Michigan lawmakers push interest-free loans for nonprofits with your money

State taxpayers would subsidize short-term loans to small nonprofits if legislation introduced by a bipartisan pair of House members were to become law.

State Reps. Julie Rogers, D-Kalamazoo, and Greg VanWoerkom, R-Norton Shores, introduced House bills 4998 and 4999 in mid-September. The legislation would create an entity called the Michigan Nonprofit Development Fund.

The bills aim to make taxpayers provide interest-free bridge loans to arts organizations and other nonprofits across Michigan.

“I am excited to offer a creative solution to support our nonprofit and arts community during a time of uncertainty,” Rogers said in a news release issued by House Democrats. “Our bipartisan bill package offers a no-interest loan to help with their cash flow so they can keep artists and staff employed and maintain operations. This economic development tool will shore up funding gaps while ensuring our theaters, art galleries and museums remain open for all to enjoy.”

The Michigan Nonprofit Development Fund, as envisioned by the legislation, would allow qualifying nonprofit organizations to borrow up to $25,000 interest-free. These loans would provide short-term support for the institutions to pursue their health, education, arts, cultural and social services. Loans would be available to nonprofits that have annual revenues under $1 million and written confirmation of a forthcoming government grant or contract.

“This bill is a timely boost for Michigan’s creative sector. It adds flexibility and support as arts and culture organizations navigate alternative funding. It helps keep programs vibrant and communities inspired,” said the Cultural Advocacy Network of Michigan as quoted by the news release. On its own website, the network describes the House-approved budget as devastating the arts sector and “stripping communities of the programs and cultural resources they rely on.”

A budget analyst from a Michigan nonprofit organization that seeks no government funds panned the bills put forth by Rogers and VanWoerkom.

“What great works of art were ever created via government subsidies or no-interest loans?” Michael LaFaive, senior director of fiscal policy at the Mackinac Center for Public Policy, asked in an email to Michigan Capitol Confidential. “Artists and institutions would be much better off if they were made to avoid politics so they don’t risk ‘betraying their craft’ as Ernest Hemingway once said. What these art institutions need is not a new government program, but a farewell to alms.”

Bills such as these distort incentives for nonprofits, LaFaive said, and money meant for the loan fund could be used toward other purposes, such as fixing roads and bridges.

“Interest-fee loans to art organizations by definition shout favoritism, just as it would if such loans were offered to help a Ted Nugent tour, baseball tournament or curling center,” LaFaive wrote.

Both bills were referred to the Michigan House Economic Competitiveness Committee for consideration.