Michigan lawmakers move to reform corporate subsidies; hurdles remain

• A House committee on Tuesday approved plans to create a 10-year economic development plan
• The bills would fund transit and housing initiatives while dedicating, $2.5 billion toward controversial large-scale subsidies
• The next step is the full House, which could face a divided Democratic vote that would require Republican support

Michigan’s Legislature took a step Tuesday to extend the state’s largest corporate investment program, while also setting aside billions of dollars for housing and transit.

Bills calling for a 10-year, $6 billion plan that includes money for factories as well as community-building programs passed the House Economic and Small Business Development Committee.

The plan next moves to the full House, where it faces mixed prospects and could need Republican support.

Democrats hold a two-seat majority in the full chamber. State Rep. Dylan Wegela, D-Garden City, is opposed because it sets aside $2.5 billion for subsidies of megasite projects.

He testified against the bills on Tuesday, calling Democratic Gov. Gretchen Whitmer’s top incentive — the Strategic Outreach and Attraction Reserve (SOAR) — a “corporate handout.”

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Michigan has put $3 billion into the fund already, and it was set to expire this year. The legislation would set aside $250 million a year for the next 10 years and rebrand the program the “Make it in Michigan” fund.

“This is the largest amount that will ever have been set aside for that type of funding in a single vote,” Wegela said.

“We have decades of evidence that this type of ‘economic development’ does not work and does not return the investment that is promised,” Wegela said. 

A Bridge Michigan investigation found that 40% of state subsidies in 2023 were used to create jobs that pay less than $45,510, the state’s median annual base wage.

The 10-year funding plan also calls for: 

• $2 billion in transit and mobility
• $1 billion to the Housing and Community Development Fund to build affordable housing 
• $500 million to the Revitalization and Placemaking Fund to support projects such as child care

Rep. Jason Hoskins, D-Southfield, chair of the House committee that approved the package, said the bills were changed ahead of the vote to address concerns about SOAR. 

The bills now require the subsidies to create higher-wage jobs and give priority to in-state business. 

Companies would not be allowed to lay off workers at one site and qualify for incentives at another, Hoskins said. And before there’s a finalized agreement for incentives, key leaders in both chambers of the Legislature would be able to review the terms. 

The bills would allow the Legislature to have oversight “if there's something that is objectionable, if there's something in the metrics that we think a business might not meet, or they're not high enough, or not bringing in a certain amount of jobs,” Hoskins said.

Despite his opposition to the bills due to SOAR, Wegela acknowledged that legislators tried to “reform what I would call a broken program” with what he called a “good-faith effort.”

Rep. Donni Steele, R-Lake Orion, also criticized the legislation, saying it didn’t do enough to ensure that “every Michigan company has an equal shot for assistance.”

“Nothing in this plan addresses that clear lack of fairness, oversight, and accountability,” Steele said in a statement.

The original SOAR bill passed with bipartisan support in late 2021, after legislators of both parties raced to make a mega deal in Michigan. Ford Motor Co. had stunned officials months earlier when it chose Kentucky and Tennessee for $11.4 billion in electric vehicle factories, leaving legislators eager to raise the incentive stakes in the state. 

Since then, the state has offered more than $3 billion in subsidies to a handful of projects, most promising thousands of jobs in return. 

The group of bills next go to the full House, then to the Senate for approvals before reaching Gov. Gretchen Whitmer’s desk.