Commentary

Don't Extend Granholm's 'Blown Away' Program

Demand accountability instead

Without much fanfare, the Michigan Senate recently approved pouring an additional $300 million through 2019 into a corporate welfare program that's a holdover from Gov. Jennifer Granholm's time in office.

An annual $75 million earmark to the program had been scheduled to sunset in 2015.

Before rubber-stamping the extension, House members should force the state's "economic development" gurus to finally cough up some basic information on the actual performance and outcomes of this 21st Century Jobs Fund scheme.

For starters, they should demand to know how much taxpayer money has been spent, and what we have to show for it. That the program's annual reports fail to answer these basic questions should raise all kinds of red flags for legislators, journalists and the public.

Some background: In 2005, Gov. Granholm proposed to invest $2 billion in borrowed money to support "next-generation" industries. It was this program that inspired her famous "In five years you'll be blown away" declaration.

After initial skepticism from Republican legislators, a package was enacted that borrowed $400 million, pledged another $600 million through 2015 in annual earmarks, and shoved this money out the door in a variety of ways.

Gov. Granholm (and most reporters) claimed a total commitment of $2 billion, with an additional purely speculative $1 billion "blue sky" figure representing all the marvelous profits expected from picking "winner" companies in which the state would take a partial ownership stake, among other activities.

For their part, Republicans — led by then state representative and current Congressman Bill Huizenga, R-Zeeland, — also took an ownership stake in the adventure, resurrecting a proposal that was floundering due to Gov. Granholm's intransigence on a package of tax cuts they wanted (and never got) in return for approving this spending spree.

Hundreds of millions of dollars later, here are some more questions today's Legislature should ask the Michigan Economic Development Corp.:

  • What happened to the first round of "winner" firms that received grants and loans in 2007? After six years, the MEDC still does not report how much taxpayer money was spent, much less what outcomes were realized.
  • Having bought stakes in private equity, mezzanine, and venture capital funds, how much does the state own and what is it worth? The MEDC has not reported on whether there have been any returns on the money. Likewise, what investments in Michigan projects were undertaken?
  • Why does the program change every year? There was statutory guidance on the initial set of programs, but this setup was never enforced and each year brings shifting targets and goals. (Note: The state senate has passed a bill that appears to strip away the façade of expert-guided investment and simply gives the political appointees who run the MEDC's parent agency, the Michigan Strategic Fund, discretion on how to spend the money.)

Although the program's annual report doesn't seem to answer the most important questions, it raises plenty of new ones. Among them:

  • What does "negative jobs" mean? (For example, a firm called, "IA Inc./ ThreeFold Sensors," was given a $2.6 million state loan and generated "-3.84 jobs.")
  • When loans were made were they ever repaid?
  • When grants were authorized, how much was actually delivered?
  • If a 21st Century project closes, is that ever reported?

In the remainder of her term, Gov. Granholm had many occasions to regret her "blown away" puffery. Before giving a new lease on life to the program that inspired it, today's legislators should discover whether what was really blown away was millions of taxpayer dollars.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.

Commentary

Time for Detroit To Move Beyond Its Past

Mayor-elect Duggan must capitalize on changes already being made

Detroit has a new mayor who promises to work with the city's emergency manager. He has insisted crime will go down, street lights will go on and neighborhoods will be reborn.

For the sake of the city's residents, the region and the state, let's hope he's successful.

But none of that will happen if fundamental — and real — change doesn't take place in the city. Detroit can no longer operate on the assumption that everyone is out to get it. It can no longer operate as if it is owed things, be it money from the state, the federal government or the business people who invest in the city despite massive structural and political problems.

Detroit's emergency manager isn't in place to loot the city. He's trying to save it from its past.

Mayor-elect Mike Duggan said Tuesday night in his acceptance speech that he wants to work with Kevyn Orr and Gov. Rick Snyder. That's a good start.

Others have offered to help, too, and Mayor-elect Duggan doesn't have to look far for some solid suggestions. My colleague, Michael LaFaive, wrote 13 years ago how Detroit could save billions if it privatized some services and sold some assets. While the numbers have changed, most of his suggestions apply still today.

With the city in bankruptcy some of those long-overdue reforms will happen, but it can't end there. Cultural change needs to happen. And it needs to happen at all levels of city government.

Anyone who has ever tried to get a problem resolved with the city — or have a Freedom of Information Act request filled — knows that the layers of government bureaucracy in Detroit make it nearly impossible to navigate the morass.

"The people of Detroit elected me because they want somebody to go into City Hall, take on that bureaucracy and get the city services to work again," Mayor-elect Duggan said in his victory speech.

He can do that by opening up the books, demanding that city employees (whose salaries and benefits are paid for by taxpayers) be receptive to requests, and bringing transparency to Detroit city government.

That would be a good start.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.