Commentary

No Need for Veto Work, but if the Governor Insists...

Gov. Whitmer can look at cutting corporate welfare programs

The Michigan Legislature has approved a budget that spends more money on roads (among other areas) without raising taxes. That is good news. In addition, Gov. Gretchen Whitmer has said she won’t veto any department budgets and shutdown state government. More good news.

She may still line-item veto solid budget reform choices made by the Legislature that reflect their priorities. While road spending is already at record levels, the-as passed fiscal year 2020 budget raises it further.

Presumably, any veto would be done to pressure lawmakers into capitulating to the governor’s demands for a large tax increase. If she insists on using a veto, however, there is an area where she could do a lot of good: the Michigan Strategic Fund budget.

The corporate welfare programs run by the state are ineffective, expensive and unfair. Proponents of such programs simply do not have at their disposal much scholarly research to the contrary and seem to rely instead on mostly anecdotes, rhetorical flourishes and consultants who often produce for them analyses of questionable scholarship.

If the governor or her budget directors are concerned that any department has been cut too much, there are still tens of millions of dollars available in wasted corporate welfare money that could be redeployed. Its also worth reminding people that the Governor’s choice isn’t that attractive. She wants Michigan citizens to cut their own budgets so her departments don’t have to.

Anticipating a rigorous debate over spending this year the Mackinac Center released a New Year’s Day list of ideas – worth $261 million — to reform the corporate welfare budget. The legislature trimmed this back by $19 million in two areas identified in our New Year’s Day blog. The first is from “Business attraction and Community Revitalization” and the second from “Community Ventures.” More can be done.

One area that deserves to be eliminated completely is the taxpayer-funded Pure Michigan advertising campaign. The governor recommended a $5 million cut in her proposed budget. Unfortunately, legislators budgeted a $1 million increase in spending.

The Mackinac Center has studied the Pure Michigan program in depth. Our scholars have found that for every $1 million increase in official spending to promote tourism, there was a corresponding increase in economic activity in the state’s accommodations sector (hotels, motels, etc.) of just $20,000. In other words, this program generates a huge negative return on investment. This program has been a demonstrable waste of money and its appropriation should go to $0.

Lawmakers put forth a solid budget that reprioritizes revenue to address areas they believe need more revenue. The roads are highest profile among them, and the budget raises funding in that area to a new, higher record level. But if the governor wants more spending on transportation, her first and perhaps last stop should be to veto items in the state’s corporate welfare budget.