In June, when the Michigan House Appropriations Committee accepted a request from Ford Motor Co. of $100 million, promising to create 3,030 new electric vehicle jobs, Rep. Jeff Yaroch, R-Richmond, asked: “Is that who we are. stay, what do we have to pay the 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 would not be possible without the support of the state.”
Yaroch really wondered if there are other approaches that might work to attract business, such as rolling back regulations or having a lower tax burden.
Time and time again, Michigan’s largest companies require state grants to expand in Michigan. For lawmakers and taxpayers and observers the question must be, why?
Do these businesses need special arrangements because the economics of business expansion don’t work in Michigan? If the economy isn’t working for Michigan’s biggest businesses, how much worse off for its small businesses? It’s hard to see how targeted gifts change that dynamic. If anything, they mask it.
The rejection nature of the deal was another problem. It didn’t take a vote of the full Michigan legislature, or a signature from Governor Gretchen Whitmer, for Ford to get the $100 million. All it needed was a majority vote in two committees, the House and the Senate.
While Michigan residents send 148 lawmakers to Lansing, only 46 were eligible to vote on Ford’s $100 million. Should big business be handled in back rooms?
“The process is working as it should,” Quentin Messer Jr., leader of the Michigan Economic Development Corporation, said at the June 23 meeting of the Senate Appropriations Committee. “No money has been distributed 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 $100 million disbursement for a potential $1.16 billion project has been approved by the MEDC board and the House Appropriations Committee. The Senate Appropriations Committee is the final step.
This final step turned out to be more like a rubber stamp. The House committee had a livelier discussion than its Senate counterpart on the transfer of taxpayer funds, lasting about an hour.
Things moved faster in the Senate. Not quite eight minutes after the roll call began, and without a single question from a committee member, the Senate Appropriations Committee approved the $100 million by a vote of 14 to 3, with a absent legislator His House Appropriations counterparts had approved the transfer by a 20-8 vote.
The headlines immediately blasted the good news: Ford was expanding into Michigan.
July brought the bad news: Ford would lay off 8,000 people to expand electric vehicle operations.
House Appropriations Chairman Thomas Albert, R-Lowell, had pressed the MEDC to explain what safeguards are in place to ensure Ford honors its commitment, saying, “There could be layoffs today or tomorrow.”
“What is the definition of a job created?” Albert asked too.
MEDC’s Josh Hund said the projected job numbers refer to net jobs: 3,030 jobs on top of the 22,190 manufacturing jobs Ford had in Michigan at the time. The jobs must be maintained for 12 months and “must be above” the benchmark number for Ford to honor the deal.
If, by June 30, 2025, Ford has not 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 recover part of the $100 million grant.
“If at that time we determine that some of those jobs do not meet that 12-month maintenance period, or other conditions attached to those jobs, they would not count and the company would have to return a portion of the subsidies,” MEDC attorney Christin Armstrong told the House committee.
But would he? Realistic? 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 handover was not upsetting. The full Legislature had spoken, he said, when it approved $1 billion in economic development funds. The Strategic Outreach and Attraction Reserve, or SOAR, was set aside for this occasion.
Allor has no problem with legislative transfers, as a general proposition. But he voted no to this particular transfer.
“Too many freebies,” Allor told Michigan Capitol Confidential about the transfer, officially known as Legislative Transfer Package 2022-4. “And where does this money come from? It comes from the taxpayer.”
Sen. Adam Hollier, D-Detroit, voted yes on the transfer. He told CapCon that 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 there will be gains in the electric vehicle space, and we need to make sure that those The earnings are in Michigan, that the new jobs being hired are here in Michigan and that the growth is here in Michigan,” Hollier said.
“When they talk about reducing it, we hope and expect that it will be reduced in other states,” Hollier added.
Sen. Jim Runestad, R-White Lake, has not heard those assurances. He voted no on the transfer.
“I found that there are a lot of small print issues that come up, and I think we’re seeing that with this,” Runestad said. “How can they say, ‘We’re hiring with this hand and we’re firing with this hand?’ You just couldn’t give $100 million to one company, when they all need tax breaks.”
James David Dickson is the editor-in-chief of Michigan Capitol Confidential. He writes a Sunday column on government issues in Michigan. Email him at firstname.lastname@example.org.
Last weekend, I wrote about Warren Mosler's argument that the Fed's rate hikes could be…
Last weekend, I he wrote on Warren Mosler's argument that the Fed's rate hikes could…
Last week, the chairman of the Fed, Jerome Powell said, "the disinflationary process has begun".…
Earlier this week, I joined Romaine Bostick and Scarlet Fu Bloomberg TV. The Congressional Budget…
Tomorrow morning, I'll be joining CNBC's Squawk Box to talk about a new effort tax…
Former Vice President Mike Pence talks about privatizing Social Security. The remarks came Thursday before…