pure Michigan ads or MEDC business subsidies will undo the public relations damage (not to mention the more important public health damage) caused by poisoning Flint’s water supply with lead. Fulfillment of core government functions shouldn’t result in new taxes; it should result in reprioritizing existing spending. Corporate welfare is a great place to start the reprioritization.
  5. Refrain from advocating for bigger government overall. Imposing new road taxes should be a last resort as long as lower-priority spending remains untouched.

Three additional principles:

  1. Define infrastructure as narrowly and precisely as possible. To do so sustains trust with the public, keeps infrastructure dollars focused, reduces politicization and encourages competition. Broadband internet and other services already provided by the private sector shouldn’t be included. Goods within the definition should fit the criteria for true public use, not merely public benefit. Government infrastructure should be limited to things that the private sector cannot supply.
  2. Revenue raised for infrastructure should be spent on infrastructure. This is so obvious it hardly needs stating. It’s not only foremost a matter of integrity, it’s politically smart. Part of the reason Proposal 1 of 2015 (promoted primarily as a road funding measure) got drubbed in an historic rout was that voters perceived that a huge chunk of the $2 billion tax increase wasn’t going to fund roads.
  3. To the extent infrastructure taxes cannot be based on the user-fee principle, they should be consumption-based. Once every dollar spent on lower-priority programs has been shifted to infrastructure, if a shortfall remains, consumption taxes are generally preferred over income taxes for reasons of economic efficiency.

Last year, lawmakers increased funding for roads with a combination of tax increases and a redirection of projected revenue. Limiting the size of the tax increase was a step in the right direction. Plenty more of our $50 billion state budget could be profitably dedicated to roads without having to ask taxpayers to dig deeper to support core functions of government.

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Related Articles:

Bad Santa: Trump Risks Cronyist Blowout with Carrier Incentives

Michigan Senate Passes Sensible Transportation Reforms

Michigan Legislature Set to End Union Schemes

'Photo Cops' Could Write Automated Tickets to Generate Money for Detroit Public Schools

As Michigan House Considers Electric Monopoly Bill, Observers Fear Price Spikes

Why School Choice is So Valuable

Don’t Impose Granholm-era Mandates on Michigan Energy

With new federal regulations likely, legislators should wait on energy reform

Electric utility legislation recently passed by the Michigan Senate and now before the House continues to capture the attention of elected officials, media and energy producers.

Supporters claim the bill will save the state from energy shortfalls, protect a small amount of customer choice in the current system and expand the use of renewable sources. Opponents argue that the bill will actually kill customer choice, raise Michigan’s electric rates and expand Granholm-era mandates on electricity generation.

The bill’s supporters say its main virtue is that it ensures a reliable supply of electricity. For example, Sen. Curtis Hertel Jr., D-East Lansing, defended his Nov. 11 vote as a “good compromise.” He argued that out-of-state alternative electric suppliers that currently make up the choice market actually harm system reliability.

The Senate-passed version of Senate Bill 437 would solve this problem, Hertel said, by forcing electricity providers to build in-state generation and transmission facilities, using in-state workers. He argued, “An out-of-state company can leave at any time. And if the grid doesn’t work, it doesn’t really matter to them once they leave.”

DTE CEO Gerry Anderson echoed his concerns, claiming electricity choice providers could create system instability if they’re not required to keep several years of supply under contract.

Unfortunately, both arguments fall short for two key reasons. First, the incoming Trump administration is publicly committed to removing climate-focused regulations and taking a skeptical approach to international climate agreements. Thus, demands to close and replace Michigan’s coal-fueled generation stations — a key component of the rationale about system stability — are, at the very least, substantially limited.

Nevertheless Anderson has publicly stated his intention to push forward with closing the coal plants regardless of what happens on the regulatory front. Utilities claim that other regulations and market pressures are still forcing the closures, and that new natural gas and renewable generation can supply Michiganders with all their electricity needs.

But such heavy reliance on natural gas makes Michigan customers vulnerable to price swings, with volatile pricing that can at times make it a far more expensive option for generating electricity.

For example, in March of this year, NYMEX natural gas settlements were as low as $1.71 per million BTU (MMBtu), making gas an economical fuel. But as of Nov. 30, December gas settlements were $3.23/MMBtu, an 89 percent jump in price in less than one year. Industry experts confirm that coal can compete with natural gas when gas is as low as $2.50/MMBtu, which means that gas is currently a more expensive option.

Moreover, if system stability is a concern, that should raise questions about plans to shutter existing — and already paid for — generation plants. The question becomes doubly salient now that that regulatory pressures against coal plants have abated, and natural gas prices have not. Maintaining a diverse mix of fuels is the best means of ensuring system stability and low prices for Michigan residents.

The second reason these arguments fail lies in a fundamental premise of the American free-market system. People are best served when they have the freedom to choose between a variety of providers and products — even essential products like energy — as they see fit. Competition provides customers with lower prices, improved service and choice.

Michigan Rep. Gary Glenn, R-Midland, confirmed that competition better serves Michiganders by recounting testimony employees of Clarkston public schools gave to the House Energy Committee. Teachers testified that access to the state’s electricity choice program saves their district $350,000 per year and that without the program, five teachers would be laid off.

As Glenn recounted in a recent interview, the same program saves Bay City schools $200,000 per year, but the “Midland, Meridian, Pinconning, and Bullock Creek public schools are prohibited by law from doing the same thing.”

Lastly, supporters of SB 437 argue that for all its confusing language, the bill will protect the electricity choice that exists in the state's commercial market, and ensure the existing 10 percent of that market open to customer choice remains. Opponents argue the bill will protect choice in name only.

They point to a new "capacity charge" the bill would impose on competitors of DTE and Consumers  — effectively a new tax —  making  it difficult if not impossible for them to compete. That means that, if SB 437 passes the House, choice participants — like Clarkston Community Schools — could technically continue to “choose” an alternative energy supplier, but doing so would mean they pay much higher rates. Not much of a choice.

The Nov. 8 election dramatically shifted the national energy policy lanscape. Members of the Michigan House should listen to the voters and step back from locking the state further into Granholm-era mandates and 1930s-era electric monopolies. Concerns about reliability and shortages would be best addressed by keeping Michigan’s electricity system open to choice.

Pension Officials Mislead Lawmakers

Bureacrats attempt to scuttle pension reform with inaccurate and irrelevant information

Michigan’s Office of Retirement Services did a disservice to state lawmakers and the public in a Senate appropriations committee meeting Wednesday. Testifying on Senate Bill 102, which would close the state’s massively unfunded school pension system to new enrollees, ORS repeatedly told lawmakers that the proposed bills would generate hundreds of millions of dollars in new costs to the state. The bills would do no such thing, however, meaning that ORS experts either did not read the bills before testifying or just don’t understand them and shouldn’t have weighed in.

A couple of years ago, when a similar bill was being debated in Lansing, ORS testified that closing the pension system would require huge, upfront “transition costs.” The bill currently being considered close the current pension system to new enrollees and explicitly require the state to avoid paying these optional costs. Yet, ORS officials recommended following so-called “best practices” of pension financing that are entirely irrelevant to these bills, because those “best practices” would be against state statutes if the law is implemented. ORS maintained, however, that the state still should incur these phantom “transition costs” if the law was approved.

In addition, ORS cited in its testimony extra projected costs of this reform that would not be triggered by the legislation. These costs may occur if the administrators of the retirement system would like to trigger them, but that would be an administrative decision that would happen outside the scope of the legislation.

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Because ORS insisted on the importance of following “best practices” in funding and managing a retirement service, lawmakers ought to note a number of activities that are clearly not “best practices” that ORS has itself engaged in or otherwise completely ignored. Here is an incomplete list:

  • Carried unfunded liabilities in the pension system for 33 of the past 34 years. This requires extra payments that have inflated the cost of the system.
  • Racked up $26.7 billion in unfunded liabilities over the past 20 years.
  • Continued to assume that payroll will grow 3.5 percent annually when it has steadily decreased. From 2008 to 2014, school payroll fell 15 percent — ORS assumed it would increase by 23 percent over this period and has not change this assumption moving forward.
  • Pledged retirement assets to guarantee the bonds on a speculative movie studio.
  • Maintained a policy to not pay the required amount of annual interest due on the system’s unfunded liabilities.
  • Failed to pay the annual required contributions of the pension system 14 out of last 20 years.
  • Rejected state auditors’ recommendation to lower payroll growth assumptions and ignored warning about optimistic investment return assumptions.
  • Marked assets to market during good times to shortchange annual costs of the system. The last time the system had enough assets to pay for liabilities was due to this change in 1997. And lawmakers did so again in 2006 to artificially lower annual required costs.

Based on its testimony Wednesday, it seems like ORS is more interested in protecting the status quo — the $26.7 billion underfunded, defined-benefit school pension system that is ruining school district budgets and promising pensions that the state cannot afford — then they are in providing lawmakers and the public with an accurate and thorough analysis of proposed legislation. Legislators should be skeptical of ORS’s sudden interest in ensuring pension-funding “best practices” and pension system solvency.

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Related Articles:

Bad Santa: Trump Risks Cronyist Blowout with Carrier Incentives

Michigan Senate Passes Sensible Transportation Reforms

Michigan Legislature Set to End Union Schemes

'Photo Cops' Could Write Automated Tickets to Generate Money for Detroit Public Schools

As Michigan House Considers Electric Monopoly Bill, Observers Fear Price Spikes

Why School Choice is So Valuable

December 2, 2016 MichiganVotes Weekly Roll Call Report

Give taxpayer cash to developers; permissive regs for Uber; ban local bag bans and more

Senate Bill 1153, Give cash subsidies to Dan Gilbert and other developers: Passed 30 to 7 in the Senate

To authorize a new way of giving up to $250 million worth of state subsidies each year to certain developers and business owners selected by state or local political appointees. This would use the device of “abating” employee income tax withholding requirements to give virtual cash subsidies to select business owners. Reportedly the bills are intended to deliver subsidies to Detroit developer Dan Gilbert and up to 14 others around the state.

Who Voted “Yes” and Who Voted “No”


Senate Bill 1061, Give cash subsidies to smaller developers and business owners too: Passed 29 to 8 in the Senate

To authorize a new way of giving state subsidies to certain developers and business owners selected by political appointees on local brownfield authority boards. This would use the device of “abating” a particular firm's income tax withholding to give its owner virtual cash subsidies - and reduce state revenue available for other purposes - similar to the Dan Gilbert subsidies described above.

Who Voted “Yes” and Who Voted “No”


Senate Bill 627, Authorize “public-private partnerships” with broad powers: Passed 30 to 6 in the Senate

To give state and local government agencies the power to enter into joint operating arrangements with a particular business for purposes of building a transportation project or health care (hospital) or laboratory facilities. These operations could be ones solicited by a private developer, and would benefit from the government partner's tax exemptions and its power to impose property tax levies, borrow, take private property using eminent domain, levy tolls and user fees and more. Among (many) other things this would authorize new toll roads or toll lanes. The government agency involved could choose the private sector actor without necessarily having to accept the lowest bid.

Who Voted “Yes” and Who Voted “No”


House Bill 4637, Regulate Uber, Lyft, etc.; preempt local bans: Passed 31 to 4 in the Senate

To establish a regulatory framework to enable “transportation network companies” like Uber and Lyft to operate, including a preemption on local government restrictions, regulations or bans. Taxis and limousines would henceforth be subject to the same state rules. The companies would need a state permit, pay state fees for three years and carry specified liability insurance. Passengers would be covered by insurance similar to provisions for taxis but with higher liability limits. The companies would be responsible for driver background check and vehicles inspections that meet specified standards. The cars would have to bear signs, with ride requestors given specified information and options. Street hailing and the use of cab stands by the network company vehicles would be prohibited.

Who Voted “Yes” and Who Voted “No”


Senate Bill 1085, Give certain companies subsidies for hiring non-resident: Passed 23 to 13 in the Senate

To expand the definition of “new job” that makes selected businesses eligible to collect certain state "21st Century Jobs Fund" subsidies, so a firm located in a border county could get a subsidy or tax break for hiring a person who does not live in Michigan.

Who Voted “Yes” and Who Voted “No”


House Bill 5851, Limit Tax Increment Finance Authorities; require transparency: Passed 60 to 48 in the House

To establish new revenue limits and reporting and transparency requirements for downtown development authorities. The bill is part of a package that applies these new standards to different types of "TIF" authorities that have the power to skim local property taxes to support their own projects and subsidies.

Who Voted “Yes” and Who Voted “No”


House Bill 5400, Expand scope of practice for nurses: Passed 102 to 5 in the House

To expand the scope of practice allowed for Advanced Practice Registered Nurses (including nurse-midwives, nurse practitioners, or clinical nurse specialists), so they can provide more medical services without being under the direct supervision of a physician, including house calls and "doctor's rounds" in a hospital.

Who Voted “Yes” and Who Voted “No”


Senate Bill 853, Preempt local plastic bag bans: Passed 62 to 46 in the House

To preempt local governments from imposing regulations, restrictions or taxes on plastic grocery bags or other "auxiliary containers," defined as a disposable or reusable bag, cup, bottle or other packaging. Washtenaw County has already imposed a bag tax and reportedly others are considering bans.

Who Voted “Yes” and Who Voted “No”


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.

Mackinac Scholars Challenge Tourism Officials to Debate

Letter sent to key proponents of Pure Michigan campaign

Author’s note: The following letter was sent to Travel Michigan vice president David Lorenz and Michigan Lodging and Tourism president Deanna Richeson on November 1 via email. A physical copy was also mailed to the pair and author Michael LaFaive tried contacting each recipient by telephone. Neither have responded to any communications.

November 1, 2016

Mr. David Lorenz
Michigan Economic Development Corporation
300 North Washington Square
Lansing, MI 48913

Ms. Deanna Richeson
President/CEO
Michigan Lodging and Tourism Association
2175 Commons Parkway
Okemos, MI 48864

Dear Mr. Lorenz and Ms. Richeson:

I am writing to extend to you both an invitation to publicly debate Michael Hicks and myself in Lansing on the question of the efficacy of the state’s Pure Michigan tourism advertising program. The Mackinac Center will host the event at a luncheon or dinner and live-stream it on the internet. If this is agreeable I’m sure we can find a mutually convenient date and time.

As you know, the Mackinac Center has published articles critical of taxpayer-supported state advertising campaigns for the tourism industry. Our statistical study of these indirect subsidies provides evidence that the program’s economic impact is actually negative for the state.

Specifically, our work suggests that for every $1 million increase in spending on state tourism promotion there is a corresponding increase of only $20,000 in extra economic activity shared by state’s accommodation’s industry. This would mean the program represents a huge net loss for taxpayers, delivering less than negligible benefits even to those who should theoretically benefit most directly.

Our study uses publicly available data and transparent methods. Our methodology, assumptions and limitations are fully disclosed in a detailed appendix, including the rationale behind our statistical model and the tests we employed to determine its robustness. We built the model after a thorough review of the academic literature, and its output was peer reviewed by scholars who are not known to Hicks or me.

As a result, you or any other interested researchers will find our results easy to replicate. As you probably know, these things cannot be said about the claims that have been made by the Michigan Economic Development Corporation or its contractors about the Pure Michigan program.

Published reports indicate that you both disagree with our previously reported findings. Naturally we are curious regarding the basis for your dissent. Given the millions of dollars of public money at issue, we believe lawmakers, journalists and the public would also like to know this, and deserve to know it.

We are also curious as to why claims of extraordinary Pure Michigan returns on investment made by your consultant should be taken seriously, given this contractor’s lack of transparency.

We believe that valid empirical scholarship is the means by which our knowledge of the world is expanded. Policymakers and the public benefit when knowledgeable experts engage in a fair and robust exchange of views.

Sincerely,

Michael LaFaive
Director
Morey Fiscal Policy Initiative

How the New York Times Distorts the Performance of Detroit Charters

Best available research shows Detroit charter schools are successful

President-elect Donald Trump will nominate Michigan philanthropist and school choice advocate Betsy DeVos as his Secretary of Education. DeVos has worked on education policy for decades and her record shows that she believes in parental freedom over centralized control when it comes to deciding where kids go to school.

Unions, conventional school district leaders and leftist academics are not happy about the pick. Charters, vouchers, tax credits and homeschooling have all been increasing across the nation and when parents and kids get a choice, they are increasingly choosing something other than their government-assigned school district.

Since the DeVos family is in Michigan and generally support public charter schools, much of the critique has focused on these schools’ performance. These are the only publicly funded independent schools here, because, unlike most other states, the Michigan Constitution prevents using vouchers or tax credits to help parents afford tuition at private schools. Nevertheless, the best research available shows that charter schools in Michigan have been successful, especially in Detroit.

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But the New York Times and others are heavily distorting the results of Michigan’s charter schools (CapCon has a few examples). And many of these critiques rely on a front-page news article from the New York Times from this past summer (see here, here, here). The article was heavy on anecdotes and just factually inaccurate in a number of instances.

A full take-down can be read here, but I’d like to focus on one point to show the level of distortion the article resorts to. Jason Bedrick of the Cato Institute notes how Times reporter Kate Zernike words the performance of charter schools in the Motor City: “[H]alf the charters perform only as well, or worse than, Detroit’s traditional public schools.”

This information comes from a 2013 study from Stanford University’s Center for Research on Education Outcomes. The way the NYT article summarizes the findings isn’t technically incorrect, it is just cherry-picked in such a way as to totally distort what the study actually says.

Here is a chart from the 2013 CREDO study:

As the table shows, it’s true that half the charters in Detroit are doing “only as well, or worse than” district-run schools in the city. By lumping together the charters that are doing about the same and those that are doing worse, Zernike masks the inconvenient truth that only one charter in Detroit performed worse in reading and only seven performed worse in math.

As Bedrick notes:

Grouping the very few underperforming charters with the approximately half of schools that perform at roughly the same level as the district schools distorts the picture. It’s just as fair to say that more than nine out of ten Detroit charters performed as well or better than their district school counterparts. The most accurate description would note that about half of Detroit’s charters outperform their district school counterparts, about half perform roughly the same, and a very small number underperform.

No matter how the NYT and others try to spin the data, the best research shows that Michigan charter school students are outperforming their peers in district-run schools. Detroit charter students are doing even better. This is why, in a later report, CREDO researchers suggested Detroit’s charter schools “serve as models to other communities.”

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Related Articles:

The New York Times’ Comprehension Problem on Detroit Charters

ACLU: Study Finds Detroit's Charters May Outperform, But Their Competition Hurts Regular Schools

Vernuccio Joins New York Times 'Room for Debate'

Cherry-Picking Michigan Charter Data Leads to Wrong Conclusions

Tackle Licensing for Good Policy in Michigan