Cherry backs water fee for college scholarships

AP News
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Posted: Dec 14, 2009 5:50 PM

Lt. Gov. John Cherry wants to bring back the Michigan Promise Grant scholarship for 96,000 college students by charging a fee on companies that sell bottled water from Michigan.

"That water literally is owned by everybody in the state. ... It doesn't belong" to the bottlers, Cherry told reporters Monday. "This is just one proposal that will enable us to keep our promise to Michigan students despite the difficult times we're experiencing."

He estimates a $10-cent-per-bottle fee would raise around $118 million annually. That's enough to reinstate the scholarship and provide money for wetlands regulation and possibly Great Lakes restoration, he said.

Deb Muchmore, a spokeswoman for Nestle Waters North America Inc., said the proposal would force Nestle to lay off workers and possibly move out of state. If the company can't produce bottled water in Michigan at a competitive price, it will go elsewhere, she warned. It also is likely to pass the fee along to consumers.

"I don't think there's any doubt that Michigan taxpayers are looking for solutions to some of these really difficult issues," she said. "But I don't think they're going to support singling out certain Michigan industries when it's going to cost jobs and cost them more for products they enjoy."

Nestle Waters Vice President Brian Flaherty said in a release that the proposal was unconstitutional because the state constitution exempts food products from sales or use taxes.

But Cherry compared the bottled-water fee to the severance fee paid on oil extracted in the state, saying it's not a sales or use tax. The water fee would be 10 cents regardless of the size of the bottle. If the fee does get passed along to consumers, it would mean that buyers in other states will help send Michigan students to college, he added.

He wouldn't apply the fee to companies that buy the water they bottle from municipal water companies.

Michigan Gov. Jennifer Granholm has been trying to get lawmakers to raise enough cash to reinstate the scholarship program, which awards students up to $4,000 over their academic careers, typically in annual installments of $1,000 to $2,000 annually. The program was eliminated this fall to help close a $2.8 billion deficit in the state budget.

The Democratic lieutenant governor hasn't run his idea past Granholm, but she told reporters Monday that she supports the plan.

Cherry acknowledged it could be hard to get the Republican-controlled Senate to adopt the proposal, but said it's a legitimate way to raise money for the scholarship program he considers crucial to getting more Michigan residents to attend college and competing in the global economy.

"In the end ... people have to explain why they're prepared to give away a publicly owned asset to somebody free of charge so that they can make a profit," Cherry said. "Here's a revenue source and it's based upon our ownership of a natural resource that people are using for free."

Muchmore said Nestle and other water bottlers in the state already contribute to the state through taxes.

"The bottlers who are located here, including Nestle, have invested hundreds of millions of dollars into their operations and, in Nestle's case, is one of the leading employers and taxpayers in the west-central Michigan area," she said. "They do give back considerably to the state's economy."

A court settlement earlier this year allows Nestle's plant in Mecosta Township, about 45 miles north of Grand Rapids, to pump an average of 218 gallons per minute _ or about 313,000 gallons per day _ with restrictions on spring and summer withdrawals.

The Greenwich, Conn., company is part of Switzerland's Nestle SA. It bottles water in Michigan under the Ice Mountain label.

Cherry is one of several Democrats eyeing a run for governor next year. He said Monday that he'll announce his campaign decision "in a few weeks."

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On the Net:

Lt. Gov. John Cherry: http://www.michigan.gov/ltgov

Nestle Waters North America Inc.: http://www.nestle-waters.com