It won’t surprise the reader to learn that the Mackinac Center for Public Policy has been engaged in this fiscal year’s hot topic — road funding — to a great degree. We are still educating opinion leaders, including Lansing lawmakers, on the topic, with a raft of ideas for reform.
Just recently we offered lawmakers a new combination of 13 budget reforms worth $1 billion. Among those are making cuts to corporate handouts, one of the easiest things to do. We’re also anticipating the next battle in this area.
The good news is that both Gov. Gretchen Whitmer and the state House deserve some applause for what they’ve done so far, though it’s hard to know how things will turn out. The budget may be finished by the time this issue of IMPACT lands in your mailbox. Let us hope members of Lansing’s political class do not snatch defeat from the jaws of victory.
Of which victory do I speak? The governor has proposed a $5 million cut (14%) to the state’s Pure Michigan tourism campaign. The House approved its own budget proposal, which includes a cut worth $4 million. This is progress, we think.
Our 2016 study about the program found that for every extra $1 million the state spent promoting tourism, the income of the accommodations sector rose by $20,000. Other sectors in the tourism industry did worse, meaning that the program is a huge net negative for Michigan taxpayers. The Senate, however, wants to increase spending on this activity by $1.5 million. It will be interesting to see how the negotiations play out.
Of perhaps greater import, however, is the $55 million-plus cut to a corporate handout line item in the state budget called “Business attraction and community revitalization.” This represents a cut of more than 52%. The item funds two handout programs, one of which is the Michigan Business Development Program.
The Mackinac Center published a scholarly treatment of this work, using a statistical model of our own creation. The model is an attempt to identify any impact that corporate subsidies were having on employment in the counties where their projects were located. We found that for every $500,000 in subsidies, there was a corresponding loss of some 600 jobs. Again, a huge net negative for the state.
Going forward, the Mackinac Center will educate lawmakers and others on another subsidy program, Good Jobs for Michigan. This program is scheduled to sunset at the end of the year if it is not reauthorized, and we believe it should sunset. It was enacted in the hope of landing FoxConn, but that company chose to locate a new facility in Wisconsin, not Michigan.
Some want to continue the program and make as much as another $500 million available to corporate interests. Coincidentally, the state’s now-shuttered program to subsidize Hollywood film production wasted roughly that amount before it was repealed and seen as a failure.
In August, the Mackinac Center explained the case against Good Jobs for Michigan subsidies in a Detroit News op-ed titled “Let the Sun Set on this Corporate Subsidy Program.” It presented evidence that programs like this are expensive and don’t work. Money wasted on them could be better spent elsewhere, such as road repairs.
The Mackinac Center’s Morey Fiscal Policy Initiative will spend the next few months engaged in budget and corporate welfare reform. We will continue to be your voice for markets over mandates in current and coming debates.