JACK SPENCER: Crows come home to roost with tax credit debacle
The big story on the state budget this year is about the hit it has taken from behind. In the current fiscal year businesses have claimed $681 million in tax credits. The blow to the budget for the upcoming fiscal is expected to be even greater, at $807 million. Those credits were doled out in previous years through the Michigan Economic Development Corps (MEDC), which is the state’s corporate welfare arm.
Gov. Rick Snyder and the legislature are struggling with the situation. Budget-trimming is usually a healthy practice; but being forced to make budget cuts to pay for hand-outs to businesses and corporations is something else entirely. What’s worse, it could provide officials with an excuse to push for tax increases.
The so-called “regular news media” is and will continue to report on this topic. What it almost surely will not report is how the news media’s long-standing failure to do its job contributed to the mess. For more than a decade, the news media has shirked its responsibility to demand that MEDC provide basic transparency. And let’s make this clear –reporters weren’t at fault – the responsibility lies higher up the food chain.
The idea behind all of MEDC’s various programs and credits is to use taxpayer dollars to provide businesses with incentives (let’s face it – bribes) to create jobs. This columnist has repeatedly questioned whether this is a proper role for government; undoubtedly in the weeks to come a number of lawmakers will be publicly stating that same thing. Nonetheless, what’s especially infuriating is that – because much of the pertinent data remains hidden – there is no objective means of measuring how many – if any – jobs were created for the huge cost to taxpayers.
Audits of MEDC programs, performed by the office of the Auditor General, have revealed small glimpses of the agency’s job creation track record; and that track record has been abysmal. An audit released in 2013 showed that “at most” only 19 percent of the jobs that were projected to be created under the MEDC’s 21st Century Jobs Fund ever came to fruition. Unfortunately these audits uncover only the tip of the iceberg, because apparently there’s data even the auditors can’t get.
If the tip of the iceberg is that pathetic – why should anyone believe the unavailable information would reveal results that are any better?
Now, here’s the real rub; the public, the legislators and even the Governor himself aren’t supposed to know which companies cashed in the credits. That veil of secrecy came into being with a dubious legal opinion roughly seven years ago. But to fully appreciate MEDC’s anti-transparency nature one has to go back to its very roots.
As regards transparency, MEDC has never been trustworthy, and for the good and sensible reason that it wasn’t designed to be. It is essentially an advertising agency with a mission to promote projects that allegedly create jobs. Expecting the same agency that promotes projects to provide accurate and unbiased public disclosure about the performance of those same projects is ridiculous. The conflict of interest is so obvious that even a child would understand it.
A completely independent entity outside of MEDC should be in charge of tracking and evaluating MEDC programs. This entity should press for basic –even simple - information, which MEDC doesn’t bother with – such as how many people businesses that received credits employ on a monthly basis. Only an entity such as this – not the MEDC itself - should be reporting the results to the public.
During the administration of Gov. Jennifer Granholm, MEDC reported glowing job creation numbers. These jobs, of course, were merely on-paper projections dreamed up at the time that the tax credit deals were announced. Most of the regular news media simply took these press releases and printed them. Asking tough questions, or even noticing and probing some fairly obvious inconsistencies about the job creation claims was of little or no interest to the news media.
Then the legal ruling came down saying that even the amount of money the businesses were getting couldn’t be disclosed to the public. During this period the news media did begin displaying open skepticism about MEDC job creation claims. However, it registered little or no concern over the additional layer of secrecy the new ruling was about to spread over the agency.
When that happened the legislature should have said – either we figure out a way to be able to make this information public or shut down the MEDC. It is not surprising that it didn’t do that, especially with the news media (which is supposed to care about transparency) ignoring the situation instead of expressing outrage over it.
Government should have to account for every cent of public money it spends. That sure seems like a pretty basic principle and one that most people probably assume the news media would defend. Instead the news media compliantly watched as the MEDC made deals under the cover of darkness.
Here’s the really scary part – hopefully it is not true; but one can hardly help wondering what role the advertising dollars that MEDC and PureMichigan spends on TV, radio and newspapers has played in preventing the news media from vigorously pursuing the MEDC transparency issue.
Jack Spencer is Capitol Affairs Specialist for Capitol Confidential, an online newsletter associated with the Mackinac Center for Public Policy (MCPP). MCPP provides policy analysis. The political analysis represented in this column does not necessarily reflect the views of the Mackinac Center.