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$87M Spent On State Gov't Advertising In '18

$87M Spent On State Gov't Advertising In '18

Besides dodging potholes and orange barrels, Michigan drivers this summer may also find themselves encountering several raccoons staring down at them from billboards beside the road.

But these raccoons aren't hawking any particular wares for purchase. They want you to recycle properly. They serve as mascots of a $2 million state ad campaign intended to bolster recycling rates.

Government spending on advertising isn't anything new or unusual – think the ongoing Pure Michigan tourism campaign, or the occasional health-related public service announcement. 

But this year has seen the launch of some visible ad campaigns. Beyond the raccoons, there's also the $3 million state-sponsored campaign to boost skilled trades that has also appeared on billboards.

There were enough billboards spotted to prompt a question: How much do the state agencies spend on advertising in a year? 

After a survey of nearly every principal state department and other agencies, MIRS was able to identify $87.5 million spent toward advertising in Fiscal Year (FY) 2018 after obtaining data from 24 state agencies.

Lottery and the Michigan Economic Development Corp. (MEDC) were the biggest spenders. Combined, they're roughly 70% of the state spend on advertising. The MEDC, sponsors of Pure Michigan, reported spending the most at $34.1 million, followed by Lottery and its $27.9 million.

Beyond those entities, the amount spent varied widely among the agencies, from the $9.5 million by the Michigan Department of Health and Human Services (DHHS), all the way down to the $635 the Michigan Department of Education (MDE) spent to advertise a job position at the Michigan School for the Deaf.

But regardless of the amount, every state agency MIRS obtained data from reported spending some money on advertising, except for the Michigan Civil Service Commission (MCSC) and the Michigan Public Service Commission (MPSC).

The average spent among the agencies was $3.8 million, but of the 24 agencies, 14 spent something below $1 million for FY 18, not counting the MCSC and MPSC's $0 spent.

Why Does Government Run Ads?

Whether it's promoting "what we have" or informing the public, government advertising is important, said Bob Kolt, professor of practice at Michigan State University, president and CEO of Kolt Communications and a former communication official with Treasury and the Michigan Department of Transportation (MDOT).

Kolt said from his experience, advertising works. When it comes to spending money to promote tourism, for instance, Kolt said "it really does pay off. " And if anything, government gets criticized if it doesn't share information, he said.

When Kolt worked as a public information officer for Treasury in the '80s, he was asked to do a tax amnesty program, which would waive penalties and interest for people who owe back taxes.

"Back in the '80s, they said, 'Well, what do you need?'" Kolt said. "I said, 'I need $1 million in advertising.'"

Kolt made his pitch, arguing that if penalties and interest would be waived, "you've got to find tax cheats, wherever they are." And he said he would need to advertise on an ongoing basis, particularly all the way up to the deadline.

Kolt said he got what he wanted, and the return on the program ended up at $100 million. The estimated return was $15 to $20 million. They made so much money the Governor and Legislature at the time used the extra funds to help roll back the income tax, he said.

What's The Return On Investment?

State agencies sometimes point to return-on-investment (ROI) data to justify what they get out of ad campaigns.

Lottery spokesperson Jeff Holyfield said the agency's advertising ROI ranges from "2:1 to 34:1" depending on the activity, drawing that from an independent analysis done by Foresight Research in April 2018.

The MEDC also arranges for routine ROI studies on Pure Michigan. The latest edition saw the estimated ROI go from $8.99 to $9.28 for every dollar spent.

But the Pure Michigan ROI has been a longtime point of contention of the Mackinac Center, which has argued the campaign is not worth the tax dollars spent on it.

And the Office of the Auditor General (OAG) questioned the MEDC leaving out costs of tourism promotion from the ROI equation.

Still, the Mackinac Center isn't outright opposed to all government spending on advertising, said Michael LaFaive, senior director of fiscal policy with the center. It depends on the subject and source, he said.

LaFaive said if the state is spending money from the negotiated settlement between the attorneys general and tobacco companies to convince people not to smoke, "I would consider it a much more legitimate use of state dollars" because there's "evidence" that smoking-related illnesses were costing "state treasuries."

He said it's a case-by-case basis as to whether public spending is warranted on advertising. Asked about the skilled trades campaign known as "Going Pro" launched by Michigan Department of Talent and Economic Development (TED) earlier this year, LaFaive was skeptical that was such a case.

"These types of advertisements are nice, but there's a real question as to whether or not they are necessary in and of themselves beyond having these . . . state-subsidized training programs," he said, referencing a recent Mackinac Center report questioning the state's role in funding job training.

LaFaive said the private sector has long done its own training, and people now have "their own private incentive to use Google" and don't need to go beyond their nearest search engine to find training.

According to TED, the department will be measuring ROI based on changes in perception about the trades, as well as visits to the Going Pro website.

Kolt: Ads Should Measure Perceptions, Numbers

Sometimes, the campaign results are measured differently. 

The Michigan Department of Natural Resources (DNR) ran a sustainable forestry campaign with the help of Gud Marketing, the same ad firm behind the EGLE recycling raccoons and Going Pro campaign.

The goals, according to DNR spokesperson Ed Golder, were to increase understanding and appreciation among the public of sustainable forestry's impact on their lives and on Michigan, as well as for the people who care for Michigan's forests.

Among the results heralded by the DNR included a 2018 survey that found 87% of the audience agreed that, "It is important for people to actively manage forests in order to keep them healthy," an increase from 81% in 2016, as well as an increase from 75% to 84% of people seeing DNR as a "credible source of information on forests."

When measuring the effectiveness of an ad campaign, Kolt said, there are two approaches that should both be taken -- the qualitative way, where people are asked about their perceptions, or the quantitative way, with hard data research on dollars spent. 

"You listen to people and their stories to tell you how strongly they feel about something, and you do an actual dollar analysis," he said.

Another key is to provide the proper investment to make it work, Kolt said. Sometimes people may complain money was spent on advertising, but "we never heard about it." That's when "you're under-investing in a program."

And it can't just be a one-day event, he said. People need to know about it as part of a "sustaining campaign over time."

Where Do Funds Come From?

In many cases, the state agencies' ad spending doesn't come from the General Fund (GF), but rather from federal and restricted sources.

DHHS spokesperson Bob Wheaton said a majority of the agency spending comes from federal and restricted sources. And 88% of the $2 million spent by the Michigan State Police (MSP) came from federal funds, said spokesperson Shanon Banner.

Holyfield said the Lottery's $27.9 million spent on advertising didn't come from the GF or from federal funds, but rather self-funded through its own sales.

The Michigan State Housing Development Authority (MSHDA), which spent $1.3 million on ad campaigns in FY 2018, doesn't use state-appropriated funding for advertising.

In Treasury, the Michigan Education Trust spending $1.373 million and the MI Student Aid program spending $301,892.69 on advertising in FY 2018 both came out of restricted funds, said spokesperson Ron Leix.

And the Secretary of State listed $99,510 in advertising and marketing in FY 2018 tied to the Michigan Children's Protection Registry, funded by companies that are part of the program, said SOS spokesperson Shawn Starkey.

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