This story was originally published by Bridge Michigan, a nonprofit and nonpartisan news organization. To get regular coverage from Bridge Michigan, sign up for a free Bridge Michigan newsletter here.
LANSING — Lawmakers may seek to overhaul the state’s economic development policy in the next few months, following a year of reckoning over high costs and failed projects from the state’s cash-for-jobs approach.
House Speaker Matt Hall, R-Richland Township, said legislators are burned by “really bad deals” from the Michigan Economic Development Corp. and want to establish criteria that avoid politics and multibillion-dollar spending.
This month, lawmakers defunded Gov. Gretchen Whitmer’s signature tool, the $2 billion Strategic Outreach and Attraction Reserve (SOAR) fund that has sought big-ticket deals since 2022.
Some of these deals have collapsed spectacularly in recent months, including the state declaring Gotion Inc. in default of its $175 million incentive award over stalled progress at a battery plant near Big Rapids and Sandisk’s decision not to build a multibillion-dollar semiconductor plant in Genesee County.
A Bridge Michigan analysis this year found the state awarded over $2 billion in incentives — and spent about $1 billion — since Whitmer took office in 2019.
As of spring, the projects produced only 21% of promised jobs (about 13,000 of 65,000). The official tally of SOAR job growth is zero, though new company reporting is due at year-end.
Rep. Mark Tisdel, R-Rochester Hills and a leader in the House incentive revision effort, said the state should avoid picking business winners.
Instead of luring jobs from out of state, Michigan should allow existing state businesses access to “participate in the benefits and incentives,” he said.
“We have a lot of quality businesses that have been in Michigan, and they’ve been ‘paying the freight,’” Tisdel said. “Let’s reward them.”
State Sen. Mallory McMorrow said the demise of Gotion — confirmed last week by the state — “is yet another example of why it’s long past time we put a real proactive plan in place instead of constantly being reactive.”
“SOAR did not work,” said McMorrow, a Democrat from Royal Oak.
McMorrow has advocated for a spending plan that boosts communities and opportunities for residents, saying those benefits should be considered economic development, along with direct business support.
Along with Sen. John Damoose, R-Harbor Springs, McMorrow developed what she calls a 10-year plan to improve the state’s business climate by focusing on retaining college graduates and improving natural resources, housing and transportation.
The Michigan Economic Development Corp. last week issued a statement reiterating its commitment to investing in advanced manufacturing and mobility.
“We will continue doing all we can to bring good-paying jobs and economic opportunity to Michiganders everywhere.”
MEDC officials did not respond to requests for this story.
Exploring options
So what comes next?
Michigan’s Legislature is divided politically, with Republicans controlling the House and Democrats leading the Senate. That’s led to some gridlock, but Hall said he hopes to craft a new incentive policy that puts taxpayers first.
“A lot of the politicians are too cozy with the corporations,” Hall said.
“We should be working for the taxpayers, and the taxpayers are getting a very bad deal.“
Hall said he wants:
- Incentive awards to focus on reimbursement only for actual performance instead of job promises, with no more up-front payments.
- Revised discussions about HIRE, the bills that support payroll tax deductions for certain types of job growth.
- A focus on revising state regulations, led by Rep. Bill Schuette, R-Midland.
- No additional megasite funding.
Tisdel said lawmakers expect to set a “broad set of economic principles … that will guide legislation, rules and directives.”
Issue-driven incentives — such as SOAR’s emphasis on the electric vehicle industry, which was spurred by federal subsidies — need to be replaced by uniform standards, Tisdel said.
The budget moves leave the MEDC smaller, though the agency did not respond to Bridge questions about its new configuration.
As a result of concern about the MEDC, future incentive programs could be administered by the state’s Treasury Department instead, Hall said, as a neutral party without political ties.
Further, he said, he would like to see lawmakers limit the powers of the Michigan Strategic Fund, the public funding body of the MEDC.
“I would not support something that gives the Michigan Strategic Fund the ability to just constantly change the deal after the fact,” he said of awards that were extended or downsized.
Looking ahead
As legislators look to level the incentive playing field, Michigan’s business leaders are urging lawmakers not to abandon incentives.
Many states — including neighboring Ohio and Indiana — are courting the same companies as Michigan. Both states use a suite of tax incentives and credits to lure major companies.
Many business groups — including economic developers, the Michigan Manufacturers Association and MichAuto — had urged some version of SOAR to continue.
SOAR “has yielded some significant investments toward large industrial projects that have bolstered the state’s economy,” according to MichAuto, the statewide auto advocacy group.
Its elimination “comes at the expense of business competitiveness and industry strength,” a MichAuto statement said.
Indeed, many SOAR projects still promise thousands of jobs. Ford Motor Co., for example, said this fall it will open its Marshall EV battery factory in 2026, and hiring has begun. LG Energy Solution also is hiring for the Lansing-area factory that it bought from partner General Motors.
The Michigan chamber, meanwhile, is looking at tax policy changes — like restoring the state’s R&D tax credit — that could improve business growth, according to this year’s priorities.
Maureen Donohue Krauss, president and CEO of the Detroit Regional Partnership economic development collaboration, recently created a multi-group policy coalition to unify southeast Michigan messages to businesses considering the state. That, she said, will present a strong recruiting message outside of what is done in Lansing.
“We can control messaging about what our assets are,” she said. “Not every project, by any stretch of the imagination, involves incentives or is contingent upon incentives.”
Tim Bartik, economist at the Upjohn Institute for Employment Research in Kalamazoo, warned legislators that customized job training and business development funding was eliminated from the MEDC budget, along with SOAR.
“I doubt if this is a sustainable stance,” he told Bridge, due to Michigan’s below-average job growth. “There will be considerable economic and political pressures to ‘do something’ to boost job growth.”
Bringing back some of that funding — but targeting it to more distressed labor markets — could have a payoff more so than tax breaks, he said.
This article first appeared on Bridge Michigan and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
