A bipartisan five-bill package filed last week aims to illuminate state-subsidized business deals.
Each bill has bipartisan co-sponsorship in the House and Senate.
The proposed legislation is intended to provide more transparency and accountability to economic development programs. The state of Michigan will spend more than $700 million on such programs in 2020, according to the Mackinac Center for Public Policy.
Critics say much of those programs grab headlines but then fail behind closed-door-meetings and underperform in job creation for taxpayers who funded the program.
“For too long, taxpayer-funded corporate welfare programs have sounded better than they have worked,” SB 770 sponsor Sen. Lana Theis, R-Brighton, said.
“The truth is, beyond the headlines and promises made in press releases, little is done to ensure taxpayers are getting a return on their investment in these business subsidy deals.”
Theis said that the government needs to be clear with the public regarding the success or failure of taxpayer-funded awards.
SB 770 would require the Michigan Economic Development Corporation (MEDC) to post public notices when a company awarded public funds fails to meet its written agreement terms or requests to amend an agreement, and when a recipient shuts down its business.
Mackinac Center Director of Fiscal Policy James Hohman told The Center Square that many companies’ promises of taxpayer-awarded grants don’t live up to expectations post-announcement.
“Of the states old MEGA program, less than 3 percent of deals went as expected,” Hohman said. “It didn’t mean that all of them failed, but most of them failed to create the jobs that they had pledged. And in fact, most of the companies that were awarded MEGA tax credits just never came.”
SB 769 would transfer all funding returned from failed agreements to the state’s General Fund rather than to the Michigan Strategic Fund (MSF) so that money wouldn’t be handed to another corporation.
Hohman said this plan, if it passed the House, the Senate, and became law, would improve the way that Michigan government operates.
“Business subsidy administrators ought to be stewards of taxpayer money rather than cheerleaders for their programs,” Hohman said. “This package improves transparency and will help people hold them accountable for results.”
HB 5458 would require the MSF board to publicly share contract agreements 10 business days before it can approve a grant, award, tax credit, or other assistance.
The public is currently notified of agreement terms after the assistance has been approved.
SB 768 would reduce business incentives proportionally for underachieving initial promises, such as the number of jobs created. This is currently optional but would be mandatory if both chambers passed the bills, which were signed into law.
SB 771 would restore public disclosure requirements for an individual company receiving Michigan Economic Growth Authority (MEGA) tax credits.
In fiscal year 2020, the state is expected to pay out $603.5 million for MEGA tax credits, Hohman said.
The state reports the total amount paid out, but stopped disclosing which company received the taxpayer funds in 2009.
Bill sponsor Sen. Jim Runestad, R-White Lake, called that “a travesty of basic transparency.”
“Michigan taxpayers deserve to know who is collecting their money and how much they’re getting,” Runestad said. “The state signed deals with companies who are expected to collect $6.1 billion in taxpayer funding through the old MEGA program. Yet residents cannot be told how much an individual company gets.”
The Senate legislation was referred to the Economic and Small Business Development Committee.
The House legislation was referred to the Committee on Tax Policy.