After $1B and mixed results, Michigan lawmakers cooling on corporate incentives

• Gov. Gretchen Whitmer’s bid to expand corporate subsidies failed last year but could be revived soon
• Manufacturing groups say Michigan needs healthy subsidies to compete for jobs
• Critics want reforms: ‘Eventually, you're not going to be able to write a big enough check’

Two years after bipartisan lawmakers came together to create a $2 billion program for corporate subsidies, lawmakers are divided about whether subsidies work or should be expanded. 

Gov. Gretchen Whitmer is pushing for additional investment into the Strategic Outreach and Attraction Reserve (SOAR) Fund, saying the state needs rich deals to create jobs and compete with southern states for factories.

Under her tenure, companies have received nearly $1 billion from the state through SOAR and other corporate subsidy agreements that promised to create 65,491 jobs. So far, they have created 13,079.

Last year, Whitmer had urged lawmakers to increase funding into SOAR by $500 million, but the year ended with no deal from lawmakers. In January, Republicans took control of the House and are scrutinizing the deals. Whitmer’s fellow Democrats still control the Senate but have not been in a hurry to add more money to the fund.

Since Whitmer took office in 2019 through 2024, Michigan gained 40,600 private sector jobs, according to state data. During that time, the state lost 21,600 manufacturing jobs, with the total falling to 605,600 in 2024.

Related:

• Whitmer subsidy record: Companies get $1 billion; jobs fall short of promises
• Top 10 subsidies under Whitmer: Michigan spends $900M; firms create 4,200 jobs

Manufacturers and business groups are urging the Legislature to spend more on economic development and incentives.

“If the state doesn't work to attract new investment, new growth is limited,” Mike Johnston, executive vice president for the Michigan Manufacturers Association told a House subcommittee in March. 

“Every other state is working hard to attract new investment from around the country or around the world,” he said. “The chance Michigan wins new jobs, and from new transformational investment from outside the state, without proactive incentives is very low.”

That’s not a compelling argument for Rep. Jay DeBoyer, R-Clay and chair of the House Oversight Committee. 

“What's going to happen when Indiana just decides to give them more money?” he said. 

“If that's the competition we're trying to build, it's just a matter of time before we collapse,” he said. ”Eventually you're not going to be able to write a big enough check.“

Whitmer did not respond to requests for comment from Bridge.

Corporate subsidy movement

Momentum for subsidies increased in 2021 after Ford Motor Co. announced an $11.4 billion expansion in electric vehicle manufacturing in Kentucky and Tennessee. Those states combined offered more than $1 billion in incentives.

In December of that year, lawmakers from both parties,  at the urging of Whitmer, united to create the $2 billion SOAR Fund to compete for what they hoped were thousands of jobs from emerging electric vehicle production.

The first cash award was to General Motors Corp. and its Ultium EV battery brand for $600 million.

More than three years later, data shows that zero jobs have been created under SOAR so far, despite the state spending $890 million as of September 30, 2024, on $1.96 billion promised across eight deals, two for Ford Motor Co.

Since then, lawmakers have added more business incentives, including a tax credit for research and development, capped at $100 million, along with a new $60 million innovation fund. 

Lawmakers also are considering a $100 million tax rebate for companies that expand with high-paying jobs.  That bill is a retooling of the Good Jobs For Michigan program — now called HIRE for High-wage Incentive for Regional Employment. The Good Jobs program allowed businesses to keep the state tax revenue generated by new jobs. It became law in 2017 and sunset in 2019.

Six companies received the tax capture awards before it expired; state records indicate that only KLA Corp. of Ann Arbor Township generated jobs and received funding. KLA hired 511, instead of the planned 250. 

Debating the best approach

SOAR funding still has a $200 placeholder allocation in Whitmer’s proposal for the state’s 2026-2027 fiscal year budget, which lawmakers will begin considering in the next few weeks.

The small allocation is expected to be the opening volley of negotiations about spending on incentives.

Losing SOAR  “without better or comprehensive replacements will throw us off track,” Whitmer said this year at the Detroit Auto Show.

Even Whitmer’s fellow Democrats who support incentives say more money should be set aside in economic development deals for programs that benefit residents.

Whitmer is “going to have to really work hard with all parties involved if she wants to be able to continue to use SOAR,” said state Rep. Jason Hokins, D-Southfield, a co-sponsor of legislation to tie SOAR funding to a 10-year plan for increased transit and housing. 

State Reps. Dylan Wegela, D-Garden City, an incentive opponent, and Emily Dievendorf, D-Lansing, modified that 10-year plan, with a proposal to cut SOAR to $100 million per year and increase a housing fund to $250 million.

State Sen. Mallory McMorrow, D-Royal Oak, launched official pitches for SOAR reform in 2023, rebranding it as Make it in Michigan and adding what she called Michigan 360 to address regional prosperity and community revitalization. 

A Bridge investigation published in 2024 showed that Michigan had pledged $335 million in economic development incentives in 2023 to 83 companies that planned to create 11,408 jobs. Of them, 40% of jobs created were to pay less than the state’s average, and nearly 90% of incentives funded manufacturing jobs, Bridge found. 

Focusing on job creation as the measure of success in economic development is “problematic,” McMorrow wrote last year as she pushed for incentive reform. 

“We were kind of going after the scatter-shot approach of going after every project, and offering larger and larger sums of incentives,” McMorrow told Bridge this month. “What I heard from CEOs was, ‘We need these incentives because we don't have the talent, or it's difficult to locate in this area because there isn't housing.

“It’s trying to use incentives to solve some fundamental issues on the back end, which costs significantly more than addressing it on the front.”

McMorrow has found a Republican ally in Sen. John Damoose, R-Harbor Springs, in pushing for a new approach to economic development. 

They are consponsoring initiatives to launch 10-year strategy planning and to set up an advisory board to the Michigan Strategic Fund, the public funding arm of Michigan Economic Development Corporation that votes on incentive awards.

A 10-year economic development strategy would bring certainty for businesses seeking assistance and the highest return for taxpayers, McMorrow said, eliminating jolts as political majorities shift.

An incentive plan also needs to revise the MEDC’s measurable metrics for success, like adding median household income, access to housing, transportation needs, population and educational attainment, McMorrow said, as well as considering more frequently the needs of the different regions of the state.

Republicans are pushing for more legislative oversight of spending and the type of jobs created by incentives, as well as greater geographic and industrial diversity for the spending.

House Speaker Rep. Matt Hall, R-Richland Township, is proposing a massive road-fix bill, funded in part by redirection the $500 million per year in SOAR funding that ends this year. 

In addition, he set up a House subcommittee to focus on corporate subsidies. 

“These deals are not good deals,” Hall said in April 2024 while announcing Republican approaches to incentives.  “We’re paying way too much money with not enough return for the taxpayer.”