Are Michigan’s corporate giveaways masking the state’s real problem?
Why do Michigan’s biggest companies require state subsidies to expand here?
In June, when the Michigan House Appropriations Committee took up a Ford Motor Co. request for $100 million, with a promise to create 3,030 new electric vehicle jobs, Rep. Jeff Yaroch, R-Richmond, asked: “Is this what we’re left with, that we have to pay companies to stay?”
His answer came a week later, in the Senate Appropriations Committee.
Gabby Bruno, Ford’s director of economic development, told the committee: “These jobs and investments wouldn’t be possible without the support of the state.”
Yaroch was really asking if there are other approaches that might work in attracting business, such as rolling back regulations or having a lower tax burden.
Time and again, Michigan’s biggest companies require state subsidies to expand in Michigan. For lawmakers and taxpayers and observers the question has to be, why?
Do these companies need special arrangements because the economics of business expansion don’t work in Michigan? If the economics don’t work for Michigan’s largest companies, how much worse are they for its small businesses? It’s hard to see how targeted giveaways changes that dynamic. If anything, they mask it.
The backroom nature of the deal was another problem. It didn’t take a vote of the full Michigan Legislature, or a signature from Gov. Gretchen Whitmer, for Ford to secure the $100 million. All it took was a majority vote in two committees, the House and Senate appropriations committees.
While Michigan residents send 148 lawmakers to Lansing, only 46 were eligible to vote on the $100 million for Ford. Should big business be handled in back rooms?
“The process is working as it should,” said Quentin Messer Jr, leader of the Michigan Economic Development Corporation, at the Senate Appropriations Committee’s June 23 meeting. "No money has been disseminated or distributed to Ford, and that doesn’t happen until this body approves that process, as the House did.”
What that meant was this: The state’s disbursement of $100 million for a potential $1.16 billion project has been approved by the MEDC’s board, and the House Appropriations Committee. The Senate Appropriations Committee is the final step.
That final step turned out to be more like a rubber stamp. The House committee had a more lively discussion than its Senate counterpart about the transfer of taxpayer funds, lasting about an hour.
Things moved faster on the Senate side. Not quite eight minutes after the start of roll call, and without any committee member asking a single question, the Senate Appropriations Committee approved the $100 million by a 14-3 vote, with one lawmaker absent. Their House Appropriations counterparts had approved the transfer by a 20-8 vote.
Headlines blasted out the good news immediately: Ford was expanding in Michigan.
July brought the bad news: Ford would be laying off 8,000 people, to expand electric vehicle operations.
House Appropriations Chair Thomas Albert, R-Lowell, had pressed the MEDC to explain what safeguards exist to make sure Ford would honor its commitment, sayingm “There could be layoffs today or tomorrow.”
“What is the definition of a created job?” Albert also asked.
The MEDC’s Josh Hund said the projected jobs number refers to net jobs: 3,030 jobs in addition to the 22,190 manufacturing jobs Ford had in Michigan at the time. The jobs have to be held for 12 months, and “they must be in excess” of the baseline number for Ford to comply with the agreement.
If, on June 30, 2025, Ford hasn’t hired for 3,030 net jobs and met 90% of its hiring goals at each of the five facilities supported by the transfer, the MEDC could work to claw back some of the $100 million grant.
“If at that point we determined that some of those jobs don’t meet that 12-month maintenance period, or other conditions attached to those jobs, they wouldn’t count, and the company would be required to pay back a portion of the grant funds,” MEDC attorney Christin Armstrong told the House committee.
But would it? Realistically? If Michigan feels it needs to give Ford $100 million to create 3,000 jobs, why wouldn’t it also feel the need to waive the clawback provision?
For Rep. Sue Allor, R-Wolverine, the legislative transfer was not bothersome. The full Legislature had spoken, she said, when it approved $1 billion in economic development funds. The Strategic Outreach and Attraction Reserve, or SOAR, was set aside for just such an occasion.
Allor doesn’t have a problem with legislative transfers, as a general proposition. But she voted no on this particular transfer.
“Too many giveaways,” Allor told Michigan Capitol Confidential, said of the transfer, officially known as Legislative Transfer Package 2022-4. “And where’s that money coming from? It’s coming from the taxpayer.”
Sen. Adam Hollier, D-Detroit, voted yes on the transfer. He told CapCon he still supports it, even after the reported layoffs.
“Our expectation is that if there are changes in the market, there may be losses in the traditional internal combustion engine space, but we know that there’s going to be gains in the electric vehicle space, and we’ve got to make sure that those gains are in Michigan, that the new jobs that are hired are here in Michigan, and that the growth is here in Michigan,” Hollier said.
“When they talk about their downsizing, we expect and are hopeful that they will be downsizing in other states,” Hollier added.
Sen. Jim Runestad, R-White Lake, has heard no such assurances. He voted no on the transfer.
“I found there’s a lot of fine print issues that come up, and I think we’re seeing that with this,” Runestad said. “How are they able to say ‘We’re hiring with this hand and we’re firing with this hand?” I just couldn’t give $100 million to one company, when they all need tax relief.”
James David Dickson is managing editor of Michigan Capitol Confidential. He writes a Sunday column on government issues in Michigan. Email him at firstname.lastname@example.org.
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.