Michigan House Democrats unveil new economic development plan

A group of Democrats in the Michigan House wants to provide long-term funding for corporate subsidies while adding a new transit fund to the mix. Their plan marks the latest addition to competing proposals to overhaul the economic development fund Gov. Gretchen Whitmer has championed to lure manufacturing jobs to Michigan.

House Democrats plan to introduce legislation Tuesday to extend funding for the Strategic Outreach and Attraction Reserve (SOAR) fund 10 years beyond its current expiration date, according to state Rep. Jason Morgan, D-Ann Arbor, who helped craft the proposal. It would provide up to $250 million annually to SOAR through the 2036 fiscal year, he said. It would also provide up to $200 million each year for a transit and mobility fund.

SOAR once enjoyed bipartisan support. But after losing control of the Michigan Legislature, Republicans have largely opposed funding requests for projects touted by Whitmer as key to ensuring Michigan maintains its competitive edge in its homegrown industry: autos.

Since its creation, the fund has primarily subsidized projects related to electric vehicles, drawing criticism from GOP House Leader Matt Hall, R-Richland Township, who voted to create SOAR. "I never thought it would only be used for basically electric battery plants," Hall said earlier this year.

Meanwhile, some Democratic lawmakers have expressed discomfort with the amount of business subsidies they've approved.

In the state Senate, Democrats have already passed legislation to move funds currently slated for SOAR. Under their proposal, 50% of the corporate income tax revenue earmarked for the fund would instead go to community investments ranging from child care to transitional housing for those recovering from a substance use disorder. But it wouldn't touch the timeline for funding SOAR, letting the automatic deposits into the fund expire in the fiscal year that ends Sept. 30, 2025.

Democrats in the House argue their longer-term funding for SOAR — especially when paired with transit and other investments in housing and placemaking — reflects the kind of comprehensive approach and vision Michigan needs to grow its economy and population.

"This would be the largest sustained investment in transit in Michigan's history," Morgan said.

Transit advocates have long clamored for more funding in a state known for putting the world on wheels while lacking the kind of extensive and reliable public transportation networks common in other U.S. metro areas.

House Democrats' legislation would also extend other earmarks of corporate income tax revenue: up to $50 million for a placemaking fund and up to $100 million for a housing and community development fund, according to Morgan. State Rep. Jason Hoskins, D-Southfield, who chairs the House Economic Development and Small Business Committee, said he may hold a hearing on the package next month.

For some Democrats, their big spending on business subsidies fits uncomfortably in the legacy of a historic Democratic trifecta in which the party enjoys full control of state government for the first time in 40 years. So some began eyeing changes to Michigan's economic development.

What does the path forward on economic development look like?

"I have rarely been so excited about an idea that just feels like it has it all," Morgan said. He characterized House Democrats' plan as the kind of holistic economic development needs that also provides businesses with certainty. "We can't be successful as a state with a short-term, ever-shifting strategy," Morgan said.

But at least one Democrat opposes the legislation — and Democrats will need every vote if Republicans unite in opposition. State Rep. Dylan Wegela, D-Garden City, who has routinely opposed corporate subsidies called the proposal "legislative malpractice."

"It is a departure from what I hoped the Democratic Party would stand for. And the thing is, there are some good parts about the quote unquote reform, the problem is they're extending (SOAR) 10 years," Wegela said. If lawmakers want to invest in public transportation they should do so without providing billions for corporate subsidies, he said. "There's nothing stopping us from doing that."

Republicans in the House, for their part, have laid out their own proposals that would include reinstating Michigan's so-called right-to-work law and cutting taxes, almost certain to go nowhere in the Democratically-controlled chamber.

Anything Democrats pass in the state House would need to garner support in the state Senate. State Sen. Mallory McMorrow, D-Royal Oak, who chairs the Senate Economic and Community Development Committee, has said repeatedly that she wants to imagine what the state's economic strategy looks like after current automatic funding for SOAR dries up.

She told the Free Press before the Senate passed her legislation that she didn't see an appetite to extend funding beyond the current sunset. And when her bill passed, she called SOAR a "temporary tool." McMorrow did not immediately respond to a request for comment on the House legislation.

Michigan Economy: Battle over Michigan economic development policies heads to state House

Conference to reveal political shift on economic development again?

The House legislation will land the same day Michigan politicians and business leaders gather on Mackinac Island for the Detroit Regional Chamber's annual policy conference that has in recent years illustrated the divide over economic development policies.

At the gathering two years ago, legislative leaders from both parties joined Whitmer to announce more than $100 million from SOAR for Ford to create 3,200 jobs.

But the next year, after Republicans opposed subsequent deals, no GOP lawmakers joined Whitmer at the conference when she affirmed her administration's economic development strategy. At a news conference, Democratic lawmakers forecasted a greater focus on community investments along with public funds to land deals with companies but were vague on details.

McMorrow later pointed to that announcement as providing the broad outline for her own economic development legislation. As initially proposed, the legislation would require 20% of public funding for state deals with companies to go toward community investments in the area where a company planned to locate or expand.

Whitmer voiced general support for the package the day after it was introduced. But she opposes the changes from Senate Democrats to move half of funding slated for SOAR to a community investment fund.

It is unclear where she stands on the latest proposal in the House. "Like any legislation, we will review it as it moves through the process," said Whitmer's press secretary Stacey LaRouche in an email.

Contact Clara Hendrickson at chendrickson@freepress.com or 313-296-5743. Follow her on X, previously called Twitter, @clarajanehen.

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This article originally appeared on Detroit Free Press: Michigan Democrats weigh future of economic development