Editorial: Biz development as political tool? No, thanks

The Detroit News

The role of government in business and community efforts is often debated in Michigan, with some conservatives questioning whether the state should pick winners and losers. Now that it appears some of that economic development funding is being used as a political tool, taxpayers should weigh whether the spending is still justified.

A recent Detroit News report looked at how three small Michigan communities — all in Republican districts — may be facing political retribution from the state’s economic development arm because their lawmakers did not support Democratic Gov. Gretchen Whitmer’s budget.

These are two buildings that the Alpena Downtown Development Authority has said could benefit from $300,000 in facade restoration funding from the state. The award was pulled from a state board's agenda in September.

Last fall, the towns of Paw Paw, Alpena and Manistee had been promised $600,000 in facade restoration grants awarded by the Michigan Strategic Fund, which is controlled by a board that decides how state community and job development dollars are distributed. The funding had been set aside in 2018.

More:How 3 communities got caught in a Whitmer-GOP funding fight

Yet at the end of September — right around the time lawmakers approved a $26 million cut to business attraction and community revitalization dollars (25% of the line item) — the Michigan Economic Development Corp. informed the three communities they would not receive the promised funding. The MEDC is the Michigan Strategic Fund’s administrative arm.

The MEDC blames the budget “uncertainty” for the withholding of facade funding.

Whitmer administration officials say the cuts made by Republican lawmakers make the local grants unwise.

But it’s obvious there’s more to the story.

The Michigan Strategic Fund received around $200 million in the current budget, with $89 million directed to business attraction and community revitalizatiohn. The total figure also takes into account the loss of $37.5 million in the Pure Michigan travel campaign funds.

Gov. Gretchen Whitmer speaks with Speaker of the House Lee Chatfield before her State of the State speech in this file photo from Tuesday, Feb. 12, 2019.

Whitmer had killed the Pure Michigan funds as part of her nearly $1 billion in budget vetoes to get Republicans to come to the table on road funding.

Although some of her vetoes got added back in, the tourism funds got left out.

So the MEDC is feeling the sting of those cuts. But it shouldn’t take out its frustration on Republican-majority communities.

Some free-market observers are cheering on these cuts to what they see as corporate welfare.

Michael LaFaive, senior director of the Morey Fiscal Policy Initiative at the Mackinac Center, says the millions in funding the state directs to the MEDC would be spent on other pressing needs, such as road funding. And if small business owners weren’t paying taxes into the MEDC, then they would have more money to direct to their own businesses.

LaFaive isn’t surprised to see communities represented by Republican lawmakers taking the hit.

“It’s hard to take the politics out of Lansing,” he says.

The Mackinac Center has long argued that the return on investment for government-sponsored economic development — especially tourism — isn’t worth the taxpayer burden, and may even have a negative impact.

Lawmakers now have a good opportunity to see how these programs fare in the coming year, and, if they are going to be mired in politics, may decide to direct the money toward road funding instead in the next budget.