LANSING (AP) – The state Senate yesterday approved selling part of the state’s tobacco settlement to gain $1 billion to invest in up-and-coming industries that may provide Michigan the jobs it sorely needs.
The Senate voted 34-4 to sell about one-third of the state’s future tobacco settlement, money that tobacco companies are paying to end a string of lawsuits involving health care costs for sick smokers.
The $1 billion would be used to help broaden Michigan’s economy beyond its heavy reliance on traditional manufacturing. A portion of the money would be invest in life sciences, advanced automotive manufacturing, homeland security, defense technology and alternative energy. At least $240 million over five years would go to grants and loans for life sciences.
Because the Senate made changes to the legislation, it now heads back to the House, which first proposed the plan in the summer and approved it last month. The Senate’s vote moves the economic stimulus package closer to the desk of Democratic Gov. Jennifer Granholm, who supports it.
“We’re taking a major step forward in recognizing that Michigan’s economic and jobs future is going to look very different from our economic past,” said Senate Majority Leader Ken Sikkema (R-Wyoming).
Sen. Mark Schauer (D-Battle Creek) said current headlines about Delphi Corp.’s bankruptcy, General Motors Corp.’s financial struggles and other bad economic news show why the state must act quickly.
“Michigan’s recent economic struggles demonstrate the danger of putting all our eggs in one basket,” he said.
Known as securitization, the sale of a portion of the tobacco settlement would provide a lump sum rather than payments spread out over many years. The state could get about 56 cents for every $1 sold from the tobacco settlement, according to the nonpartisan Senate Fiscal Agency. Much of the tobacco settlement currently goes to the Michigan Merit Award Scholarship for college-bound high school students and for health benefits for poor residents.
The nine-bill package would create the 21st Century Jobs Trust Fund. Two boards, mostly appointed by the governor, would award grants and loans to so-called “competitive-edge” businesses and make venture capital and private equity investments.
One bill would create a life sciences pipeline aimed at building a network of tech-based companies that can work together on a product from start to finish. Another would reduce fees on businesses selling stock.
While the legislation received mostly bipartisan support in the GOP-controlled Senate, four Republicans voted against it.
“We are better served by removing the obstacles to job creation than by trying to engineer a giant program where government pretends to know more than the market,” said Sen. Laura Toy (R-Livonia). She also argued that voters should decide whether to go ahead with the plan.
Some critics have complained that the legislation, by allowing for direct state investments in private equities, violates the spirit of a long-standing constitutional ban on such investments.
But Granholm and most lawmakers disagree.
Granholm applauded the Senate for passing the securitization plan and urged the House to pass it quickly. Granholm spokeswoman Liz Boyd said the $1 billion could be used to leverage another $1 billion in private investment.
Jason Brewer, a spokesman for Republican House Speaker Craig DeRoche of Novi, said it was too early to say when the House could vote on the plan. He cautioned that House Republicans think the plan must be accompanied by legislation cutting business taxes.
“We view the issues as one and the same,” Brewer said. “We can’t invest in the future without changing our tax code to make Michigan a more competitive state in which to do business.”
The Senate could vote on business tax legislation next week.