Testimony, HB 5104-5107 — Make it in Michigan Fund Reforms

Summary

Testimony of Rachel E. Richards, Fiscal Policy and Government Relations Director at the Michigan League for Public Policy, presented October 24, 2023 to the House Committee on Economic Development and Small Business on HB 5104-5107, the Make it in Michigan Fund reforms. The League supports the bills, sponsored by Rep. Hoskins and Rep. Andrews, stating they add guardrails, transparency and accountability to the fund formerly called the Strategic Outreach and Attraction Reserve (SOAR) Fund. The testimony describes added project factors, including location in an economically disadvantaged community, employer-sponsored benefits and recent layoffs, and the requirement that at least 20% of the total award support the community where the business is located. It cites the Amazon HQ2 project in Virginia as an example.

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MICHIGAN LEAGUE aril PUBLIC oe

Testimony Presented to the House Committee on Economic Development and Small Business
HB 5104-5107 — Make it in Michigan Fund Reforms

Rachel E. Richards, Fiscal Policy and Government Relations Director
October 24, 2023

Good afternoon Chair Hoskins and members of the Senate Committee on Economic
Development and Small Business. My name is Rachel Richards, Fiscal Policy and Government
Relations Directar at the Michigan League for Public Policy. For those of you who are not yet
familiar, the League is a nonpartisan research and advocacy organization that promotes
economic opportunity for all and analyzes the impact of public policy and budget decisions on
the lives of Michiganders who have been historically and systemically left out of prosperity. We
are the only statewide policy organization to address poverty in a comprehensive manner, and
we do so by advocating for policies that address immediate issues affecting Michiganders
today while also attempting to tackle the upstream issues causing the outcomes we currently
see. The League is also the state's Kids Count organization, working as a part of a national
effort to measure the well-being of children at the state and local levels and to shape efforts
that improve the lives of Michigan children.

The League supports House Bills 5104-5107, sponsored by Rep. Hoskins and Rep. Andrews,
which will provide increased guardrails, transparency and accountability to one of Michigan's
largest economic development funds, the Make it in Michigan Fund, or what was formerly
referred to as the Strategic Outreach and Attraction Reserve (SOAR) Fund.

It's not common for the League to be testifying on an economic development package. In fact,
we are often on the other side of the issue. For us, child care is economic development.
Education is economic development. Strong worker benefits and social safety net programs are
economic development. Affordable, accessible housing and transit are economic development.
And investing in thriving and vibrant communities is economic development. Without these
investments in Michigan's people, the state fails to attract and retain both workers and
employers.

However, if states are going to use economic development incentives—and Michigan currently
does—we should make sure that the programs are set up to provide a significant benefit to the
communities, workers and families in which these employers locate. The result of economic
development incentives should not simply be landing the project, but also making sure the
project leaves the state in a better place. We should make sure that we aren't just chasing jabs,
but creating good jobs. And we should ensure that the programs we have are effective at
meeting their goals. This package of bills helps improve one of our existing programs in the
following ways:

Using data to educate, advocate and fight for policy solutions that undo historic and systemic racial and economic inequities to lift up
Michiganders who have been left out of prosperity.
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e Improves transparency and accountability around the projects being funded through the
Make it in Michigan Fund.

¢ The addition of factors the state must use in determining which projects are funded,
including whether the project will be located in an economically disadvantaged
community; whether the potential business provides access to employer-sponsored
benefits, like healthcare, paid family and medical leave, or retirement opportunities;
whether the potential project has downsized or laid off workers recently; and whether the
project has engaged with the community in which it intends to be located.

« Adds these economic development tools to the Economic Development Incentive
Evaluation Act, which requires the state to periodically evaluate the effectiveness of
various state economic development incentives. This requirement was created in 2018,
and the League supported its enactment.

A key piece of this legislation is the requirement that at least 20% of the total award under the
Make it in Michigan Fund must support the community in which the business is located. These
funds will not go to the business directly nor will they be used to directly benefit the specific site
of the business. Instead, municipalities, certain educational institutions or community
organizations, among others, would receive the funds to benefit the community and indirectly
benefit the locating project. These organizations would then use the funds to improve
community needs such as workforce programming and training, the expansion of childcare,
mental or behavioral health services, youth programming, infrastructure improvements like
water and transit, a housing analysis to identify current and future housing needs, or other
community resources like broadband and green space preservation.

We are an organization that both follows the data and listens to our community partners to
inform our policy decisions, and both of those continually show that the need for investments in
these areas—child care, affordable and accessible housing, safe drinking water and public
transit—is high. Additionally, community needs differ, and ensuring that there is community input
in what investments will be made with these funds is necessary.

Based on an analysis by Michigan State University, there are 20 counties in Michigan where at
least three children under the age of 5 are competing for a single child care slot—otherwise
known as a child care desert—which results in families unable to access care of any kind, let
alone affordable care. And some communities have a complete lack of slots available for
infants and toddlers, who have the highest care needs of any age group. This lack of care has a
significant impact on our overall state economy. A recent report details that we are losing an
estimated $2.88 billion in annual economic activity due to the lack of affordable, accessible
child care.

What's more, nearly 1 in 4 Michigan households has a high housing cost burden, where housing
costs exceed 30% of a househald’s income, with rates higher for renters and people living in
urban communities. A recent report by the Lumina Foundation found that only 50.5% of
Michigan working-aged adults (25 to 64) had a postsecondary credential or degree in 2021. And
while the statewide unemployment rate is currently 3.7%, disparities exist among zip codes,
gender and race, and our labor force participation rate remains low.

A recent example of how this has worked in practice is the Amazon HQ2 project in Virginia.
While a portion of the Virginia proposal was typical economic development incentives paid

Using data to educate, advocate and fight for policy solutions that undo historic and systemic racial and econemic inequities to tift up
Michiganders who have been left out of prosperity.
1223 TURNER STREET » SUITE G1 + LANSING, MICHIGAN 48906
AUNITED Way AGENCY
directly to the business or provided in a way that would directly benefit the business, a key
component of the proposal was a significant investment in education, focusing on future talent
in the tech space. Virginia landed the project over other states that promised larger direct
payments and investments in the business itself. While earlier this year, Amazon announced
they'd be pausing the construction of the HQ2 office due to economic conditions and a remote
workforce, the investments in education will continue to benefit the community, as they were not
provided directly to the company. Ultimately, regardless of whether the proposal continues to
move forward, Virginians have benefited and will benefit from the education investments, and
the project ultimately leaves the state in a better position.

We recognize that this legislation will not solve the holistic needs of the state. A recent report
notes that the state needs over $3 billion in additional investment in child care to ensure
affordable, accessible, high quality care that provides child care workers a living wage and
benefits like healthcare. infrastructure needs an additional $3.9 billion annually according to one
study, and another notes that our schools face a gap of $4.5 billion to adequately educate our
children. These are holes created after decades of disinvestment and years in which there were
not enough revenues to meet current needs. We also recognize that future evaluations may
determine retooling of the criteria to make sure we are landing good jobs, with standards around
pay that are geographically and occupationally aligned and safe working conditions. And while
no one tool will reverse these outcomes, we must start having a conversation around a
comprehensive approach to addressing these community needs.

Using data to educate, advocate and fight for policy solutions that undo historic and systemic racial and economic inequities to lift up
Michiganders who have been left out of prosperity.
1223 TURNER STREET + SUITE G1 + LANSING, MICHIGAN 48906
P: 517.487.5436 © F: 517.371.4546 » WWWEMLPPLORG
AUNITED WAY AGENCY


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