Added on April 29, 2019  Sara Swanson

Whitmer seeks a $5 million Pure Michigan cut to apply to roads. GOP balks.

by Lindsay VanHulle (Bridge)

Gov. Gretchen Whitmer would cut $5 million from the popular $36 million Pure Michigan travel campaign next year, instead directing the money toward her top priorities to fix the state’s infrastructure and public schools.

Yet some state lawmakers, from both parties, are vowing to use the state budget process to keep the current tourism funding level intact.

In context, $5 million is a sliver of Michigan’s overall $10.7 billion discretionary general fund, which pays for everything from health and human services to prisons. But the reluctance to scale back Pure Michigan funding illustrates the difficult decisions state policymakers have to make when deciding how to prioritize spending in a state with other pressing fiscal challenges.

In this case, should that $5 million go toward broader goals of improving Michigan’s poor roads and infrastructure and struggling schools, as the administration proposes? Whitmer’s team argues that recruiting visitors and companies to the state is easier when the roads are smooth and good schools and clean water are available when they arrive. 

Or, as some legislators and tourism industry leaders contend, does the state need to continue investing in promoting its lakes and outdoors to get leisure travelers and businesses to consider Michigan in the first place?

“Both are right,” said the administrator caught in the crosshairs, Dave Lorenz, vice president of Travel Michigan, the state’s tourism promotion arm housed within the Michigan Economic Development Corp.

“We have all of these needs. We have all of these mutual goals that we all agree with,” Lorenz said. “That’s why I always say — and I mean it — whatever budget we have, we’ll make the best of it.”

The $36 million Pure Michigan campaign is perhaps best known for the series of TV and radio commercials voiced by actor Tim Allen, a Michigan native.

Under Whitmer’s budget proposal, Pure Michigan’s funding would shrink to $31 million for the 2020 fiscal year that starts Oct. 1, ultimately freeing up $5 million to go toward other general fund priorities.

The centerpiece of the governor’s overall proposed budget is a 45-cent, per-gallon gas tax increase that would raise $2.5 billion over a year for roads.

The Pure Michigan reduction is part of a broader package of $122 million in proposed cuts to several programs next year, $74.6 million of which is out of the general fund, according to budget office data.R

Administration and Travel Michigan leaders say the Pure Michigan proposed cut is doable in part because the campaign is now using more digital media marketing geared toward younger travelers, which is more cost-effective to produce than traditional TV or print ads. For instance, Travel Michigan has launched interactive road trips through social media channels, and advertises on the streaming music service Spotify.

A cut of $5 million likely would mean fewer broadcast TV ad buys, Lorenz said, though it’s difficult to quantify the impact before the budget is finalized. Local convention and visitors bureaus also contribute funding to Pure Michigan by partnering with the state on regional tourism promotion.

“We’ll survive with a budget cut, and we will find ways to be as effective as possible,” Lorenz said. “Let’s just hope that in the future, our budget will be able to increase.”

Republicans who control the state budget process, however, say they intend to keep Pure Michigan funding at least at today’s level when they release their budget proposals over the coming weeks and months.

GOP lawmakers represent many of the state’s lakeshore tourist destinations, especially in northern Michigan, though Pure Michigan funding has enjoyed bipartisan support.

“Pure Michigan is a promotional budget, not an infrastructure budget. And so we’re going to restore that. Probably add a little bit to it, in fact,” said state Sen. Ken Horn, R-Frankenmuth, chairman of a Senate budget subcommittee that has oversight of MEDC funding.

Republican House Speaker Lee Chatfield, from Levering in Emmet County, about a 15-minute drive from Mackinaw City, told Bridge he was “disappointed” to see Pure Michigan funding cut in Whitmer’s budget and, like Horn, vowed the House will “focus on ensuring that it’s fully funded.”

For her part, Whitmer doesn’t appear to be taking a hard line on cutting Pure Michigan, according to the state budget office, and she is open to talking with lawmakers about funding for the campaign.

“While we feel confident that the $31 million that was recommended is a funding amount that will provide for an effective marketing effort for Pure Michigan, restoring the $5 million reduction is certainly an item that we are open to having further discussion about with the Legislature,” said Kurt Weiss, a state budget spokesman.

Tourism industry opposes cut

Tourism industry leaders say they hope legislators preserve funding for Pure Michigan, a program some have criticized for how it calculates its return on investment.

The Pure Michigan campaign has succeeded at attracting visitors to Michigan, said Justin Winslow, president and CEO of the Michigan Restaurant & Lodging Association, which lobbies on behalf of the hospitality industry in Lansing.

Pure Michigan still generates positive returns on investment, Winslow said. That, he added, along with the fact that the economy is still growing, helps make the case for continued funding.

Winslow and other Pure Michigan supporters point to data collected for Travel Michigan that estimate return on investment; in 2016, for instance, it was valued at $8.33 for every dollar spent on the campaign. But that analysis has its skeptics, including the Midland-based Mackinac Center for Public Policy, a free-market think tank, which argues that the methodology used to produce the ROI figures is murky and the numbers can’t independently be verified.

Travel Michigan in 2017 hired a new company to evaluate the effectiveness of the Pure Michigan campaign, a decision the state said at the time was mostly because the new vendor would offer more insights about what promotional tools are working.

The company, Indianapolis-based Strategic Marketing and Research Insights, found that the ads returned $9.28 for every $1 spent in 2018.

Michael LaFaive, fiscal policy director for the Mackinac Center, said he applauds Whitmer for cutting funding for Pure Michigan and hopes it’s redirected to roads, where the money would be better spent.

“I agree with (Whitmer’s) priorities,” LaFaive told Bridge. Investing in transportation and infrastructure are “broad-based tools, and you could even call them economic development tools, such as an efficient transportation system.”

This isn’t the first time Pure Michigan funding has been mentioned in the same conversation as roads.

In 2015, an early road-funding proposal from House Republicans would have diverted some economic development dollars to roads. MEDC administrators countered that doing so would require cuts to Pure Michigan; lawmakers contended there were other areas within the state’s economic development agency that could be scaled back instead.

Peter Fitzsimons, executive director of the Petoskey Area Visitors Bureau, said what worries him is that once a budget is cut, it becomes easier to justify keeping funding at a lower level — or cutting more in the future.

“I think that’s a slippery slope,” Fitzsimons said. “I don’t want to get on that slope.”

A zero-sum game

To Mike Nystrom, the Pure Michigan campaign has always carried a bit of irony.

Michigan invites visitors to enjoy the state’s natural beauty, but when they get here, they find crumbling roads and beaches closed due to bacterial contamination, said Nystrom, executive vice president of the Michigan Infrastructure & Transportation Association, which represents Michigan road builders.

Nystrom said he isn’t advocating to walk away from Pure Michigan. But he said he agrees with Whitmer’s overall budget philosophy, adding: “Let’s work on fixing our foundation before we invite people into our home.”

“If you hit a pothole in Michigan and it affected your travel plans, you’re going to keep that in the memory banks and probably not rush back and visit our state again in the near future,” Nystrom said.

First impressions do matter, said Bonnie Knutson, a professor in the School of Hospitality Business at Michigan State University, who focuses on consumer trends and brand strategy.

Travelers might have a negative impression of a place if potholes and poor roads delay their arrival, Knutson said. But bad roads might not be the memory that lasts if the weather is perfect and they have fun at the beach.

Tourism promotion and fixing infrastructure aren’t mutually exclusive, Knutson said. The question for policymakers, she added, is to identify priorities, because money for one program generally has to come from another.

“It’s a zero-sum game, is the long and short of it,” she said.

To Horn, the Senate subcommittee chair, it boils down to this: The purpose of Pure Michigan isn’t to fund roads.

Horn, in his second and final term representing Saginaw County and parts of Genesee County, said his top priority is attracting more people to live and work in the state. State estimates have pegged the number of job openings by 2024 at more than 800,000.

Last term, Horn sponsored an economic development incentive to help developers clean up and build on contaminated sites, and championed a tax incentive for companies adding hundreds of jobs.

Those incentives, along with Pure Michigan, are necessary tools to lure young people to move to Michigan — particularly to cities — and fill high-tech positions, Horn said.

“I’m not going backwards on this,” he said. “Michigan has come too far with that Pure Michigan campaign to let it go now.”

Sen. Adam Hollier, a Democratic first-term state senator from Detroit, told Bridge he supports keeping funding in place for Pure Michigan and Whitmer’s proposed 45-cent gas tax increase.

If $5 million can stretch farther in digital to reach millennials like him, Hollier said, then spend the extra $5 million and do even more.

“People like to say you can do more with less, and to some extent that’s possible. But I’ve always been a firm believer that you get what you pay for,” said Hollier, the sole Democrat on the Senate budget subcommittee that oversees MEDC funding. “Programs that we believe are successful, we should continue to invest in. And I think this is one of those.”