Michigan Democrats Join Call for Corporate Welfare Scrutiny

Published November 22, 2013

Those who want to bring transparency to the Michigan Economic Development Corp. have some new allies — state House Democrats.

The MEDC is a government authority that is supposed to spur economic activity and promote the state of Michigan. For years, the MEDC has been criticized for a lack of transparency.

House Democrats are joining critics including the Mackinac Center for Public Policy in saying Michigan taxpayers have the right to find out whether the MEDC is spending tax dollars wisely or wasting them. In December pressure was put on the House Commerce Committee to put some real teeth into legislation (House Bill 4480) that is supposed to make the MEDC more transparent.

Dems Want to Recover Funds

In fact, House Democratic Leader Tim Greimel (D-Auburn Hills) told Michigan Capitol Confidential that House Democrats want more than transparency; they want provisions to recover the money the MEDC spends on poorly performing programs.

“We have to be able to know whether or not these programs, which are corporate welfare, have performed effectively,” Greimel said. “If it turns out that they haven’t, we need meaningful clawback provisions to get the money back that has been spent.”

When it was introduced in March, House Bill 4480 was touted as a way to bring transparency to the MEDC. Initially, however, the bill appeared to represent no more than a pretense of transparency promoted by MEDC officials. There were indications in the spring that House Bill 4480 would be strengthened. Instead, the bill has been in the House Commerce Committee eight months and undergone no significant changes.

Little Reform Seen

James Hohman, assistant director of fiscal policy at the Mackinac Center, said the current version of House Bill 4480 does nothing to increase MEDC transparency.

“Right now all the bill does is tell the legislature how the MEDC wants to be graded,” Hohman said.

House Bill 4480 is part of a multi-bill package that would amend the Michigan Strategic Fund Act. The Michigan Strategic Fund is an entity with broad authority to engage in promoting economic development and job creation and retention. These programs and activities are generally administered by the MEDC.

During the week just before the legislature’s departure, a hearing that had been scheduled to take up the MEDC legislation was canceled. According to well-placed sources, there currently aren’t enough “yes” votes on the committee to move the bill package.

‘Need to Make Significant Changes’

“House Bill 4480, as it currently stands, doesn’t provide any increased transparency regarding performance of programs under the Strategic Fund,” said Rep. Jon Switalski (D-Warren), the ranking Democrat on the House Commerce Committee. “To me, the Republicans have a choice. If they keep the bill as it is, they’re not interested in transparency. They need to make significant changes to the bill.

“They need to increase the amount of transparency regarding performance to hold the MEDC accountable for the taxpayer dollars it spends,” Switalski continued. “Any money that is not being used efficiently should be paid back.”

House Commerce Committee Chair Rep. Frank Foster (R-Pellston) said he’s committed to a bill package that includes strong transparency provisions.

“We want to make transparency the centerpiece of this legislation,” Foster said. “We’re willing to talk with as many people as necessary to get this accomplished.”

Sponsor Wants New Draft

Rep. Tom Leonard (R-Lansing), the sponsor of House Bill 4480, said he wants the bill to be redrafted.

“This remains a work in progress,” Leonard said. “We’re diligently working to try to add as much teeth to it as possible. My intent is that the next time we meet, whenever that may be, we’ll be able to bring in a new substitute that provides real transparency.”

In his first year in office, Leonard bucked the majority on several votes where he opposed expanding various corporate and developer subsidy schemes.

Jack Spencer ([email protected]) is Capitol affairs specialist for Michigan Capitol Confidential, a news service of the Mackinac Center for Public Policy, where this article first appeared.