This program was designed to replace a previous, larger refundable tax credit program that cost the state billions without producing much in the way of net new jobs. After six years in operation, the first measures of the Michigan Business Development Program’s effectiveness are in. It would appear that this program is not achieving its intended goals. A majority of the subsidies are likely handed out to companies that would have expanded in or moved to Michigan anyway, and these projects are potentially crowding out better investments. Despite claims to the contrary, the MBDP does not create net new jobs for Michigan citizens.
Eliminating this program would be precisely what Gov. Rick Snyder proposed to do with failed state economic development programs when he was running for his first term as governor. His campaign literature, “Rick for Michigan: Reform The Michigan Economic Development Corporation,” reads: “Incentive programs that do not add value to economic development or aren’t worth the cost should be discontinued.” We agree and the MBDP appears to fit that description.2. Prohibit amendments to relax milestones.
The state offers up subsidies to companies that agree to meet certain job creation and other milestones by certain dates and then repeatedly relaxes those standards. They should not. At question here is the state’s ability to allegedly pick winners from losers in the marketplace. The ability to relax agreed upon standards of performance artificially raises the “success” profile of state officials and their purported ability to invest public dollars in just the right private businesses.3. Cease unqualified claims of high returns on investment.
In each year’s annual report the state makes claims of projected success that strain credulity. The fiscal 2016 report claimed a $10 return for every $1 invested by the program. Yet we know that projections — using the REMI model — are based on presumptions of success that often do not pan out the way the state presumes it will. The Mackinac Center for Public Policy’s analysis, which uses historical as opposed to projected data, suggests the program does not create net new jobs.4. Mandate a counterfactual analysis.
For the sake of perspective, mandate that the MSF and MEDC use the REMI model to analyze alternative uses of the MBDP subsidies. What if, instead of giving companies $50 million a year, the funds were instead used to buy some other basket of public goods, complete an infrastructure project or cut personal income taxes? Using the model thus would put claims of large scale job creation from MBDP projects in greater perspective.5. Improve the transparency of the program.
The MSF obfuscates its poor choice of investments by expunging dismissed companies from its master count of deals in each year’s annual report to the Legislature. It should not. Companies that have been dismissed — or have ever been in default, for any reason — should be explicitly maintained in each year’s report. Reporting requirements make no mention of the process for expunging projects and removing them is inimical to the purpose of reporting. These reports are supposed to provide the clearest picture of program performance, not just a vehicle to cite purported success stories. Including data each year on every failed deal, both present and past, will provide a quick reference and perspective to lawmakers on the ability of state development officials to actually pick winners from losers in the
[*] “Rick for Michigan: Reform the Michigan Economic Development Corporation” (Rick Snyder for Michigan Committee), https://perma.cc/ UG7C-N3RA.