Despite Lack Of Jobs and Repeated Broken Promises, Legislature Proposes Extension Of Corporate Welfare Program
21st Century Jobs Fund has past jobs and audit failures; Senate looks to continue
Despite repeated failures, the Michigan Legislature is pushing ahead with extending, and in some ways expanding, a government program that hands out select tax breaks, subsidies and loans to particular firms and special interests.
The “21st Century Jobs Fund” law enacted in 2005 created a smorgasbord of selective business subsidy-granting techniques targeted at different types of economic activities and actors. Reviews of this and other state “economic development” programs show that they consistently fall short on jobs projections, lack sufficient documentation for auditors, and spend tens of millions of state dollars with little or no return for taxpayers.
Capitol Confidential did a series of articles on the program last summer. The results are summarized below – all programs fall under the 21st Century Jobs Fund or a directly related area:
- The Michigan Pre-Seed Capital Fund loaned $7.7 million to 35 companies with the promise of 390 jobs – only 79 jobs were created.
- Mascoma Corp., a biofuel company from New Hampshire, was awarded over $20 million from Michigan as part of the Centers of Energy Excellence program on top of $100 million from the federal Department of Energy. The company promised 70 jobs and a new ethanol plant in the Upper Peninsula – it reports only three jobs, a failed initial public offering (IPO) and no plant.
- The Centers of Energy Excellence program awarded 12 grants worth $67 million with the promise of 1,746 jobs – only 588, or one-third, of the jobs came to be.
- The Renaissance Zones program exempts certain companies from state and local taxes: The program predicted it would generate $826 million in private investment and create 1,061 jobs – the reality was $268 million in investment and only 220 jobs; a third of the investment and a fifth of the jobs.
- The Competitive Edge Technology program gave $30 million to seven universities and projected 411 jobs – only 153, less than half, were actually created.
- The Michigan Strategic Fund gave $1.65 million in a direct investment to Microposite Inc. to make “environmentally friendly” siding – the company created zero jobs and went out of business.
- The Michigan Auditor General found that multiple parts of the 21st Century Jobs Fund did not provide sufficient documentation for a significant portion of the reported achievements. A separate audit of the Brownfield Redevelopment Financing Program found that the state treasury did not “evaluate the effectiveness” of the program – it was estimated that “79 percent of the brownfield authorities had not submitted annual financial status reports from 2008 through 2010.”
- A 2010 analysis from the Detroit Free Press found that only one-third of the jobs promised by the 21st Century Jobs Fund ever materialized. A vice president at the MEDC acknowledged the numbers but maintained that the program would pay off for the state in the long run.
Since the 21st Century Jobs Fund was created in 2005, large bipartisan majorities of the legislature have steadily expanded its scope. Despite the program’s failures, a series of recent Senate bills perpetuating the program and revising its subsidy-granting decision-making apparatus have been introduced and appear to be on a fast track. They include the following, with descriptions provided by MichiganVotes.org:
- Senate Bill 269, sponsored by Sen. Mike Kowall, R-White Lake, would eliminate a 2015 sunset on funding for the program, making permanent a law directing that $75 million be appropriated for it every year.
- Senate Bill 278 and Senate Bill 270, sponsored by Kowall and Sen. Judy Emmons, R-Sheridan, respectively, eliminate requirements that fixed proportions of the program’s spending be allocated though the various subsidy-granting methodologies authorized under its numerous sub-programs. Along with other bills in the package, these essentially convert this from appearing to be a "rule-based" subsidy program governed by statutory prescriptions and restrictions into one in which the political appointees on the Michigan Strategic Fund board have more discretion to give out subsidies as they choose.
The Mackinac Center’s Director of Fiscal Policy Michael LaFaive has co-authored several studies examining the results of various state corporate activities over the years. He told Capitol Confidential: “Government ‘economic development’ programs are intended to boost the economy by letting a small group of supposedly ‘far-sighted’ experts, bureaucrats or politicians give discriminatory subsidies to particular firms or industries. History has demonstrated repeatedly that whether rule-based or discretionary, the concept misallocates scarce human and financial capital, creates unfairness, generates abuses like crony capitalism, and doesn’t grow the economy. Given that record, these bills are the equivalent of re-arranging the deck chairs on the Titanic while leaving the throttle set at ‘full speed ahead.’ ”
Senators Kowall and Emmons did not respond to a request for comment.
(Editor's note: Every Saturday, Michigan Capitol Confidential brings you a story about a bill being discussed in committee or presented in the Legislature for a vote. For more information, go to www.MichiganVotes.org.)
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.
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April 5, 2013, MichiganVotes.org Weekly Roll Call
Y = Yes, N = No, X = Not Voting
The House and Senate did not meet this week, so rather than votes this report instead contains several recently introduced bills of interest.
Senate Bill 251: Allow less than unlimited auto crash injury insurance
Introduced by Sen. Virgil Smith, Jr. (D), to allow auto insurance companies to offer policies in which the maximum personal injury protection coverage (PIP) is $50,000. The current no-fault insurance law mandates that vehicle owners buy unlimited personal injury coverage. Referred to committee, no further action at this time.
Senate Bill 278: Convert 21st Century Jobs Fund from rule-based to discretionary corporate subsidies
Introduced by Sen. Mike Kowall (R), to essentially eliminate requirements that certain proportions of the money spent by a “21st Century Jobs Fund” business subsidy program be allocated using various methodologies, such as the state giving particular companies or developers loans or cash grants, buying shares of a company, tourism industry marketing subsidies, and other so-called government “economic development” spending. This and related bills would generally convert this from appearing to be a “rule-based” program governed by statutory prescriptions and restrictions into one in which the political appointees on the Michigan Strategic Fund board have more discretion in giving out subsidies. Senate Bill 269 would make permanent $75 million in annual appropriations for this program which are set to expire in 2015. Unusually, these and related bills were advanced out of committee and to the full Senate just two days after their introduction.
Senate Bill 276: Require community service work by welfare recipients
Introduced by Sen. Joe Hune (R), to require welfare recipients to perform community service if they are not already required to participate in welfare-related work or training programs. Referred to committee, no further action at this time.
House Bills 4148 and 4318, Authorize more community college bachelors degrees
Introduced by Rep. Mike Shirkey (R) and by Rep. Joel Johnson (R), respectively, to allow community colleges to grant bachelor degrees in nursing, “ski area management,” wastewater treatment technology, “allied health,” information technology, and manufacturing technology (HB 4148); or just in nursing (4318). These would be in addition to community college bachelor degrees authorized by a 2012 law, which included cement technology, maritime technology, energy production technology and culinary arts. Referred to committee, no further action at this time.
House Bill 4331: Ban employment decisions based on credit history
Introduced by Rep. Henry Yanez (D), to prohibit an employer from making employment decisions based on an individual's credit history, unless a good credit history is an established bona fide occupational requirement of a particular position. Referred to committee, no further action at this time.
House Bill 4354: Require gross negligence for suits against emergency room physicians
Introduced by Rep. John Walsh (R), to restrict medical malpractice lawsuits against emergency room physicians to cases of gross negligence. Referred to committee, no further action at this time.
House Bill 4363: Ban local governmental body “phone-in” voting
Introduced by Rep. Amanda Price (R), to establish that if a member of a public body is allowed to cast a vote on a decision by the body without being physically present, it is a violation of the state Open Meetings Act. Referred to committee, no further action at this time.
House Bill 4447: Authorize “alternative” math and science teaching certificate
Introduced by Rep. Robert Genetski (R), to grant an “alternative” teaching certificate that would allow an individual who has not undergone a full teaching college program to teach 6th to 12th grade math and science. The individual would have to have passed state basic skills and subject area exams; have a college bachelor's degree in math or science; have successfully completed at least one upper level college course covering lesson planning and classroom management and one covering testing, measurement, student and evaluation; and have successfully completed one full year of student teaching. Referred to committee, no further action at this time.
House Bill 4451: Authorize wrongful imprisonment compensation
Introduced by Rep. Jon Switalski (D), to authorize payment by the state of civil damages to a person wrongfully imprisoned for a crime he or she did not commit. The damages would be $60,000 for each year of wrongful imprisonment, plus “economic damages” including lost wages and more. Referred to committee, no further action at this time.
House Bill 4453: Extend already-extended renaissance zone tax breaks even longer
Introduced by Rep. Stacy Erwin Oakes (D), to allow a renaissance zone that has already received a seven-year extension of the extensive tax breaks granted to residents and businesses in the zone to receive an additional extension for eight more years. Referred to committee, no further action at this time.
House Bill 4455: Restrict and regulate unmanned aerial drone vehicles
Introduced by Rep. Tom McMillin (R), to allow and establish regulations for the use by the state or local governments and law enforcement agencies of unmanned aerial drone vehicles, generally limiting their use to situations where there is a public safety emergency or probable cause exists to suspect specific criminal activity. The bill would ban drones that carry weapons from Michigan skies. It would also would establish specific conditions and restrictions for disclosing and retaining information a drone obtains about a person, mandate public disclosure of drone operation details, authorize penalties for violations and more. Referred to committee, no further action at this time.
House Bill 4458: Prohibit TIFA “capture” of Detroit Zoo or Arts tax money
Introduced by Rep. Eileen Kowall (R), to prohibit the “capture” by a local Tax Increment Finance Authority (such as a Downtown Development Authority) of regional property taxes imposed to subsidize the Detroit Zoo and the Detroit Institute for the Arts. Referred to committee, no further action at this time.
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 https://www.michiganvotes.org.
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.
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