News Story

Michigan launches ‘new era’ economic development fund, but its history is one of failure

Legislators, Gov. Gretchen Whitmer, go all in on select corporate subsidies, attempting to pick winners and losers.

The Michigan Legislature is spending billions on a program that gives out select subsidies, mostly to large corporations. The SOAR Fund — Strategic Outreach and Attraction Reserve — was created in December 2021, with an initial allocation of $1 billion. It will now receive $846.1 million more.

The decision to add more to the fund received widespread media attention, with many accounts reporting on job predictions. Absent, however, was coverage of what similar incentive programs have achieved in the past — very little.

The most comprehensive analysis of Michigan select incentive programs found that job announcements rarely turn into jobs. Fewer than 20% of the jobs promised when new deals are announced come into existence.

Only 2.3% of deals produce as many jobs as advertised. While SOAR lacks a long track record, previous efforts have resulted in billions of dollars spent but very few jobs.

Here are the major projects funded over the past 15 years, the amount in subsidies given by Michigan taxpayers, and the results, according to official records

  • Xtreme Power (2009): $106.7 million pledged for 2,500 jobs (0 jobs produced)
  • Motown Motion Pictures (2009): $101.1 million for 3,600 jobs (0 jobs produced)
  • FortuPowerCell: $100 million for 300 jobs (0 jobs reported)
  • MPI Research (2008): $86.0 million for 3,300 jobs (0 jobs produced)
  • Ford (2010): $78 million for 1,000 jobs (0 jobs reported)
  • General Electric (2009): $73.9 million for 1,200 jobs (latest report: 419 jobs)
  • Farmers Group (2009): $62.6 million for 1,600 jobs (1,006 jobs reported)
  • Dow Kokam (2010): $42 million for 320 jobs (the state does not report on current jobs at this plant)
  • Wonderstruck Studios (2009): $28.6 million for 700 jobs (0 jobs reported)
  • Johnson Controls-SAFT(2009): $20 million (the state does not report on current jobs at this plant)

It is difficult to determine how many jobs are created by some projects, especially battery plants.

Michigan has paid out $1.12 billion in credits to various companies in that market. There are a total of 2,096 battery manufacturing jobs in the state of Michigan. Even if every job were the result of a state subsidy – which is unlikely – that would mean taxpayers spent more than $534,000 for each job.

In the past year, the state of Michigan has approved a $100 million payout to Ford in exchange for a pledge of 3,030 jobs. Two months later, the company announced 3,000 layoffs, many in Michigan.

It also approved $600 million for General Motors, which state lawmakers and the media said would create and retain 5,000 jobs. But the fine print showed only 3,200 jobs were required, and those jobs had to last only six months for GM to comply with the deal.

Opposition from the new spending came from conservative Republicans and gubernatorial candidate Tudor Dixon, who is running against Gov. Gretchen Whitmer.

Nearly all House and Senate Democrats joined most Republicans in supporting the bill.

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.