The MC: The Mackinac Center Blog

Senate Votes to Continue Film Subsidies

Will House put Michigan residents above Hollywood actors?

The Michigan Senate passed a bill yesterday that gets rid of the sunset provision for the state’s film incentive program, meaning the subsidies are set to continue beyond 2017. Senate Bill 1103 also removes a clause that previously capped the amount taxpayers would spend on highly paid out-of-state workers (such as actors, directors and producers), which is currently set at $540,000.

Mackinac Center experts have railed against the subsidy program because it has cost nearly half a billion dollars, but resulted in no new jobs, takes money away from other projects that better serve the public and is widely recognized as one of the poorest ways for states to spend tax dollars.

Joe Henchman is the vice president of state projects for the nonpartisan Tax Foundation. He was in Michigan recently to give an award to Gov. Snyder for tax reform and was asked by MIRS News about the film credit program.

“These states (with film incentive programs) are essentially writing checks to Hollywood — which is one of the most profitable industries in America — for what amount to transient jobs that don’t last very long,” Henchman said.

He expands upon this in a blog on the Tax Foundation website:

A big reason why Michigan pared the program back was a 2010 state-commissioned study that found the incentives cost $117 million and created 1,039 full-time equivalent jobs, for a cost of $112,800 per new job. Due to the nature of the film industry, most of the jobs are temporary and transient, with production companies using out-of-state labor to fill many positions.

Since then, California has tripled its film credit spending to over $300 million per year, and New York is over $400 million per year. To do battle with these states requires writing enormous checks to one of the most profitable industries in America. I would think Michigan has bigger priorities for its tax dollars than handouts for Hollywood.

SB 1103 now heads to the House for consideration. Members of the GOP-dominated chamber have a decision on whether they will stand by their previous support for ending the program, or take a vote to continue it indefinitely.

Free the Food

Cottage food industry regulations need revamp

Farmers' markets often sell cottage foods (image via WikiCommons).

“Aunt Karen, you’re homemade salsa is so good. You should bottle it and sell it!”

You’ve probably said something similar to a relative, friend or neighbor. And this is how many food companies get started – a recipe of homemade hard work, a pinch of encouragement and a healthy dose of risk-taking.

But in Michigan, it is harder for some food entrepreneurs to get started than others, as the state regulates this so-called cottage food industry in a seemingly arbitrary way.

State law does exempt anyone who sells less than $20,000 worth of homemade food from the mountains of regulations, rules and licensing requirements the state heaps on food producers. But this applies to makers of only certain types of food. (And this does not pertain to pet food. To make and sell that, of course, you'll need a license.)

According to Forrager.com, a website devoted to the cottage food industry, Michiganders can make and sell cherry and pecan pies, but not pumpkin or sweet potato. You can roast coffee beans and sell them, but you can’t add water and sell the resulting coffee. Most jams, jellies, nut butters and vinegars are okay, but ketchup, mustard, relish and salsa are prohibited. Finally, you can sell chocolate-covered strawberries, but not…strawberries.

Other seemingly random rules apply to cottage food producers. For instance, food producers cannot sell their food over the Internet – all sales must be done person-to-person. It’s also not allowed to donate your food to someone else who might give it away or sell it. You can, apparently, donate food to someone who just wants to eat it, though. How any of this protects consumers is not clear.

Finally, food may only be produced in a person’s “primary residence,” meaning you’d be breaking the cottage food law if you sold food cooked in the kitchen of your cottage (irony intended).

Public health concerns might explain some of these rules, but these concerns don’t manifest themselves in face of these capricious rules. Regardless, homemade food producers sell such small quantities that it’s unlikely they would ever pose a significant threat to public health. Further, the regulations and licensing mandates required of larger food producers do not eliminate the possibility that they could threaten public health anyway.

Texas recently relaxed its cottage food industry regulations, and witnessed food entrepreneurs from all over the Lone Star State create thousands of new small businesses. Michigan policymakers should consider doing the same and revisit our cottage food industry laws.

(After this, maybe we can reassess the threat that unlicensed dog biscuits might pose to public health.)

Michigan Education Digest

Charter school success, MEA politics

The new issue of Michigan Education Digest is now available. Topics include charter public school success, Flint’s self-created overspending crisis and MEA politics.

Center Research Cited in Daily Caller

Corporate welfare continues to grow

Mackinac Center research, particularly this piece by Senior Legislative Analyst Jack McHugh and Assistant Director of Fiscal Policy James Hohman, is featured in a story by The Daily Caller about corporate welfare.

You can read more about the Center’s work on corporate welfare here.

While the Legislature is on a campaign season break from voting, the Roll Call Report continues a series reviewing key votes of the 2013-2014 session.

House Bill 4001, Cap FOIA charges and increase government FOIA scofflaw penalties: Passed 102 to 8 in the House on March 20, 2014

To cap the costs a government body may charge to fulfill a Freedom of Information Act request, and increase the penalty for a unit of government wrongfully denying an open records law request. The bill was referred to the Senate Government Operations Committee on March 25, where it remains.

Who Voted "Yes" and Who Voted "No"

House Bill 5574, Give $195 million bankruptcy grant to Detroit: Passed 74 to 36 in the House on May 22, 2014

To grant $194.8 million to Detroit, to be applied toward a proposed bankruptcy settlement.

Who Voted "Yes" and Who Voted "No"

House Bill 5492, House road repair bills: Passed 91 to 18 in the House on May 8, 2014

To earmark a portion of state use tax revenue to roads. Reportedly this would generate around $250 million annually for repairs. Along with several other House-passed bills this would increase road funding by around $500 million annually, with only a small amount from increased taxes and fees. The Senate did not take up this package, instead voting on and defeating measures increase fuel taxes by $1.2 billion.

Who Voted "Yes" and Who Voted "No"

House Bill 5255, Authorize eminent domain for oil well CO2 pipelines: Passed 69 to 41 in the House on February 13, 2014.

To extend the state law authorizing eminent domain takings for gas, oil and other pipeline easements, so it also includes pipelines carrying carbon dioxide used to produce hydrocarbons in secondary or “enhanced recovery” operations.

Who Voted "Yes" and Who Voted "No"

House Bill 4369, Codify “education achievement authority” for failed schools: Passed 56 to 54 in the House on March 20, 2014

To codify in statute the authority of a state “education achievement authority” tasked with reforming public schools whose performance is in the bottom 5 percent for two consecutive years. Not more than 50 schools could eventually be subject to this office's authority, and their management could be transferred to a charter school, or another conventional school district. The Senate earlier passed a more rigorous proposal, and has not taken up this version.

Who Voted "Yes" and Who Voted "No"

Senate Joint Resolution V, Call for U.S. balanced budget amendment convention: Passed 77 to 32 in the House on March 20, 2014

To submit an application to Congress calling for a "convention to propose amendments to the U.S. Constitution," limited to proposing one that prohibits the federal government from spending more in any fiscal year than it collects in tax and other revenue (balanced budget amendment). Legislatures representing two-thirds of the states must request this to get a convention, and three-quarters of the states must approve any amendment proposed by an “Article V” convention for it to become part of the constitution.

Who Voted "Yes" and Who Voted "No"

House Bill 5108, Repeal ban on ticket scalping: Passed 66 to 42 in the House on February 27, 2014

To repeal a state law that bans ticket “scalping” at sports and entertainment events, or selling tickets at a higher price through some service or agency. The Senate has not taken up this bill.

Who Voted "Yes" and Who Voted "No"

House Bill 5414, Phase-out “driver responsibility fees”: Passed 108 to 0 in the House on May 21, 2014

To phase-out the so-called “driver responsibility fees” (a.k.a. “bad driver tax”) imposed for certain traffic violations, which were originally adopted in 2003 to avoid spending cuts in that year’s and subsequent state budgets.

Who Voted "Yes" and Who Voted "No"

House Bill 5168, Facilitate DARTA operating Woodward streetcar: Passed 82 to 26 in the House on June 5, 2014

To eliminate restrictions on the Detroit area regional transportation operating a Woodward Avenue streetcar in Detroit.

Who Voted "Yes" and Who Voted "No"

House Bill 5255, Authorize eminent domain for oil well CO2 pipelines: Passed 25 to 13 in the Senate on March 18, 2014

The Senate vote on the bill described above.

Who Voted "Yes" and Who Voted "No"

Senate Joint Resolution V, Call for U.S. balanced budget amendment convention: Passed 26 to 12 in the Senate on November 7, 2013

The Senate vote on the measure described above.

Who Voted "Yes" and Who Voted "No"

House Bill 5414, Phase-out “driver responsibility fees”: Passed 37 to 0 in the Senate on June 12, 2014

The Senate vote on the bill described above.

Who Voted "Yes" and Who Voted "No"

House Bill 5168, Facilitate DARTA operating Woodward streetcar: Passed 32 to 6 in the Senate on June 11, 2014

The Senate vote on the bill described above.

Who Voted "Yes" and Who Voted "No"

House Bill 5477, Impose higher gas tax: Failed 17 to 21 in the Senate.

To phase in a diesel and gas tax increase of more than $1 billion over five years. This was a "trial" vote a much more costly road package than the one passed by the House (described above), which the Senate did not take up.

Who Voted "Yes" and Who Voted "No"

House Bill 5574, Give Detroit $195 million bankruptcy grant: Passed 21 to 17 in the Senate on June 3, 2014

The Senate vote on the bill described above.

Who Voted "Yes" and Who Voted "No"

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

BEA President Unsure What Her Contract Says

Center attorney explains it

Patrick Wright, vice president for legal affairs, explained in the Livingston Daily Press & Argus why the president of the Brighton Education Association is wrong about a lawsuit filed by the Mackinac Center Legal Foundation against the union on behalf of a Brighton High School teacher.

The MCLF filed the suit Wednesday on behalf of Adam Neuman against the BEA and the Brighton Area Schools Board of Education for violating his right-to-work freedoms. A contract between the union and district says all members of the bargaining unit, via payroll deduction, must pay for the union’s release time (time allotted union officials to conduct union business during work hours). Michigan’s right-to-work statute, however, says anyone who has opted out of a union is under no obligation to financially support it.

Ellen Lafferty, BEA president, told the Livingston Daily that she thinks only members of the union must pay for the release time.

“Since he is not a member of the association due to him opting out in August, this language does not pertain to him,” she said.

State law, however, forces even those who opt out of a union to remain a member of the bargaining unit.

Wright said Lafferty’s claim is “irrelevant” based on what the contract says. Any payroll deduction by the district on the union’s behalf would also be illegal under Public Act 53 of 2012, including any deduction from the paychecks of those still in the union.

Wright also told the newspaper that the union and district need to change the language in the contract and if “it’s done to our satisfaction, this lawsuit will probably go away fairly fast.”

Media Coverage of Center's Latest Lawsuit

Brighton teacher sues union, school board

The filing of a lawsuit by the Mackinac Center Legal Foundation on behalf of a Brighton High School teacher against his union and school district for violating his right-to-work freedoms is gaining state and national media attention.

Adam Neuman is suing the Brighton Education Association and the Brighton Area Schools Board of Education because after opting out of union membership, he does not believe he should have to pay money via payroll deduction to support the union’s “release time,” allowing union officials to conduct union business during school hours.

Fox News has covered the case, as has the Livingston Daily Press & Argus and WHMI-FM93.5 in Howell. Reason has also written about the case. Neuman and Patrick Wright, vice president for legal affairs at the Mackinac Center for Public Policy, also appeared on “The Frank Beckmann Show” on WJR AM760.

Film jobs in Michigan (click to enlarge).

Five years and $500 million later, Michigan has fewer film jobs than it did when the state started its subsidy program.

According to the federal Bureau of Labor Statistics, Michigan had 1,561 film jobs in 2013 (the latest year information is available). In 2008, the state had 1,663 film jobs. See chart nearby.

Michigan currently spends $50 million per year subsidizing film productions. Previously, the program was uncapped – in 2010-11, the state spent $115 million. Overall, as of this year, taxpayers have devoted $494.7 million to the program.

Because film productions are so mobile, among other reasons, the economic analysis of incentive programs is overwhelmingly negative – from researchers on the left and the right.

~~~~~

See also:

Housing Expenses Among the Perks Michigan Residents Pay For Big Hollywood

Batman and Superman vs. Taxpayers

Record Profits For Warner Bros. Doesn't Stop State From Giving Company Huge Subsidy 

Five Reasons Government Subsidies For Films Are A Bad Idea

Film Incentives: The $50 Million Sequel

Public Employee Pension Systems Raided To Pay Film Studio Bills

Big Hollywood Bailout: Taxpayers Spent Nearly $40 Million To Subsidize Disney's 'Oz'

Cost of Film Program Could Repair Over 5 million Potholes

One Sector Grew Last Decade: Corporate Welfare

Very few jobs to show for special favors, subsidies

Michigan Capitol Confidential has been reviewing how the state's economy performed during the previous decade, in answer to a question raised by a politician’s recent assertion that “those years weren’t as bad as we think.” Separate articles looked at changes in Michigan’s employment, personal income and loss of people to other states. The data shows the period was quite bad, although causes and culprits will be debated.

But one sector does appear to have experienced significant growth during the 2000s: corporate welfare, euphemistically called “economic development programs” by politicians.

Measuring its growth is challenging because of frequent changes in programs and goals, a lack of transparency, and an abundance of spin and puffery in the information that is released. Moreover, the state has a poor record of actually confirming that subsidy recipients kept their “jobs” and “investments” promises.

Nevertheless, figures do exist illustrating the overall trajectory.

The Michigan Economic Growth Authority was considered the state’s flagship economic development program in the 2000s. Launched by Gov. John Engler in 1995. It granted “refundable” tax credits to particular firms selected by political appointees on the entity’s board. (MEGA  was replaced in 2011 by a direct subsidy program, with amounts appropriated annually by the Legislature.)

Companies had to make investments and employ specified numbers of people before they could collect the credits, which were delivered in the form of business tax reductions and flat-out subsidy checks. How much of each has not been revealed to the public, reportedly due to Treasury Department rules.

As the charts below show, the volume of MEGA activity rose sharply under Gov. Granholm, both in the quantity of deals and their size:

Value of Credits
The number of jobs promised by these deals rose apace:

Direct Jobs

Most of the jobs never happened though. A 2009 Mackinac Center study found that from the program’s 1995 inception through 2004, only 29 percent of the jobs initially promised came to pass. And even when these companies added jobs, considering the costs of these incentives, it’s questionable whether their net economic effects are positive. Moreover, it is impossible to know how many of those jobs would have happened even without the special treatment.

In addition to expanding MEGA, Gov. Granholm also launched her own selective subsidy and tax break programs. One of these was called the 21st Century Jobs Program, an economic central planners’ smorgasbord ranging from business loan guarantees to panels of “experts” allocating state research subsidies to the state actually owning a share of particular businesses. This was approved by the Legislature in 2005 and financed by $400 million in new government debt, with a commitment to spend an additional $75 million annually for another eight years (spending that continues today.)

Like MEGA, the results were not what was promised: A 2013 Auditor General report found that just 19 percent of the original jobs projected came to pass.

A number of other corporate and subsidy programs were launched or expanded by Gov. Granholm. One paid up to 42 percent of the expenses incurred in Michigan by film producers. In 2011 the open-ended nature of these film subsidies was ended, replaced with fixed-sum grants ($25 million worth in the 2011-2012 fiscal year, and $50 million annually in subsequent years.)  As of last spring, nearly $450 million has been spent on these subsidies, with little to show for this massive redistribution of Michigan taxpayer dollars (see chart). 

Film Jobs

There is no systematic evidence that the corporate welfare expansion did anything to relieve the dismal economic conditions that prevailed during Michigan’s “lost decade.” Indeed, the evidence from many studies shows that these government attempts to pick winners and losers were actually harmful. 




While the Legislature is on a campaign season break from voting, the Roll Call Report continues a series reviewing key votes of the 2013-2014 session.

Senate Bill 821, Whitmer amendment to impose "Amazon" internet sales tax: Failed 12 to 26 in the Senate on March 4, 2014

To "tie-bar" a bipartisan personal property tax reform bill to Senate Bill 658, which would impose state sales tax on catalog or internet purchases made from sellers outside the state that have an affiliation with a different business located in Michigan, in the manner pioneered by internet retailer Amazon.com. The amendment would have required the internet sales tax legislation to become law for the personal property tax reform to do so.

Who Voted "Yes" and Who Voted "No"

Senate Bill 783, Let landlords ban medical marijuana use: Passed 31 to 7 in the Senate on March 4, 2014

To prohibit the possession or use of medical marijuana on any portion of private property that is open to the public, or where it is banned by the property owner. The bill would also permit a landlord to refuse to rent a residence to someone who uses medical marijuana on the property. The House has not taken up this bill.

Who Voted "Yes" and Who Voted "No"

Senate Bill 878, Accommodate and regulate the “millionaire party” business: Passed 37 to 0 in the Senate on April 24, 2014

To revise the law governing charitable “millionaire party” gambling events that include casino games, in a manner that accommodates charities contracting-out operation of the fundraising events to a service that operates them for multiple charities at a single location, one event after another. This would recognize and accommodate a system that has evolved where on most days a person can gamble on casino-like games at a particular location, with the proceeds going to different charitable. The state Gaming Control Board had proposed restrictions on this. The House never took up the bill, and the dispute appears to have been successfully negotiated to permit the practice with some new regulations.

Who Voted "Yes" and Who Voted "No"

Senate Bill 768, Let state universities provide "unmarried partner" benefits: Failed 12 to 26 in the Senate on May 6, 2014

To adopt an amendment to the annual Higher Education budget offered by Sen. Gretchen Whitmer that would remove a prohibition on universities providing health insurance or other fringe benefits for "unmarried partners" of employees.

Who Voted "Yes" and Who Voted "No"

Senate Bill 774, Add spending for summer jobs program: Failed 12 to 26 in the Senate on April 30, 2014

To approve an amendment to the Natural Resources budget offered by Sen. Hopgood that would increase spending on a "Michigan Conservation Corps" from $4.1 million to $7.6 million. This is the state version of a New Deal era program created in 1933. The extra money would be for a summer jobs program.

Who Voted "Yes" and Who Voted "No"

Senate Bill 791, Revise, make permanent non-transportation 7/8th cent gas tax: Passed 38 to 0 in the Senate on May 21, 2014.

To eliminate the 2016 sunset on a 7/8ths cent-per-gallon gas tax that was originally supposed to expire in 1998 and only be used to clean up leaking underground fuel tanks, but which has been extended several times, and was diverted to other government spending by a 2004 “fund raid” enacted to avoid spending cuts in that and subsequent years' budget. This bill has not been taken up by the House.

Who Voted "Yes" and Who Voted "No"

Senate Bill 786, Give tax breaks to aquaculture and hydroponics: Passed 36 to 1 in the Senate on March 26, 2014

To exempt aquaculture and hydroponics production facilities from property taxes, and instead levy an alternative tax equal to 25 percent of the regular tax paid by other property owners.

Who Voted "Yes" and Who Voted "No"

Senate Bill 934, Preempt $10.10 minimum wage initiative; hike mandated minimum: Passed 24 to 14 in the Senate on May 15, 2014

To repeal the current state minimum wage law that makes it unlawful to employ a worker for less than $7.40 an hour, and replace it with a new law gradually increasing the mandated minimum to $9.20 an hour in 2017, and indexed to inflation thereafter.
As introduced the bill was seen as a Republican gambit to preempt a ballot proposal mandating that employers pay even higher minimums. It became a bipartisan gambit after concessions including inflation indexing brought most Democrats on board.

Who Voted "Yes" and Who Voted "No"

Senate Bill 850, Exempt public safety employees from no-contract "step pay hike" ban: Passed 27 to 10 in the Senate on June 10, 2014. Passed 27 to 10 in the Senate

To exempt law enforcement and fire department employees from a 2011 law that banned automatic seniority-based automatic pay hikes for individual government employees (“step increases”) during the time when a government employee union contract has expired and no replacement has been negotiated.

Who Voted "Yes" and Who Voted "No"

Senate Bill 910, Ban enforcement of new woodstove emissions limits: Passed 25 to 12 in the Senate on June 11, 2014.

To prohibit the Department of Environmental Quality from imposing new state woodstove and wood heater regulations, or enforcing new federal ones. The bill was introduced following news reports that proposed federal Environmental Protection Agency rules would impose restrictive new limits on wood heat. The House has not taken up this bill.

Who Voted "Yes" and Who Voted "No"

Senate Bill 324, Require certification of federal health care law “navigators”: Passed 37 to 0 in the Senate on June 12, 2014

To require “certification” for the individuals and organizations acting as “navigators” authorized by the federal health care law (“Obamacare”) to assist individuals who apply for government-subsidized health benefits through the law's “exchange,” including criminal background check and training in a program that protects the privacy and security of Michigan residents' personally identifiable information. The bill authorizes administrative sanctions and fines for individuals and organizations who violate various rules, including “steering” a person toward a particular policy. The House has passed a similar bill (HB 4576), but neither has been approved by the other body.

Who Voted "Yes" and Who Voted "No"

Senate Bill 748, Revise protectionist Detroit "limousine" regulations: Passed 30 to 8 in the Senate on June 11, 2014.

To allow Detroit to expand the scope of a city regulatory regime on “limousines,” by extending it to vehicles that can carry eight people including the driver. The limousine regulations have the effect of limiting competition to the taxi cartels that are protected by the city. The bill is sponsored by Detroit Democrat Virgil Smith, Jr. and cosponsored by Oakland County Republican Mike Kowall. It has not been taken up by the House.

Who Voted "Yes" and Who Voted "No"

Senate Bill 934, Preempt $10.10 minimum wage initiative; hike mandated minimum: Passed 76 to 34 in the House on May 27, 2014

The House vote on the bill described above.

Who Voted "Yes" and Who Voted "No"

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.