Michigan's workhorse business subsidy program has handed out 875 deals since 2012, but the majority of recipient companies fail to meet their job creation targets, according to a new analysis from the Mackinac Center for Public Policy published this month. The Michigan Business Development Program has paid out $507 million of $792.2 million in approved spending, yet only 336 of its 875 projects have successfully reached the end of their grant agreements — roughly the same number that have been dismissed or terminated. The analysis concludes the program wastes taxpayer money by subsidizing business expansions that would have happened anyway.

The program's success rate has declined sharply over time. In 2012, companies created enough jobs to collect 83% of what was offered, and in 2013 they created 98% of announced jobs and collected 89% of authorized money. By 2018, only 57% of jobs were created and 58% of approved funds were paid out. In 2023 and 2024 deals, just one-third of approved funds were disbursed, though most grant periods are still ongoing. Meanwhile, lawmakers have ramped up spending: administrators made $33 million in deals in the program's first year, compared to more than $100 million in 2024, but only $34 million has been paid out for those 2024 deals so far. Each year the program costs about what it takes to manage the state's fisheries.

The report finds that the program's fundamental problem is that it "gives taxpayer money to companies and doesn't ask for anything in return." Any business with a project expecting to create 25 to 50 jobs is eligible, regardless of whether they would do anything differently without the money. The only preference given is to businesses "that need additional assistance for deal-closing and for second stage company gap financing," but companies aren't competing for limited funds since lawmakers have steadily approved tens of millions in subsidies each year. The analysis also notes that reported success can be misleading: companies stop reporting to the state after their grant agreement ends, so auto supplier Gedia was last reported as having met its 2017 deal expectations and created 78 jobs, but those jobs no longer exist after the company sold its buildings and laid off employees in 2023.

The report explains that because administrators run out of money infrequently and can always ask for more, they have little incentive to demand companies provide something in return for subsidies. A significant share of approved money never gets paid out because companies often don't make investments, fail to hit job targets, or don't meet other terms of their deals, leaving administrators with money left in the bank. This dynamic means the state subsidizes select businesses for expansions they would have pursued without taxpayer funds. The analysis argues that "giving taxpayer cash to support expansions that would have happened without subsidies is all cost to taxpayers for no economic benefit," and that lawmakers could have a larger effect by spending the money on things that wouldn't happen without public funding, like filling potholes or building parks, or by leaving it in taxpayers' pockets to begin with.

The report warns that even with low standards, companies struggle to meet expectations, and the program's declining performance ought to signal that the future is uncertain. It concludes the program "ought to be a warning to lawmakers that they're wasting taxpayer money" — half a billion dollars spent on business deals where most companies never deliver on their promises.