Interview with Jennifer Granholm, former Governor of Michigan

Interview by Hope Richardson

“I had to cut more out of state government, as a percentage, than any governor in the nation, and we did that in partnership with the unions. When unions are at the bargaining table they bargain hard, but they are the ones who can identify where the savings can come from.”

This spring, former Michigan Governor Jennifer Granholm began a two-year joint academic appointment at the University of California, Berkeley, as Distinguished Practitioner of Law and Public Policy. Granholm, the first woman governor of Michigan, led the state from 2003–2011, during a severe economic downturn. As the automotive and other manufacturing industries faltered, Michigan lost an estimated 850,000 jobs. Granholm worked to broaden the state’s economy, targeting new sectors for growth such as clean energy, homeland security, biotechnology, and film production.

PolicyMatters sat down with Gov. Granholm on March 2, 2011, to discuss the green economy, higher education priorities, and state leadership in a time of fiscal crisis.

Gov. Jennifer Granholm received her bachelor’s degree from the University of California, Berkeley in 1984 and graduated from Harvard Law School in 1987. She served as a federal prosecutor in Detroit and was later elected Michigan’s first female attorney general. More recently she was a member of President Barack Obama’s transition team. She also serves as Senior Advisor to Pew Charitable Trusts’ Clean Energy Program.

PolicyMatters Journal (PMJ): Several states in the Midwest (such as Wisconsin, Ohio, and Indiana) are considering bills that would limit collective bargaining among public employees. These actions are being framed by their proponents as a response to budget deficits. What is your perspective on this debate?

Gov. Granholm: These actions are being proposed because they want to break the union. It’s not because of the budget. The unions have already given what has been asked. And I say that with full knowledge, having been through the toughest time of any state in the country with Michigan’s economic woes. I had to cut more out of state government, as a percentage, than any governor in the nation, and we did that in partnership with the unions. When unions are at the bargaining table they bargain hard, but they are the ones who can identify where the savings can come from. It’s going to happen here in California, too, with these big budget cuts—but you don’t need to go after the workers.

I would say, too, that as a management principle, why would you attack the people who are carrying out the mission of the organization? It just is such a self-defeating way of going about this to say “my way or the highway.”

I know that in Michigan we got at least $700 million in concessions from [unionized] state employees at the bargaining table, and then, in a bipartisan way, we made changes to the law that allow us to treat new employees differently from the vested employees who had been there before. Young people who are just graduating from college might not expect to go into a pension plan and have the same deal as their parents did. So you can look at things in a sort of tiered way. This is what the private sector did with United Auto Workers. They have tiered benefits. That’s what we did inside Michigan’s state government, and it will save billions of dollars over the next decade. You do not need to dismantle collective bargaining in order to achieve those results.

PMJ: Can you talk about your strategy for building the foundation of a new economy in Michigan? In your opinion, what strategies work best to create jobs?

Gov. Granholm: This was my obsession for seven of the eight years that I was governor. I say seven of the eight because the first year I didn’t really understand fully that there was such a massive structural change happening beneath the foundations of Michigan’s economy, with the loss of these manufacturing jobs to low-wage countries.

Michigan is a state of 10 million people; we’ve lost about 850,000 jobs. Those are largely related to manufacturing, largely auto industry, but not entirely. My whole strategy was to do what is known as a S.W.O.T. analysis of the state: identify what our strengths, weaknesses, opportunities, and threats are. We brought in experts, we identified sectors that would be natural for us to create clusters around as a strategy, and then we developed a series of incentives around each of those clusters.

We were aided significantly in our efforts in 2009 with the Recovery Act, when the president offered states the opportunity to compete for clean energy jobs. We really went after that with gusto, and the results have been great. I’m proud to say that [on February 28, 2011] the Gallup organization did an analysis of which states in the nation have had the fastest-growing economies over the last year, and Michigan was number one in the country because of the improvements we set in motion.

But it’s a very long-term strategy. There are two strategies, I would say: One is to diversify the economy, and the second is to educate our kids. You know, in Michigan we came from a manufacturing-sector background, with a very low percentage of adults who had gone to college, so we had to change a paradigm. We really focused on that education strategy as well.

PMJ: In Michigan, as in California, budget challenges have led to decisions to cut state funding for higher education. As governor, one of your long-term goals was to double the number of college graduates in the state of Michigan. Can you describe your efforts to advance that goal while facing the reality of a restricted budget? What are your thoughts on ways that states can work with university leaders to lessen the impacts of declining state support for higher education?

Gov. Granholm: It was very hard. I think that there needs to be—the universities don’t like this—but there needs to be a greater focus on tuition restraint in order to ensure that people have access. Now, the public universities in Michigan are actually fairly reasonable. We also added what was known as a Promise Scholarship to the mix, which means that we securitized our Tobacco Settlement Fund and created a $2 billion pool of money.† Part of that we used to help kids go to college, and part of it we used to diversify the economy into those sectors that I described.

The legislature refused to fund the Promise Scholarships in my last year in office. It was my biggest disappointment. I had Republicans in the house and the senate, and we battled constantly. But I think governors have to do whatever they can, in partnership with universities, to keep tuition down and keep college accessible. Now does that mean that there may have to be some selections, like many universities are making, about the relevance of course offerings, particularly those that may be extremely narrow or obscure? I do think there has to be some shrewd decision-making on their part.

But I also think it’s really important to focus—and California’s got to do this, too—on the lead-up to college. That means kids have to graduate from high school college-ready, so they’re not doing remedial work while they’re in college. That’s not so applicable to Cal, but it certainly is to many universities. So I think both the short term and the long term have to be addressed.

PMJ: Based on your experience bringing clean energy investment to Michigan, what steps would you recommend on a national level to grow America’s clean energy economy?

Gov. Granholm: One: we need a renewable energy standard nationally. You guys in California just upped your energy standard to 33 percent. We cannot expect that this economy is going to grow in the United States if we don’t send the right market signals for the industry to have some confidence that their investment will, in fact, bear fruit. So that really is the demand side of the equation, to send the right market signals.

Two: you also have to work on the supply side by providing low-interest loans and upfront asset financing for those who make significant investments in capital. The technology associated with advanced solar panels, for example, is extremely expensive, and the banks are not lending. The federal government can be a partner in providing a layer of financing. They have done this in little bits, but not a whole lot.

Three: we have got to be serious about the infrastructure for electrification of the vehicle—the advances in battery technology that will store renewable energy so we can deploy this and get full use of it. This is all job creation.

And then we’ve got to really be significantly investing in research and development, as well, on the federal side. I’ll give you one quick example of that. The Department of Energy put out competitive grants for batteries as part of the Recovery Act. Now there are seventeen companies in Michigan that are doing advanced battery work as a result of the cluster that we created. But the federal government provided all this upfront funding. Prior to that, 2 percent of the electric vehicle batteries were built in the U.S., and now it’s going to be about 40 percent. You cannot separate research and development from the actual manufacturing of new technologies. The engineers, the researchers have to be where the buildout occurs.

If we don’t do that, all of this stuff is going to be gone. This is a $6 trillion global opportunity, and we are missing out. And there’s a sense of urgency, because once these other countries have it—and China is being very aggressive about getting it—it’s just going to be gone. If we could only have a bit of that sense of urgency here in this country to create those jobs here, things would be entirely different.

PMJ: Can you share any key lessons from your experiences as a governor that might inform California policymakers as the state considers a proposal to eliminate local redevelopment agencies?

Gov. Granholm: Well, let me just say that I think you’ve got to have effective economic development on the ground where it occurs. If you centralize it too much, then you lack the full array of options. It just gets bottled up. You need to really decentralize economic development in many aspects. You need to distribute leadership across the state.

But you also want to hold people accountable. If you’re just giving money to entities and they’re not showing results, that’s obviously not what you do. But I think enlisting others to do the very serious work of restructuring an economy and bringing in jobs requires that it not come from one central point, but that you have local allies on the ground. Hold them to accountable standards; don’t fork over money without some specific conditions. But I think you’ve got to enlist others.

PMJ: The recent census showed Michigan as the only state to lose population. With its struggling economy, what can Michigan do to keep people from leaving the state in search of better prospects? In particular, how can Michigan retain graduates of its colleges and universities?

Gov. Granholm: It’s all about diversifying the economy. I mean, that’s why our focus has been to add these new sectors, sectors that are hiring. Again, you have to address the supply and demand issues. Those who are seeking great talent are going to want to know: Is that talent going to be available when the time is right? That’s why we chose the sectors we did—advanced energy, clean energy; advanced manufacturing, which would include things like robotics and nanotechnology; life sciences; pharmaceuticals; the bio-economy; homeland security and defense; as well as film and video gaming, a creative economy. So those are all of the diverse things that we have focused on.

I pray that the next governor doesn’t undo a lot of the groundwork that we laid. People aren’t going to stay if the unemployment rate is high, because they’re going to search where the opportunity is. But Michigan has got fantastic “bones,” and the question is how to enhance that in order to keep the young talent there.

PMJ: The recent recession caused a disproportionate loss of jobs among men, affecting traditionally male-dominated industries like manufacturing, transportation, and construction. About a year ago, the number of women on U.S. payrolls surpassed the number of men for the first time in history. Did you think about gender dynamics when you were designing the response to the recession in Michigan?

Gov. Granholm: Ah, the “mancession.” Not necessarily. Although I must say, my husband is totally focused on this issue.

I didn’t think about gender dynamics when, for example, we did our S.W.O.T. analysis of the sectors we wanted to select, although pharmaceuticals, life sciences, and health care [fields that traditionally employ a high proportion of women] actually became our largest sectors over the course of the past four years.

But this is a really interesting phenomenon that’s happening in the country. And Michigan, because of our concentration in manufacturing, was hit particularly hard by it. The response that we devised was a policy response to not just men, but those who are unemployed, who happen largely to be men. We launched a program called No Worker Left Behind. We went to the federal government and we said, while these people are collecting unemployment, allow them to go to community college—because for the vast majority, they may not have been to college, ever. No Worker Left Behind was a way to say to those who are unemployed, “Go to community college and we will pay,” using the workforce training dollars from the federal government of $5,000 per year, $10,000 per student, to train workers in an area of need in an emerging sector—those six sectors that I talked about, plus some others like technology. We would pay for them to get their degree or their certification in those areas. They couldn’t go and get a degree in political science or French (those were my degrees), but they could get one in clean energy technology, for example.

As a result of that policy, we saw a 35 percent increase in community college enrollment, and 82 percent of those who went through got a job in the area they were trained in, which is four times the national rate. So we focused on getting men and women, once they have had the rug pulled out from under them by the loss of a job that is not coming back, to realize that they, too, have got to retool themselves, that they’re facing a “structural problem” too, but that they have an opportunity to go back and get retrained in a new area.

PMJ: Our motto here at the Goldman School of Public Policy is “Speaking Truth to Power.” Can you comment on how your experience—particularly as governor of Michigan during a time when it was necessary to confront hard truths and make difficult tradeoffs—offers lessons for students at GSPP?

Gov. Granholm: For students who are now studying public policy and deciding where they are going to land, I think it’s really important to choose to go to areas that are the most difficult. It’s easy, perhaps, to jump into a nice place and work for a big entity where you don’t have to worry about ruffling a lot of feathers, but the most valuable way your great talents can be used is to dive into a place that is the most difficult—I think, for example, of urban education and working in inner cities where there are systemic, very difficult problems. You may get burned out, you may be frustrated, but if we don’t recruit the best and the brightest to the most difficult circumstances… that’s exactly where we need these great minds, and hearts, and souls to be. And so, speaking truth to power, it’s one thing to say that in a more comfortable position, but where it’s really needed is in the most difficult places.

States can securitize funds from the 1998 Tobacco Master Settlement Agreement with the four largest cigarette manufacturers to create “tobacco bonds.” Revenues raised from the sales of these bonds can then fund state government activities.