• Michigan Senate Democrats on Thursday proposed legislation to divert money from economic development to roads
• The plan would ax $500M in annual funding for the SOAR fund, sending some of that back to a state transportation fund
• The proposal comes as Michigan lawmakers race to finalize a budget deal to avoid a government shutdown next week

LANSING — Michigan Senate Democrats on Thursday introduced a measure to eliminate future funding for a key business incentive program, a move that could pave the way for a road funding and budget deal in Lansing.

The proposal, laid out in an amendment set for a possible vote but not publicly discussed, would eliminate $500 million in annual funding for the Strategic Outreach and Attraction Reserve (SOAR) Fund — Gov. Gretchen Whitmer’s signature economic development program.

Later Thursday, the Republican-led House approved a bill that would cancel a planned corporate income tax deposit into the SOAR fund for this year as part of a larger road and state budget framework.

Funding for both roads and economic development has been a sticking point in budget negotiations in Lansing, where Whitmer and the Legislature must finalize a deal by Tuesday night to avoid a government shutdown.

Leaders in the House and Senate, as well as the Whitmer administration, did not immediately respond to multiple requests for comment regarding the legislation on Thursday afternoon.

SOAR grounded?

While House Republicans had already proposed redirecting SOAR funding to roads, Whitmer has lobbied to continue funding for the program, which her administration has used to spend more than $2 billion on large-scale subsidies and land development to try and lure job creators to the state.

Whitmer’s initial budget proposal included only a placeholder for potential SOAR funding, but she signaled that she expected hundreds of millions to remain available to economic developers trying to make big jobs deals.

“I know securing these big factories hasn’t always been easy, but we gotta keep working on it,” she said in January at the Detroit Auto Show. “We can’t just unilaterally disarm, like some on the far left and far right would have us do.”

But the SOAR program — once a bipartisan win as Michigan chafed from losing a Ford Motor Co. investment in 2021 — became controversial.

Scrutiny over the spending quickly turned to skepticism that the dollars, the most ever spent by the state on cash-for-jobs deals, would yield a payback.

Many of the companies were tied to the electric vehicle industry and received extensions on their projects as sales lagged. Ford on Thursday reported hiring 100 workers at its new, downsized battery factory in Marshall; that deal along with five others are supposed to deliver nearly 15,000 jobs in the coming years.

By summer, as a $20 billion incentive offer to Sandisk fell apart when the company withdrew its interest, lawmakers in both parties were expressing weariness with the high-dollar corporate giveaways.

Road funding push

Whitmer has long pushed for additional road funding after winning election in 2018 on a promise to “fix the damn roads.” 

After lawmakers rejected her 2019 proposal for gas tax hikes, the Democratic governor instead borrowed money for state road construction through a $3.5 billion bonding program. That money is running out, however, and the governor has warned of a looming “fiscal cliff.” 

Related:

• Cash-for-jobs deals targeted in Michigan. What to know about agency funding them
• Michigan House Speaker Matt Hall ‘optimistic’ budget shutdown can be avoided
• Michigan schools face tough calls as government shutdown looms
• State workers left in dark as Michigan shutdown, layoffs loom

Redirecting SOAR dollars could be just one part of a larger road funding puzzle that lawmakers are still trying to piece together.

There appears to be growing consensus that the state should devote all taxes paid at the pump to transportation, an approach both Whitmer and House Republicans have endorsed.

Doing so would mean forgoing some sales tax revenue that currently goes to schools and local cities, which Senate Democrats are unlikely to support without replacement revenue for those entities.

The legislative amendment introduced Thursday appears to address that issue by devoting some annual income tax revenue to schools.

House Republicans are now considering whether they could support any new taxes to include in the deal, according to The Detroit News. Among the potential ideas: New taxes on wholesale marijuana, hemp drinks, deliveries or digital advertising.

As she began her latest push for more road funding in February, Whitmer urged lawmakers to consider new taxes on corporations and marijuana.

‘Hugely different’ proposals

Officials from the Michigan Economic Development Corp., which administers the state’s incentive program, declined to comment Thursday while the Senate remained in session.

However, on Wednesday, the MEDC’s executive committee was briefed on widely diverging budget proposals for the agency’s programs. The House proposes $65 million, the Senate, $176 million and Whitmer $205 million plus a placeholder for SOAR megadeals.

“These (proposed amounts) are hugely different, and this is why we are not able to make an informed recommendation about a full-year corporate budget,” acting CFO Hannah Rethamel told the committee.

Besides state funding, the MEDC will receive $69 million from other sources in revenue in 2026 — much of it tribal gaming revenue. This year, corporate revenue was $84 million.

Unclear is how cutting SOAR will affect the MEDC staffing and programs, which also include small business support, business lending and travel promotion through the Pure Michigan office.

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