News Story

Inflated Jobs Numbers Cost Michigan Taxpayers $7.7 Million

Over-reported numbers from Michigan's two largest auto companies

General Motors and Ford inflated the number of jobs their companies would retain when accepting tax incentives from the state and collected an estimated $7.7 million for “phantom” jobs from 2006 to 2008, according to an analysis done by the Mackinac Center for Public Policy. The analysis was based on information contained in an audit of the MEDC performed by the CPA firm Andrews Hooper & Pavlik.

Every year, companies involved with the Michigan Economic Development Corp. tax credit program report how many jobs they’ve created and/or retained and then receive money from the state for each job. 

From 2006-2008, GM and Ford over-reported their retained jobs in Michigan Economic Growth Authority tax credit projects by 3,286 and 3,978 jobs, respectively, according to the Center's analysis and the audit.

State Rep. Tom McMillin, R-Rochester Hills, said his office has asked the state Department of Treasury to get all overpayments of taxpayer monies back, including those made to GM and Ford.

"I will also be working to make sure MEDC convinces me that this sloppy handling of taxpayer money doesn't occur in the future,” Rep. McMillin said.

The MEDC was criticized in two previous reports that found that the number of jobs businesses actually created from MEGA deals fell far short years later of what the state announced in press releases.

Companies list both “retained” and “created” jobs. A retained job is an existing job that, in theory, stayed in the company’s plant thanks to the tax subsidy. A created job is one the company added to the already existing workforce.

An August 2009 Mackinac Center study by Michael LaFaive and James Hohman found that for every 1,000 jobs companies projected they would create in MEGA deals, only about 294 were created on average.

In April of 2010, an Auditor General report verified the Mackinac Center study when it found only about 28 percent of projected jobs “created” from MEGA deals actually came to fruition.

But Hohman, assistant director of fiscal policy of the Mackinac Center, said the GM and Ford “phantom jobs” issue shows the MEDC’s tax credit program was flawed in more ways than just inaccurate press releases.

“Michigan’s economic development programs have always overpromised and under delivered. Now we’re seeing that even the reported job growth was too optimistic,” Hohman said in an email. “The state has defended these programs as ‘performance-based.’ This audit shows that, on the contrary, the state has been paying credits for jobs that did not exist.”

Spokespeople from the MEDC, Ford and GM didn’t return emails seeking comment.


See also:

MichCapCon Coverage of the MEDC

Senator Says MEDC Should Stop Believing Its Own Press Releases

Lawmaker Says 'Willful Neglect' Is the Rule at Embattled State Agency

Thirty-One MEDC Salaries Top $100K

Analysis: MEDC Letter an Admission of Failure

Bad Week for Michigan Corporate Welfare Machine