LANSING – The leading legislator in the House on funding for the Michigan Economic Development Corporation said Wednesday that it is not delivering results and should be subjected to potentially major budget cuts.

Rep. Jack Brandenburg (R-Harrison Township), chair of the House Appropriations Subcommittee on Economic Development, chided MEDC officials and the MEDC’s performance several times at a hearing of his subcommittee.

Brandenburg has never been a fan of the MEDC, a quasi-public entity formed by cooperativestate-local effort that primarily seeks to attract new businesses and retain existing ones through tax credits. In 2003, he – along with fellow subcommittee member Rep. David Farhat (R-Fruitport) – called for defunding the MEDC of its state money and redirecting those funds to preserve a college scholarship program.

“I have always believed these Economic Development Corporations are vastly overrated,” he said after the meeting. “I don’t think they work.”

Asked whether he would push for a budget with no state funds for the MEDC, Brandenburg said, “Put it this way: I don’t think anything is guaranteed around here.” He said he would need to speak with House Speaker Craig DeRoche (R-Novi) and Rep. Scott Hummel (R-DeWitt), the House Appropriations Committee chair, before determining a funding level for the MEDC.

Throughout the meeting, Brandenburg jabbed at MEDC staff. He criticized the MEDC’s average salary, which he said is much higher than traditional state employees’.

When MEDC legislative lobbyist Jim McBryde advised Brandenburg that such questions would best be directed to MEDC CEO Don Jakeway, who was unable to attend the hearing because of a commitment in Toronto, Brandenburg retorted, “Maybe you’re right because he does make $200,000 a year – more than the governor.”

Brandenburg criticized the MEDC’s employment of 18 persons with a vice president or senior vice president title as “top heavy” and something that “would never occur in the private sector.” And he ripped the MEDC for taking on faith that companies have created the jobs that they promised to create as a condition for receiving a tax credit as a “bad process.”

Near the close of the hearing, Brandenburg questioned how he could justify continuing MEDC spending at existing levels as Governor Jennifer Granholm has recommended when the state had the worst unemployment rate in the nation in February.

“I’ve heard a lot from the MEDC on how great all of you are,” he said. “But gentlemen, the numbers just don’t bear you out.”

McBryde and Jim Donaldson, also of the MEDC, sought to defend the agency. McBryde said as a quasi-public entity, there are equivalents to the vice president positions in the rest of state government and disagreed with Mr. Brandenburg that the number of those posts was out of line.

Donaldson took issue with Mr. Brandenburg’s criticism over the MEDC’s lack of auditing businesses to confirm they delivered on their job creation commitments. He said businesses routinely come to them when they are having problems and unable to meet their commitment.

“The companies that we deal with are honest with us,” he said. “These are trustworthy, honest people.”

But when Donaldson cited Kmart as an example of a company that had notified MEDC of its major problems that sent it into bankruptcy, Brandenburg was incredulous.

Besides a stock plunge prior to the bankruptcy filing and an eventual wiping out of the old Kmart shares, three former Kmart executives have been accused by federal regulators of civil fraud for misleading accounting. Two others settled with the federal government in the face of similar allegations. Donaldson insisted that the MEDC dealt only with Kmart middle managers, not the executives in question, but Mr. Brandenburg wasn’t buying.

“How can you sit there and honestly look at me and tell me that Kmart is ‘trustworthy’?” he asked.

MEDC spokesperson Michael Shore said the agency is confident its budget will emerge from the Legislature in good shape. He noted that the Michigan Economic Growth Authority, the tax credit incentive program run by the MEDC, was reauthorized overwhelmingly in 2003 by the Legislature.

“We’re confident that our record speaks for itself. The vast majority of the Legislature, without regard to partisan makeup, are supportive of what we do,” he said. “We’re responsive to criticism, and we look to improve how we do things, but I don’t think we’re overly concerned that anything we do is in danger today.”

Shore allowed that “it was not an easy committee hearing,” but said such scrutiny is part of the budgeting process.

“You know what, we’re dealing with some serious financial times in Michigan, and we’re understanding that the things we do ought to be reviewed carefully by the Legislature,” he said. “He (Mr. Brandenburg) is an elected representative of the voters of Michigan, and they’re our bosses. We understand that sometimes they’re not going to be the most comfortable moments.”

Shore said considering that Toyota Motor Corporation took out a full-page ad Wednesday in The New York Times, The Washington Post and USA Today proclaiming Michigan as a great place to do business, it was a good day for the MEDC. Toyota and the MEDC have agreed to state tax breaks in exchange for the corporation locating a research and development center in Michigan.

Rep. Chris Kolb of Ann Arbor, the top subcommittee Democrat, strongly defended the MEDC, recalling the state’s loss of some major employers to other states in the early 1990s when former Governor John Engler discontinued economic incentive programs. Mr. Engler later changed course with policies that eventually resulted in the MEDC’s creation.

As bad as the economic situation is in Michigan, the unemployment rate remains well below the levels seen in the early 1980s and the early 1990s when the rate was in double-digits, Kolb said.

“If this state does not continue to move forward on economic development, we might as well turn out the lights,” he said. “I’m damned glad that we have people working on economic development in this state.”

This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com