News Story

Pressure Mounting For MEDC Transparency

House Democrats call for scrutiny of corporate welfare programs; accountability for tax dollars

Those who want to bring transparency to the Michigan Economic Development Corp. have some new allies — House Democrats.

The MEDC is a government authority that is supposed to spur economic activity and promote the state of Michigan. For years, the MEDC has been criticized for a lack of transparency. 

House Democrats are joining critics like the Mackinac Center for Public Policy in saying that Michigan taxpayers have the right to find out whether the MEDC is spending tax dollars wisely or wasting it. Earlier this month, pressure was put on the House Commerce Committee to put some real teeth into legislation (House Bill 4480) that is supposed to make the MEDC more transparent.

In fact, House Democratic Leader Tim Greimel, D-Auburn Hills, told Michigan Capitol Confidential that House Democrats want more than transparency; they want provisions to recover the money the MEDC spends on poorly performing programs.

"We have to be able to know whether or not these programs, which are corporate welfare, have performed effectively," Rep. Greimel said. "If it turns out that they haven't, we need meaningful clawback provisions to get the money back that has been spent."

When it was introduced in March, House Bill 4480 was touted as a bill that would bring transparency to the MEDC. Initially, however, the bill appeared to represent no more than a pretense of transparency promoted by MEDC officials. There were indications in the spring that House Bill 4480 would be strengthened. Instead, the bill has been in the House Commerce Committee eight months and undergone no significant changes.

James Hohman, assistant director of fiscal policy at the Mackinac Center, said the current version of House Bill 4480 does nothing to increase MEDC transparency.

"Right now all the bill does is tell the Legislature how the MEDC wants to be graded," Hohman said.

House Bill 4480 is part of a multi-bill package that 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)."

During the week just before the Legislature's departure for deer hunting, a hearing that had been scheduled to take up the MEDC legislation was canceled. According to well-placed sources, there currently aren't enough "yes" votes on the committee to move the bill package.

"House Bill 4480, as it currently stands, doesn't provide any increased transparency regarding performance of programs under the Strategic Fund,” said Rep. Jon Switalski, D-Warren, the ranking Democrat on the House Commerce Committee. "To me, the Republicans have a choice. If they keep the bill as it is, they're not interested in transparency. They need to make significant changes to the bill.

"They need to increase the amount of transparency regarding performance to hold the MEDC accountable for the taxpayer dollars it spends," Rep. Switalski continued. "Any money that is not being used efficiently should be paid back.”

House Commerce Committee Chair Rep. Frank Foster, R-Pellston, said he's committed to a bill package that includes strong transparency provisions.

"We want to make transparency the centerpiece of this legislation," Rep. Foster said. "We're willing to talk with as many people as necessary to get this accomplished."

Rep. Foster acknowledged that House Bill 4480 probably wouldn't be ready until after the New Year.

Rep. Tom Leonard, R-Lansing, the sponsor of House Bill 4480, said he wants the bill to be redrafted.

"This remains a work in progress," Rep. Leonard said. "We're diligently working to try to add as much teeth to it as possible. My intent is that the next time we meet, whenever that may be, we'll be able to bring in a new substitute that provides real transparency."

In his first year in office, Rep. Leonard has bucked the majority on several votes where he opposed expanding various corporate and developer subsidy schemes.

(Editor's note: This story has been slightly edited since its original posting, and additional information has been added.) 

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.