‘Economic Development’ week skips the ‘development’ part – Michigan Capitol Confidential
Demands for corporate social assistance are high, but results are virtually non-existent
On March 18, 2010, Governor Jennifer Granholm appeared at a media event with Richard Short, the CEO of a company called RASCO. The company had just received $9.1 million in business grants from the state of Michigan for what officials called an “alternative energy company.”
The day after this media event, Short was arrested by Michigan State Police. Short had violated his parole and defrauded a mortgage company by cashing a check for $73,000. He was accused of stealing money from an elderly woman with dementia who lived next door to him. Short’s daughter said her father was a serial con man who faked cancer. When he met Granholm, he was living in a trailer park.
Short never received this tax credit from the state’s corporate welfare agency, the Michigan Economic Development Corporation.
Governor Gretchen Whitmer said that from May 3 to May 9 economic development week. But residents are unlikely to hear about the checkered past of economic development programs in this state. Since 2001, Michigan lawmakers have approved $17.7 billion in cash grants for developers and corporate owners, and billions more in tax breaks and other select favors. A Mackinac Center dashboard shows how state officials and senators voted on bills authorizing about $6 billion of that amount.
Business welfare in Michigan generally follows a predictable pattern: there’s a press conference that gets major media coverage, announcing a deal with job forecasts. Then there’s very little tracking on how these companies are doing.
This happened several times during Granholm’s administration. The governor promoted the opening of an alternative battery company called A123 Systems at a press conference in 2010, which has been videotaped on the MEDC website. Granholm said many alternative energy companies such as A123 Systems would create 63,000 jobs in Michigan over a decade. She repeated the 63,000 job claim for emphasis, then a phone rang with a prearranged call from President Barack Obama. Obama congratulated A123 Systems for reaching “an important milestone”.
But A123 Systems filed for bankruptcy in 2012 and was eventually acquired by a Chinese company. The MEDC removed its video of the press conference.
A similar fate befell many alternative energy projects supported by the MEDC under the Granholm administration.
Although the MEDC promotes its publicly funded projects by touting the number of jobs these projects will create, it does not have to disclose the number of jobs that will be created.
Many jobs advertised in press releases never materialize.
A Report of the Auditor General in 2013 found that only 19% to 22% of the jobs promised by companies subsidized by various MEDC programs were created.
But that didn’t stop Granholm from pretending the jobs were real.
Economic development corporation claimed 1.4 million direct, retained and indirect jobs created, according to a MIRS News study of all job claims that were made in press releases during the Granholm administration . That would represent 29% of the state’s labor force at a time when Michigan had the highest unemployment rate in the nation. By the end of Granholm’s two terms as governor, 596,000 fewer Michigan residents had jobs.
In 2017, the Michigan Auditor General examined the performance of a state subsidy program called MEGA, comparing the number of jobs projected with the number of jobs created. The state audit found that companies were rarely producing the number of jobs they originally claimed in 2014, 2015 and 2016.
Years later, the MEDC is still credited for accomplishments that have not materialized. In 2021, during the COVID-19 pandemic, Whitmer said the MEDC subsidized a building that pharmaceutical company Pfizer was using to make a COVID vaccine. The building, however, had not yet been constructed.