Rick Haglund: SOAR incentives fund flying too high, some Dem and GOP lawmakers say

If there’s one thing Michigan lawmakers from both sides of the aisle have mostly agreed on over decades, it’s handing out billions of dollars of tax breaks, cash and other incentives to businesses promising to create jobs.

But now there’s growing bipartisan support for reigning in those incentives, which some lawmakers say are not producing an adequate return on taxpayers’ money.

Democratic and Republican lawmakers are taking aim at the massive Strategic Outreach and Attraction Reserve (SOAR) Fund. SOAR was created in 2021, largely to support electric vehicle production after Ford Motor Co. shocked Lansing by announcing $11.4 billion in battery and electric vehicle assembly plant investments in Tennessee and Kentucky.

SOAR has handed out about $1.7 billion to Ford, General Motors and other corporations building an electric vehicle industry in the state.

State Sen. Mallory McMorrow, who chairs that body’s Community and Economic Development Committee, said in a March floor speech that creation of the SOAR Fund “felt like a reaction,” rather than a comprehensive economic development plan.

“However, since that time, a lot has happened,” the Royal Oak Democrat said. “And quite frankly, markets and economies change. We’ve seen some of the projects we’ve invested in using this tool resize, downsize. We’ve received pushback. 

“And I think sometimes we have to take hard lessons in acknowledging that sometimes even with the best intentions, things may not turn out the way that we wish,” McMorrow said.

Automakers are retrenching as electric vehicle sales, while growing, are falling far behind industry forecasts.

Ford, which has received $1 billion from the SOAR Fund and other tax incentives, has cut 800 jobs from the projected 2,500 workers it expected to hire at its planned Marshall battery plant.

GM, which was awarded $600 million from the SOAR fund in 2022 for a $4 billion electric truck investment at its Orion assembly plant in Oakland County, has delayed production there from this year until late 2025.

McMorrow says the state needs a more holistic economic development strategy that relies far less on trying to create jobs by forking over cash and tax breaks to businesses.

She cited Michigan’s failed 2017 effort to land Amazon’s second headquarters, despite being prepared to offer $4 billion in incentives.

“Amazon told us we didn’t even crack the top 20 because we didn’t have talent and we didn’t have transit,” McMorrow said.

In March, the Senate passed bills she and several others sponsored that will spend more on public transit, child care, housing, revitalizing downtowns and neighborhoods, and other quality-of-life issues Democrats say will help the state attract new residents and jobs.

“This is an entirely new approach to how we view economic development here in the state of Michigan, focusing on the quality and livelihood it will bring to Michigan families, workers and their communities,” said Sen. Mary Cavanagh (D-Redford Twp.).

The plan would rename the SOAR Fund the Make It in Michigan Fund. Its centerpiece is the Michigan 360 program that would take half of SOAR Fund money — up to $250 million — and spend it on community investments.

That approach is in line with recommendations from Gov. Gretchen Whitmer’s Growing Michigan Together Council, a group of state leaders charged with developing ideas on how to expand Michigan’s long-stagnant population and boost prosperity.

Its major recommendations were to establish Michigan as an innovation hub, build a lifelong learning system and create “thriving, resilient communities” that would attract young talent.

Republicans also are sore at SOAR.  House Republicans last month rolled out their jobs plan that tightens oversight of the fund and calls for unused SOAR cash to be returned to the general fund.

“Doling out billions of dollars to a few electric vehicle battery plants won’t turn our whole economy around,” House Minority Leader Matt Hall (R-Richland Township) said.

Hall cited a Bridge Michigan analysis that found Michigan is primarily subsidizing manufacturing jobs that often pay less than the state’s median wage of $45,510. And those manufacturing jobs have precipitously declined over the past four decades.

But House Republicans’ jobs plan basically recycles old ideas that didn’t grow the economic pie, including cutting taxes and business regulations, and restoring a Right to Work law.

The plan has no chance of being adopted by a Democratic-controlled Legislature. But Senate Democrats’ effort to overhaul SOAR also faces potential opposition from fellow Democrat Whitmer, who recently told the Detroit News she’s afraid to “unilaterally disarm” in the state economic development incentive wars.

States are playing a highly addictive game in competing for business investment. GOP former Gov. Rick Snyder once lamented that costly financial incentives were “the heroin drip of state government.”

Are Lansing policymakers finally ready to go to rehab?