LANSING – Jim Barrett, who retired on June 30 after 32 years as president of the Michigan Chamber of Commerce, says Michigan is going through the most challenging economic period he has seen in that time, but is optimistic about its future. Although businesses continue to chafe under what many see as excessive tax and regulatory burdens, he said legislators and the governor are more receptive to business needs than when he first joined the organization and when business issues could rarely get a hearing.

But Barrett remains disappointed that a project the chamber largely underwrote to instill more government efficiency through a budget-writing process focused on priorities did not bear better results. Government efficiency will be an ongoing push for the Chamber under new president Rich Studley, he said, particularly as it attempts to repeal the 22 percent surcharge on the Michigan Business Tax with no replacement of its revenue.

A number of factors, not just taxes and regulations, contribute to creating a good business environment, Barrett said, adding that “as a state, we have the greatest challenges that I’ve seen in my career at the Chamber.” That is due in part to the restructuring of manufacturing, the negative publicity the state gets for its chronically high unemployment rate, the MBT and particularly its surcharge, regulations by the Department of Environmental Quality “and some of the behavior of our elected officials,” he said.

“But like a lot of business people, I’m very optimistic about our future. We want a prosperous Michigan but there’s no question we’ve got a lot more to do.” He said the surge in unemployment in May is a reminder that “punishing businesses with high taxes and over regulation will negatively impact the state economy.”

Key challenges for the state, aside from governments at all levels having to balance their budgets at a time of more limited revenue, are in the education area, Barrett said. “We have a low proportion of adults with four-year college degrees compared to most thriving states. We need to hold firm on tougher academic standards for high school graduation, emphasize the importance of baccalaureate degrees and technical training and action by the government that will encourage a broad range of businesses, particularly those already located here, to invest and create jobs in Michigan.”

Unlike many local chambers of commerce, he said the Michigan Chamber’s role is not to serve so much as a booster for the state, but to focus on the three branches of government to “act in ways that do encourage investment.”

Compared to the 1970s when he started lobbying for the Chamber and when unions dominated state politics, Barrett said, “There’s much more interest and concern on the part of those in the executive branch and legislative branches of government of the implications of policies that are adopted relating to job creation and business investment. But there’s still too much negativity and old union mentality approaches on the part of some, especially in the legislative branch.”

At the same time union membership was falling, the Chamber ramped up its lobbying efforts, developed voting records to evaluate legislators and worked more collaboratively with other business groups, he said.

Among the positive changes he identifies since he began working at the Chamber in 1971 are the tax limitation proposals of the 1970s, workers compensation reform of the 1980s, legal reforms, success in helping to elect candidates to the Supreme Court and Court of Appeals, and the school finance reform in the 1990s.

“I believe our state has benefited from less focus on accomplishing the agenda of organized labor, personal injury attorneys and education unions, but we’ve still got a long way to go,” he said.

The Chamber is on record supporting an increase in the gas tax to improve the highway system, and Barrett said energy issues also need to be addressed.

The Chamber’s best ally in the executive branch was former Governor John Engler, whose 12-year administration ended in 2002 and who Barrett called the best governor he’s seen in moving a public policy agenda. “There’s no question that John Engler moved us in the proper direction in reducing the tax and regulatory burden and making government more efficient,” he said.

But asked if enough was done to restructure the state to better deal with the massive shift in the state’s economy with the shrinking manufacturing sector, Barrett said, “Hindsight is 20-20. The one area that we’ve really fallen short on was efficiency in government. I can’t think of anything more important to the citizens of the state than to have legislators and the executive focus on how we can more efficiently spend the $42 billion in revenues we have available.”

The “budgeting for outcomes” project was launched with the budget deficits faced in 2005 by Governor Jennifer Granholm in office and Republicans in control of both chambers, and Mr. Barrett said, “I wish we would have been more effective in encouraging the governor and all of those in the Legislature in focusing in on efficiencies and priorities. If that had happened, we clearly would not have needed the increase in taxes on individuals and businesses to the tune of $1.5 billion that happened.”

One area he said he would like to see the state match the private sector is moving its pension systems to a defined contribution rather than defined benefit, something that helps mobile employees as well as controls state costs. Other good models in both the private sector and local government area for improving efficiency, Barrett said, is in the area of contracting for services.

The state could then set priorities and properly pay for those services sought by businesses and individuals as part of a desired quality of life in Michigan while eliminating services of lesser priority, he said.

Other states, he added, do provide a model of how to exist without as many government entities as the more than 2,800 that now exist in Michigan. But even if political reality makes it unlikely that number can be reduced, Barrett said, “If there was simply more collaboration among them, they could probably be much more efficient in providing services.”

Granholm also supports more collaboration in providing services at the local level – she proposed incentives last year for school consolidation and collaboration – but Barrett said, “There needs to be less talk and lot more action.”

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