Gov. Whitmer’s SOAR incentive fund, once a triumph, now faces headwinds
- Michigan started its SOAR fund to subsidize the largest manufacturing deals that consider the state
- Nearly $2 billion later, both Republicans and some Democrats are weary of the mega spending
- This fall, Democrats vow to overhaul Michigan’s incentive spending
Michigan suffered a gut punch two years ago when home-grown Ford Motor Co. announced it would spend $11.4 billion on electric vehicle production campuses not in Michigan, but in Kentucky and Tennessee.
Michigan’s industrial legacy
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A new road:
Within weeks, Democratic Gov. Gretchen Whitmer and a Republican-led Legislature punched back: announcing the state would steer $1 billion into a new incentive program to recruit and retain “critical industries” like manufacturing, a pot that has since grown to $2 billion.
The Strategic Outreach and Attraction Reserve (SOAR) Fund was born.
Two years later, Michigan has landed four large EV battery deals. But initial excitement over the deals has given way to pushback from lawmakers in both parties. Democrats, who now control the Legislature, told Bridge Michigan they soon will introduce bills to rein in the SOAR program.
“We've made it abundantly clear that we are going to reform the tools in a way that makes more sense,” said Sen. Mallory McMorrow, D-Royal Oak, who chairs the Senate Economic and Community Development Committee.
SOAR supporters say the program has made Michigan more competitive for projects that bring in 1,000 or more jobs. Most are related to EVs, with companies pitting states against each other for favorable subsidies to locate there. Indeed, since the beginning of last year, more than $13 billion in subsidies have been awarded across the U.S., according to a study from progressive policy group Good Jobs First.
But enthusiasm for SOAR incentives has waned in Michigan over concerns as varied as the expected pay of promised jobs, the size of incentive awards, what if anything the state is asking of companies in return.
Some critics say Michigan’s focus on the number of new jobs is misplaced, particularly as SOAR subsidizes manufacturing jobs that will pay far less than the state’s median earnings, which were $55,432 in 2022 (median household income was about $67,000).
The state’s investment in economic development shouldn’t be limited to “chasing … manufacturing jobs,” McMorrow told Bridge.
Join us for live discussion Thursday on Michigan’s industrial legacy
On Thursday, Sept. 28 at 12 noon, Bridge Michigan business editor Paula Gardner and environment reporter Kelly House will discuss their industrial legacy reporting project. Senior editor David Zeman will moderate this interactive discussion. Bring your questions!
Moving forward, she said, incentives “are going to be much more prescriptive than we've seen in the past,” so that taxpayer funding for these projects better aligns with the state’s prosperity and climate goals.
That includes new environmental expectations, McMorrow said: If companies “have a bad environmental track record, is that somebody that we want to be proactively pursuing?”
Unclear is where Whitmer stands on incentive changes. She declined an interview with Bridge. Her spokesperson touted 36,000 new automotive jobs in Michigan since Whitmer took office.
In May, the governor wrote Democratic legislative leaders defending her record, saying “our economic strategy is working.” McMorrow described weekly meetings with the governor’s staff since then as collaborative.
Business leaders, including the Michigan Chamber, support SOAR but said some ideas for reforms — such as expanding daycare subsidies — also will benefit employers. Some are involved in discussions with legislators and await final details.
John Walsh, president and CEO of the Michigan Manufacturers Association, defended incentives as important to Michigan’s manufacturing future.
Manufacturing incentives may inspire companies to add research and development and other functions to their expanding production sites, he said. At minimum, they will help keep companies here in Michigan, employing tens of thousands of workers connected to the state’s auto industry.
“If we want to have a part of that, … we have to entice our companies to stay in Michigan and perhaps bring others here to do the same,” Walsh said.
But Tim Bartik, senior economist at the Upjohn Institute for Employment Research in Kalamazoo, said sound incentive programs need constraints.
The move to bigger and bigger incentives “cannot continue,” Bartik said. State budgets have expanded due to federal pandemic relief and efforts to increase EV and silicon chip manufacturing in the U.S. But that money won’t be replaced when it runs out.
“We’re going to have to be smarter and target these things quite a bit more than we've been doing in the past,” Bartik said. Being more selective may “require some tough choices.”
Some Republicans have soured on SOAR, too. Sen. Jonathan Lindsey, a Republican from Allen who sits on the Senate’s economic committee with McMorrow, called the awards corporate handouts.
“We have made it clear to large corporations that the state of Michigan…is a piggy bank that is so foolishly obsessed with trying to get headlines out of winning these big deals,” he said. “We put ourselves in such a bad negotiating position.”
Democratic leaders say no more SOAR projects will be approved until the Legislature addresses the impending reform bills. McMorrow said lawmakers will seek a bigger voice in the award of corporate grants for job creation, as well as in the kind of jobs the state should prioritize.
There was some grumbling, for instance, after Ford said it would build a $3.6 billion EV battery factory in Marshall. In return for $330 million in SOAR grants (and a combined $2.2 billion in public subsidies), the automaker promised 2,500 jobs, but 80 percent of them will be semi-skilled and start at $20 an hour ($41,600 a year), far below Michigan's median household income.
Michigan, McMorrow said, should be asking questions like, “Are these jobs actually going to do the work of attracting new residents to the state of Michigan?”
And, “Is it going to raise the median income?”
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