News Story

MEDC Programs Consistently Fall Short of Initial Claims

Michigan's 'corporate welfare' arm perpetually exaggerates its numbers

The Michigan Economic Development Corp. has awarded millions of dollars in grants, loans and tax breaks under claims that such efforts will grow economic development, job creation and private investment, but the trend of failing to meet expectations exists instead.

The MEDC oversees the 21st Century Jobs Fund. In a 2008 press release, then-Gov. Jennifer Granholm said, “The 21st Century Jobs Fund is the cornerstone of the most comprehensive and aggressive strategy in the nation to transform our economy, grow new high-tech companies and create good-paying jobs for our citizens.”

Programs of the 21st Century Jobs Fund have not lived up to this description.

The Michigan Pre-Seed Capital Fund has loaned $7.7 million to 35 companies on grounds that it would create 390 jobs. However, only 79 jobs, a mere 20 percent of the promised jobs, have been created.

The Centers of Energy Excellence program claimed that awarding $67 million to 12 firms would create 1,746 jobs. Only 588, a third of the promised jobs, have materialized.

The Competitive Edge Technology Grants and Loans program projected that by granting seven universities $30 million in grants, 411 jobs would be created. Five years later, the program reports a net job creation total of 153 jobs.

Failure is not exclusive to 21st Century Jobs Fund programs. Other economic development programs overseen by the MEDC have not lived up to claims made by state officials.

The Renewable Energy Renaissance Zones program offered tax breaks to seven select companies that were supposed to create 1,061 jobs and attract $826 million in private investment. Only 220 jobs and $268 million in private investment have materialized.

The Brownfield Redevelopment Financing Program is unable to report the results of $500 million in tax breaks awarded since 1996 because the auditor general found the state failed to “evaluate the effectiveness” of the awarded tax breaks.

Despite these failures, economic development programs persist in Michigan. The Michigan Pre-Seed Capital Fund was followed by the Michigan Pre-Seed Capital Fund II and the Michigan Pre-Seed Capital Fund III. The Centers of Energy Excellence program was recently repackaged as the Centers of Innovation program. Six openings remain in the Renewable Energy Renaissance Zones program.

“Jobs programs are just expensive PR campaigns by the political class, and taxpayers foot the bill,” said Michael LaFaive, director of the Morey Fiscal Policy Initiative at the Mackinac Center for Public Policy. “Is it any wonder jobs promises never become jobs reality? Politicians have every reason to goose up the numbers, knowing full well that should a deal fail to materialize, the political costs won’t come close to equaling the political benefits of earlier appearing to have done something — anything — to bring jobs to areas in desperate need of them.”

LaFaive has authored a number of studies and commentaries demonstrating the degree to which government economic development programs have failed to work as advertised. Two of his studies involve the now-defunct Michigan Economic Growth Authority, the state’s once high-profile business tax incentive program.

“The state really needs to stop playing these expensive games, dump remaining jobs programs and get out of the way.”

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.