News Story

Lawmakers Looking At MEDC Transparency

Legislation is being drafted in the Michigan House that includes an attempt to bring more transparency to the Michigan Economic Development Corp.

The development corporation is a quasi-governmental and private entity that is supposed to spur economic activity and promote the state of Michigan. Although the amount of funds the MEDC spends annually has been significantly reduced under Gov. Rick Snyder, it continues to have access to millions of taxpayer dollars.

The MEDC has a history of investing tax dollars in companies that do not live up their job promises and in industries that survive largely because of government funding.

A three-bill package, currently in the House Commerce Committee, would amend the Michigan Strategic Fund Act. According to the House Fiscal Agency, "The Michigan Strategic Fund is an entity with broad authority to engage in promoting economic development and job creation and retention. Generally speaking, the programs and activities are administered by the Michigan Economic Development Corporation (MEDC)."

"Economic development and job creation continue to be a priority of this Legislature, and as chairman of the House Commerce Committee, I am proud to have a unique role to play in this effort," said Rep. Frank Foster, R-Pellston. "Our package makes a wide array of adjustments to the Michigan Strategic Fund act, ranging from business development grants to port authorities, but the goal throughout the package remains pretty consistent. We want a department that is training workers, stimulating economic growth, and helping to move Michigan forward."

Traditionally, government departments and agencies have displayed a great reluctance to report negative results that could be considered as under-performance or failures. This tendency is particularly pronounced with entities, like the MEDC, that are involved with promotion.

Over the years, the MEDC has acquired a reputation for being less than transparent

According to people familiar with the drafting of one of the bills, the MEDC had a hand in initiating the legislation, in part, to address concerns over its anti-transparency image.

One measure, House Bill 4480, in the three-bill package that amends the Michigan Strategic Fund Act, would screen out applicants who have a record of "unethical or illegal behavior," which is a direct response to a $9.1 million tax credit given to a convicted embezzler in 2010 when Jennifer Granholm was governor.

"As with any department, there are a few basic expectations we have of the MEDC, because we must be vigilant as the stewards of our taxpayer dollars," Rep. Foster said. "We want to know how we are spending our money, we want to understand the impact of that spending, and we want to know that we are continually improving how we do business. The key word here is transparency, and I'm proud to say that we are accomplishing that in this package."

Rep. Foster added that all of the bills in the package are still a work in progress.

"We're going to keep moving through the process, and we're going to continue taking feedback on this legislation so that we can continue to improve it and finish with a final product that accomplishes everything we want it to," he said.

Rep. Bob Genetski, R-Saugatuck, has expressed frustration concerning transparency issues at the MEDC in the past. He said House Bill 4480, as currently drafted, needs more work.

"So far, all the bill seems to do is create a reporting requirement that would put all that gets reported into one report," Rep. Genetski said. "I guess my reaction to that is — what's the difference? In fact, I'd personally prefer to look at several different individual reports.

"I just don't see a lot of change in what they're asking for," Rep. Genetski said.

James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy, said that when it comes to improving transparency at the MEDC, lawmakers should think in terms of being able to keep tabs on the MEDC's actual performance and outcomes.

"The MEDC's record of converting announcements to actual jobs is poor and the legislature should keep better track of it," Hohman said.

In 2009, the Mackinac Center issued a policy brief on that topic, explaining that annual audits of the MEDC and its performance were necessary to protect the tax dollars that are being used.

Another bill in the package, House Bill 4482, would, among other things, allow the MEDC to establish and operate a job training fund that will support the training of workers. The bill also would allow the establishment of what is basically a brownfield redevelopment program.

Hohman said there are reasons to be skeptical about some of the proposed MEDC measures, particularly the job training portion.

"Legislators should ask for hard data on why expanding the state's job training program will make the state better off," Hohman said.

The legislation consists of: House Bill 4480, sponsored by Rep. Tom Leonard, R- Dewitt Township; House Bill 4481, sponsored by Rep. Harvey Santana, D-Detroit; and House Bill 4482, sponsored by Rep. Foster.

The version of the legislation available on line is from April 16. Changes have been since that date. One major change was to House Bill 4482, which had included language to allow the establishment of a program where entities could invest in, and collect, a return on investment in programs, projects, economic development projects, investments, or investment funds or other programs or ventures.

That language has been removed from the bill.

Overall, these House bills are part of a larger multi-bill package that includes five bills introduced in the Senate, Senate Bills 269-272 and 278.

The MEDC did not respond to a request for comment.


See also:

Michigan Capitol Confidential Coverage of the MEDC

Three Cheers For Michigan House Democrats Questioning MEDC Transparency

Transparency,  the MEDC, and the Loss of Sunshine

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.