A Look At The State Budget for Business Subsidies

Old ideas get new taxpayer cash

Gov. Rick Snyder moved from being a skeptic of business subsidies to a supporter over time. His latest budget shows his legacy on the issue.

His recommended budget for the state’s business subsidy programs is down slightly. It calls for $161.8 million in state taxpayer-paid subsidy programs, down from $170.9 million this year. There is an additional $28.9 million for administration, a small increase from this year.

The state will continue handing out favors in its Michigan Business Development Program and Community Revitalization Program. Their money comes from general taxpayer dollars, either directly from taxation or from the tobacco settlement money that could also have been spent elsewhere in the budget.

These programs were replacements of programs that operated during the Granholm and Engler administrations. The older programs operated as tax credit programs, meaning there was no budgetary cap on them. The newer programs, by contrast, received direct budgetary approval, so at least legislators knew how much money they were going to spend on them. The old tax credits assign costs that are paid by future taxpayers, kicking the costs of today’s ribbon-cuttings onto tomorrow’s residents. The deals made as far back as the 1990s are still taxpayer obligations and the people who were awarded them are expecting to collect $717.6 million in this year alone. By contrast, the MBDP and MCRP keep lawmakers from obligating future generations.

But lawmakers have been inconsistent on whether business subsidies should be budgeted. The governor also championed last year — and the Legislature approved — two off-budget programs that will ring up another $1.2 billion in refundable tax credits. So the state will continue to create obligations that must be paid for down the road.

The recipients in the older program are kept secret. It is considered to be confidential taxpayer information. Recipients of the new budgeted programs, however, can be disclosed and that’s a good thing for transparency’s sake. But lawmakers ought to clarify that residents can be told about where their tax money is going for the older programs as well.

So the state now operates smaller programs that are more transparent than the older ones. That’s an improvement, but transparent programs can still be ineffective. A recent report looked at the MBDP and found spending on it hurt the economy more than it helped.

The state is spending money on selected businesses in other ways, too.

Pure Michigan has been around for a long time, even though the old campaign has gotten stale. But regardless, the governor wants another $35 million for it this year, also from that fungible tobacco settlement money. It’s a waste of cash, as tourism businesses should pay for their own advertising.

The state will also continue to manage some of the 21st Century Jobs Fund programs, though it will likely still fail to meet transparency requirements of law and good governance. Both the 21st Century Jobs Fund programs and Pure Michigan began in previous administrations.

To their credit, lawmakers got rid of a handful of narrowly targeted business subsidy programs over the past eight years. After spending a half-billion taxpayer dollars on the film industry, the state no longer forks over cash for film productions. The state also no longer has programs for subsidizing battery plants, or solar panels, or “anchor companies.” But these interests may still be able to get money from taxpayers under the new MBDP.

Getting rid of a few programs was a step in the right direction. Limiting what remains was a further step. But it seems that those steps were as far as our lawmakers wanted to go. So they’re going to discuss again another year of delivering around $170 million to select interests.