Gov. Granhom Claims Ignorance of MEGA Failures

Results published in major state, national media

If a person sits through Gov. Jennifer Granholm’s video portrait, they might think that she is interested and aware of her economic development programs. She spends nearly the entire production on her efforts to foster job creation. Unfortunately, a recent MIRS interview (subscription required) shows that she is blind to the failures of the programs she supports.

When asked about the low percentage of the jobs announced by the MEGA program actually coming to fruition, she responded:

“I'm not familiar with that statistic. But clearly, there are some who don't live up to expectations. But there are some that exceed expectations. Clearly, because MEGA is a paid-for-performance [program], they don't get the benefit of the tax incentive if they don't perform. I think this period of time when growth has been slow, there has been some slowness in performance, but that doesn't mean that they won't eventually perform, either. So I'm not familiar with that study.”

These statistics and studies have shown up in a number of places, first in a 2009 Mackinac Center study, and later reiterated in a 2010 Auditor General report. Both showed that less than 30 percent of jobs announced by MEGA ever arrive.

The economic analyses that have tried to account for the program’s net effects on the economy have produced results showing negative effects to only slightly-positive ones.

These results were published in the state’s major newspapers. For the governor to claim ignorance of the results strains credulity.

Her excuse that MEGA incentives are “paid-for-performance” is false. Deals are required to come with local support for the project that does not typically involve creating jobs. The most popular incentives are property tax abatements that are received by the company regardless of whether the company employs people. Visteon collected $9.6 million in local abatements on its Van Buren Township plant, and the local government made $5 million in road improvements to the plant even though Visteon never created a single MEGA job on the deal.

And even when companies create jobs, they’re given their incentives regardless of whether they stick around. Kmart collected $6 million in MEGA credits for jobs that later left the state.

Instead of ducking from the failures and falsehoods of the state’s economic development programs, the incoming Snyder administration should reform them. The first step is to acknowledge the capabilities of the programs. Michigan will not turn around through selective tax abatement programs, and the state needs to review them to find out exactly what the state wants to accomplish — and eliminate them if they are not designed to succeed in their goals.

Gov.-elect Snyder has mentioned a new emphasis on “economic gardening,” of improving the environment for all businesses, as opposed to “economic hunting,” where policies are aimed at bagging big projects.

The specifics of these policies are unclear at the moment. But it at least acknowledges that the rules that all businesses play by need to improve in order to have broad economic growth. This is an improvement from eight years of targeted incentives and economic loss.