News Story

Stances on Corporate Welfare a Difference In Michigan's 39th House Race

Rep. Klint Kesto vs. Deb O'Hagan

The Republican primary for Michigan’s 39th House District features a challenge against a sitting incumbent.

Deb O’Hagan has been involved in business activities and local Republican politics for years and founded the Lakes Area Tea Party. She is taking on Rep. Klint Kesto primarily for his support of the Medicaid expansion and Common Core.

The district is in Oakland County and is home to Wixom, Commerce Township and West Bloomfield Township. It has a 52 percent Republican base.

Capitol Confidential asked the candidates about several issues that will likely be important in the next few years. Specific questions were asked about the teacher pension system, the Michigan Economic Development Corp. (MEDC), the film subsidy program, and the state prevailing wage law.

There was agreement between the candidates about shifting teachers from the pension system and repealing the state’s prevailing wage law.

In 1997, new state workers began receiving a 401(k)-type plan, joining the vast majority of employees in the private-sector. Teachers still receive a defined-benefit plan in a system that is $25.8 billion underfunded. Both candidates said they would support a bill shifting new school employees to a defined-contribution plan.

Rep. Kesto said the state needs a “sustainable retirement program” which the current system is not.

“I believe I would support legislation that would enable local governments to be more responsible with their pension programs, and if changing the type of account from defined benefit to defined contribution is the solution, then I would be in support of that policy,” Kesto said.

O’Hagan was more forthright.

“I would support closing the unsustainable current pension system to new employees and offering defined-contribution type accounts instead,” O’Hagan said. “This system is better for both the public schools and the employees. The schools know their financial obligations up front and are forced to responsibly fund them in the year incurred, while employee's retirement benefits are protected in their own personal account and cannot be whisked away by another 'need' or a bankruptcy court!”

Michigan’s prevailing wage law mandates union-scale wages on public construction projects. This adds an estimated $224 million in costs to taxpayers per year.

O’Hagan wants the bill repealed.

“Inflating the cost of a product without a commensurate uptick in quality and value is an abuse of tax dollars,” she said. “Repealing prevailing wage should be a priority. It will open up employment opportunities that only a free market can offer.”

Rep. Kesto agreed, saying that public projects should be competitively bid.

“Our state needs to be able to get the best value and the best price in order to be responsible to its taxpayers,” he said. “Repealing the prevailing wage law would move Michigan in the right direction in that aspect.”

The differences between the candidates popped up regarding the state giving special tax credits and subsidies to select businesses. This is mostly done in Michigan via the MEDC, which spends about $300 million, and the film incentive program, which spends $50 million.

Rep. Kesto said he would support transparency — particularly concerning metrics — for the programs and more incentives to hire local Michigan employees, but would not commit to repealing either program.

O’Hagan was unequivocal.

“The state of Michigan is not in existence to prop up businesses,” she said. “We should be contributing to building a stable economic environment where all businesses can reliably make long range plans. Unfortunately, as we are trying to come out of a recession, businesses don't know what tax, law or regulation is going to affect them next.”

On the film subsidy program, she added, “Subsidizing any business is not a role of government. Instead, we should be using those funds toward the additional $1.2 billion we need to maintain and build our roads and bridges.”

Editor's note: Michigan Capitol Confidential will be reporting and writing about key primary races leading up to the election on Aug. 5. The series of stories are designed to provide readers with some insight into candidates who have said they support free market issues. The stories are not endorsements and readers are encouraged to give every candidate a serious look before the election.

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.