Program: Agricultural development, marketing and emergency management

Appropriation:

Interdepartmental Grants:

$500,000

 

Federal Funds:

$100,000

 

Special Revenue Funds:

$895,400

 

GF/GP:

$946,300

 

Total:

$2,441,700

Program Description:

The Market Development program is effectively a marketing department for the state’s private agriculture industry. It also subsidizes some charitable work with food banks in the state.

Recommended Action:

All line items underneath the Market Development Section 109 of the MDA budget for the 2003 FY should be eliminated. There are no functions in this section of the budget that cannot or are not already being performed by private for-profit and nonprofit organizations. The following is a description of each individual program, and the amount that could be saved by elimination. Savings: $2,441,700.

Marketing and Emergency Management: This program is designed to "serve as a catalyst, coordinator, and resource to provide promotional marketing, and economic development opportunities for Michigan’s food and agricultural industry." It is also dedicated to "protecting the state’s food and agriculture resources in times of emergencies." [6] Unfortunately, the marketing component of this line item is best described as corporate welfare for the agriculture industry. Agriculture is a profit-making industry and should not receive what are essentially marketing subsidies any more than the auto, computer, and defense industries should. A prime example of the department’s unnecessary marketing efforts is the free distribution of Michigan Wine Country, a trade publication of the Michigan wine industry. Author’s Note: Governor Granholm’s proposed 2005 budget reorganizes this section of the MDA slightly. For instance, there is now a specific line item for the state "Grape and Wine Program." This program, which helps market Michigan’s grape and wine industries was previously just rolled up into a general "marketing" line. Savings: $2,005,600.

Agriculture Development: The Agriculture Development Office was created in 1997 to help improve the "economic and environmental sustainability and viability of Michigan’s food and agriculture industry ... " [7] The office also "focuses on expansion of food and agricultural value-added processing ... " [8] For example, in September 2000, the MDA reached a grant agreement with the Midwest Nut Producers Council in which it would grant $82,255 in federal and state money to "develop, test and devise a marketing strategy for two products, a chestnut puree and chestnut crumble." [9] The grant will help the industry "work with 15-20 Michigan chefs to test and evaluate new chestnut products," [10] and prepare recipes in their own restaurants using chestnuts, interview customers about the dishes, and provide feedback to the grantee.

Private industry has its own incentives for adding value to agricultural products — profit being one of them. By providing government money for such research, the state is, in effect, socializing the risk of the agriculture industry while helping to ensure profits that the industry may not otherwise see. In addition, the Agriculture Development Office may actually hurt agricultural processing businesses. It has used its own resources in conjunction with the Michigan Economic Development Corporation (MEDC) to grant special favors to particular firms, while giving none to their in-state rivals. The Summer 2002 issue of the Mackinac Center’s Michigan Privatization Report, described how "Agricultural Processing Renaissance Zones" may do more harm than good.

The newest type of renaissance zone created in Michigan is known as Agricultural Processing Renaissance Zones, of which there are three, two in Oceana County and one in Ionia. All illustrate two basic problems with state favoritism in the name of "economic development": 1) It’s unfair to businesses that do not receive the tax advantages offered; and 2) Officials can’t prove that the development they claim as proof of the zone’s success wouldn’t have taken place without their interference.

Targeted tax relief places at a competitive disadvantage those businesses that do not get the state favors. This is why some Michigan agricultural companies, in January 2001, actively opposed zones being granted around the properties of their competitors, Peterson Farms, near Shelby, and Gray & Company in Hart.

One of the zones’ critics, who asked to remain anonymous for fear of state retribution, told Michigan Privatization Report, "The state has put me at a terrible disadvantage by giving my competition substantial tax relief. How can Lansing bureaucrats possibly believe that hurting me will help the economy?" This was generally the nature of other processing companies’ opposition, though several firms’ officers noted that they were not opposed to the idea of helping the agricultural industry. The state took testimony in person and by letter from businesses opposed to the way these zones were being used, but plowed ahead anyway.

All of this might be tolerable if state officials could prove that renaissance zones actually produce a positive net benefit to the economy. But the literature on the subject is very clear: Enterprise zones have little measurable impact on economic growth and employment — but they do have huge costs.

Nationwide, research indicates that enterprise zones have had a negligible impact on economic growth and development. Professors Thomas Lambert and Paul Coomes of Spalding University and the University of Louisville, respectively, studied one of the nation’s oldest and biggest enterprise zones in Louisville, Ky., and used "many measures to try and give the program every chance of success." Yet the evidence, published last May, showed that after 14 years "it is difficult to document that this program has been effective."

Other studies concur. In their paper, "Enterprise Zones and Local Employment: Evidence from the States Programs," published in Regional Science and Urban Economics, Daniele Bondonio and John Engberg found "zero impact" on local employment from enterprise zones and that "the level of the monetary value of the incentives awarded to zone businesses does not noticeably contribute toward enhancing the impact on local employment." [11]

(For more on this subject, see "Make Michigan One Big Renaissance Zone," in the Summer 2002 Michigan Privatization Report. [12]) Savings: $742,400.

Export Market Development Program: This program is similar to the marketing line item above, with an international application. In a time of fiscal crisis, should the state of Michigan subsidize dried fruit seminars in Taiwan? Promote dried blueberries in Japan? Should it market pickles in Korea, apples in Israel, and cherries in Germany? Past MDA grants have also been used to help "develop bakery recipes that utilize processed cranberry products." [13] Indeed, should the state do these things at any time? The case that it should is an extremely weak one.

In February 2002, the MDA gave a $5,950 grant to the Michigan Food Processors Association so its members could attend a food show in Canada. [14] In March, a delegation from the Michigan Potato Industry Commission flew to tropical Costa Rica with the help of a $5,600 MDA grant. [15] The goal? To educate Costa Rican snack processors on the use of Michigan potatoes in their respective businesses.

A review of the commission’s spending indicates part of its grant was spent before and after the trip on meals at the Budweiser Brew House in Detroit and at a Bob Evans restaurant in Romulus. These are particularly troubling uses of grant funds. Even if subsidizing this travel were a legitimate function of the state, is it not fair to assume that commission members would have eaten something, and paid for it themselves?

These are just a few examples of how Michigan subsidizes the international marketing efforts of private business. For-profit businesses should be required pay for their own marketing efforts. It is a basic issue of fairness. Most business owners do not receive state help marketing their own businesses yet they are forced to pay taxes to support those who do. Savings: $100,000.

Food Bank Council: This appropriation provides a General Fund/General Purpose subsidy to the Food Bank Council of Michigan for handling items donated for charity. The Food Bank Council of Michigan is a private, nonprofit charity that is comprised of 10 smaller food banks in the Great Lakes State. Each bank provides food and funds to low-income people through 2,500 charities. [16] This is a seemingly kind, but unnecessary, state appropriation. Europe, America, and Michigan have a long and generous tradition of private charity. If the state took less money from taxpayers, private citizens would have more to give to private food banks and similar organizations, voluntarily.

Michigan’s "Harvest Gathering" program is a good example of how the private sector can alleviate citizens’ hunger problems. Harvest Gathering is a private, nonprofit foundation founded by then-MDA director Bill Schuette in 1990. Schuette and other state officials used their high-profile positions to help raise private funds and food for Michigan families. Last year alone, Harvest Gathering collected and redistributed 650,000 pounds of food at 100 locations across all 83 counties in Michigan. Savings: $630,000. Governor Granholm’s 2005 proposal increases the gross appropriation to $630,500.

Future Farmers of America: This line item subsidizes the Michigan chapter of the Future Farmers of America. Future Farmers of America is a private, nonprofit organization whose mission is to make a "positive difference in the lives of students by developing their potential for premier leadership, personal growth and career success through agricultural education." [17] The state should no more appropriate funds for this organization than it should for future economists, accountants, or computer scientists of America. To subsidize one career choice over others, the state effectively gives its blessing to a single job category as if farming is more important than other work choices. Government should be neutral with respect to how free young men and women choose their occupations. In addition, career opportunities are of sufficient importance that young people have every incentive to find career information without government involvement. Savings: $60,000. Governor Granholm’s 2005 proposal leaves this appropriation unchanged over the previous year’s budget.