Michigan governor sees rays of hope piercing state's economic gloom

A huge Christmas tree, strung with multicolored lights, graces the front walk of Michigan's state capitol these days. But aside from that, and one man roaming the surrounding grounds with a shoulder bag and litter spear, a visitor won't notice many frills in state spending here.

Statistically, Michigan - the center of the US auto industry - has been hit harder by the recession than has any other state in the union. Its 12.5 percent unemployment rate leads the nation.

The result is a dramatic increase in demand for social services that coincides with a sharp drop in income from state taxes. In October the Michigan state treasury took in $30 million less than state budget officials had expected.

Insisting that Michigan is ''fighting for its economic life,'' Gov. William G. Milliken notes in an interview in his capitol office that close to $1.3 billion has been pared from the state budget over the last 15 months.

The cuts touch virtually every area of spending. Welfare benefits, for instance, are less than they were three years ago. And 20,000 Michigan residents have been removed from general assistance rolls altogether. All state park outdoor centers and most nature centers have been closed. Some 7,500 state workers have been let go through attrition and layoffs. In the state labor department alone, some 57 workers are currently adjusting to demotions and the lower salary scales that go with them.

What then is the State of Michigan doing to soften the impact of such hard times and spur a recovery?

Raising taxes as a solution is out. Governor Milliken decided against that early in the crisis. Well aware of the rising sentiment for property tax relief in his state, he reasoned that adding any further burden was ''unfair.''

And, while stepped-up consumer spending would surely help Michigan's economy, the governor has no illusions that his recent purchase of an American compact - a Mercury Lynx which he claims is an ''absolute delight'' - alone would do the job. But he points to it as an example of quality improvement which he thinks will make American products more competitive in the international market.

The governor, a Republican who has held the state's top elective post here since January 1969, also cites as ''encouraging'' a growing recognition on the part of labor that its success is closely tied to that of the company and the realization by both management and labor that a less adversarial relationship is in their mutual interest.

''There will have to be more give and take,'' he says. ''Unless we adjust and adapt to the new economic facts of life, we're not going to survive. . . . Our auto industry isn't going to make it just doing business as usual.''

The great hope in Michigan, as in most states these days, is to encourage industries already in the state to expand and to lure a wide variety of outside businesses to the state.

Though these are times when few states are scoring grand successes in such ventures, Governor Milliken has high hopes of bringing in a number of high technology industries. Michigan's strong initial focus in this effort is to attract developers and producers of industrial robots. Courting genetic engineering and industrial microbiology firms may be next.

Michigan has overseas offices in Brussels and Tokyo and has, over the last eight years, become a base for 140 foreign firms producing everything from chewing gum to musical instruments. Over the next decade, the state expects foreign investment to yield $700 million in economic benefits.

In his personal efforts to expand and diversify Michigan's industrial base, Milliken recently spent four days in West Germany and three days in Hollywood, where he talked up Michigan's potential as a film production center. He claims that his state, largely because of the auto industry, has the largest concentration of film production talent outside of Hollywood and New York. ''We're aggressively going after every dollar we can get,'' he explains.

To put some steam behind this effort and to spur further tourism - one of the few bright spots in Michigan's current economic picture - the governor hopes to kick off a $10 million a year ''Say yes to Michigan'' promotion campaign in January at the Superbowl game in nearby Pontiac. But first the Legislature must say ''yes.''

Some economic surveys rank Michigan as close to the bottom nationally in terms of desirable climate for attracting business. The state is known for its high wages, heavy unionism, and generous workers' and unemployment compensation benefits. In Milliken's view, the single greatest barrier to further economic development here is the level, scope, and time length of benefits paid to injured employees under the workers' compensation system. He notes that under rules set by the state Legislature, the system costs Michigan employers $650 million a year more than comparable systems in neighboring states.

The governor has been hammering hard at the Democratic majority in the Legislature to tighten the definition of injured workers eligible for benefits and to put some time and income limits on those benefits.

The result, he says, has led to the ''most difficult and probably the bitterest struggle'' between the executive and legislative branch since he took office. But the Democrats have come up with a reform package that Milliken suggests is better in some ways than his own. What he most wants at this point is action. ''I have no pride of authorship,'' he insists.

Michigan's turnaround, says the governor, depends in large part on that of the nation. But in the meantime, he says, state leaders will be working hard to try to nurture a more favorable climate for economic development.