Democrats have a few weeks to finish economic policies. Businesses are wary

• Several economic proposals have not faced a vote this term in the Michigan Legislature
• Among them are a $6 billion proposal that would extend large-scale economic development incentives for 10 years
• With the balance of power shifting from Democratic to Republican on Jan. 1, business leaders say several new economic policies could be decided in coming weeks

Batches of economic policy proposals have fallen out of the public spotlight since early summer, but Michigan’s legislative leaders now expect to turn up the bill-signing heat during the final weeks of the lawmaking session.

Tuesday’s general election results propel Republicans into the House majority on Jan. 1, two years after Democrats won the House and Senate, along with the gubernatorial race.

Now, with just weeks left with that majority, the “lame-duck” session could result in waves of new rules affecting businesses and the economy, as lawmakers take their last stabs to enact legislation before Tuesday night’s winners are seated on Jan. 1. 

But moving with such haste could be risky. Taking bills into law within less than two months means that most will not get the public vetting typical with such proposals, Wendy Block, vice president of government affairs for the Michigan Chamber, told Bridge. 

And negotiations to get votes on big proposals — even within the Democratic party — could yield progress on measures that normally would not make it to a vote.

“That scenario has us concerned, just because there are so many bad bills that linger out there that could really impact the ability of Michigan to compete for jobs,” said Block.

Related:

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During lame duck, “legislation moves fast and furious,” Block said. “There's lots of deal making. It's a mad scramble to the end.”

It’s the last chance to “leverage the Democratic trifecta, and therefore to get a number of policy changes over the finish line while they still can,” said Brian Calley, CEO of the Small Business Association of Michigan (SBAM).

As a result, Democrats could vote on bills that Gov. Gretchen Whitmer has said she wants “in our toolbox to grow our economy.”

The largest is a $6 billion, 10-year economic development plan that would continue controversial large-scale economic development incentives — including buying development land for new business — and fund transit improvements. It was put on hold in June after legislators appeared unlikely to have the votes to pass it. 

Other issues watched closely by the business community include proposed polluter pay laws introduced in 2023, job expansion tax credits, data center tax breaks and local preemption, which would allow communities to set their own regulations.

Negotiations also have been underway over altering business-led efforts to change the paid sick-leave law that takes effect in February, alongside requests by the restaurant industry to reverse the elimination of the tipped minimum wage. Both became law this year after legal challenges following actions by Republicans in lame duck.

This Democratic lame duck session comes after the “trifecta” government repealed Right-To-Work legislation, setting business interests on edge. 

Whitmer wants the economic proposals presented in a single package, Block said. 

That may be so that “the SOAR package gets over the finish line,” Calley added, referring to the state’s Strategic Outreach and Attraction Reserve.

On the agenda

As lame duck brings a “laundry list of legislation,” Whitmer spokesperson Bobby Leddy told Bridge, the administration looks to Republicans to join Democrats on economic issues.

“Our job remains the same no matter who is in the White House or the state House,” Leddy said. 

Here are business issues that could come before the Legislature by the time the House and the Senate are scheduled to adjourn for the year on Thursday, Dec. 19. 

1. $6 billion economic development overhaul

Opposition to large-scale economic development incentives grew since 2023, after Michigan allocated over $2 billion through SOAR.

SOAR was approved in 2021 with bipartisan support. The large-scale incentives are still warranted to increase Michigan’s job growth, Whitmer said two years ago as she budgeted $1 billion to continue it through fall 2025. 

“It continues powering our economic development efforts to  … bring manufacturing and supply chains home to Michigan,” Whitmer said in July 2023.

Many lawmakers disagreed, saying that the corporate handouts didn’t reach communities or deliver lasting impact to boost chances of creating still more jobs. 

A Bridge Michigan investigation in 2023 looked at the environmental shortcomings of giving incentives to previous polluters to build on greenfields. An investigation this year exposed the slow pace of job growth, while Bridge also showed that 40% of incentives support low-wage jobs.

Senate Democrats, and later their counterparts in the House, put forth proposals aimed at getting a bigger bang for incentive bucks by setting up a dedicated funding stream for a decade. That move also would broaden the spending beyond direct corporate awards.

The 10-year funding plan calls for a total of: 

• $2.5 billion for the traditional economic development incentives intended to attract employers and create jobs — half the current funding for SOAR
• $2 billion in transformational transit and mobility projects
• $1 billion to the Housing and Community Development Fund to build affordable housing across the state.
• $500 million to the Revitalization and Placemaking Fund to support community projects, like increasing childcare options

However, opposition arose quickly in the House, with two lawmakers — Rep. Dylan Wegela, D-Garden City, and Rep. Emily Dievendorf, R-Lansing, offering a counterproposal that would swap the spending between SOAR and the housing fund, while also raising the corporate income tax to pay for it. 

The proposal needs the full Democratic majority to pass. Wegela told Bridge there have been few negotiations so far, leaving him to remain a holdout on the vote.

“There seems to be no desire, at least at the moment, to raise the corporate income tax rate, and I’m hesitant to really even enter into negotiations if that's not on the table,” he said. 

“We continue to cede revenue to multibillion-dollar corporations, and the slice of the pie of public dollars for the public is shrinking.”

Opposition to large incentives is present in both parties, Wegela and Calley told Bridge.

Republicans offered their version of economic development incentives in the spring, calling for more scrutiny and oversight from economic development incentives. Party representatives did not comment for this story. 

However, when introducing the Republican legislation, Rep. Matt Hall, R-Richland Township, said that existing companies should get more of the benefits.

“It’s much cheaper to just help our existing companies grow than it is to go out and hunt for new ones,” Hall said then. 

State Sen. Jeff Irwin, D-Ann Arbor, characterized current negotiations as neither “difficult nor acrimonious.”

“The Legislature and the governor's office have been engaged in (them) for many months now, trying to figure (it) out,” Irwin told Bridge last week.

Presumably, he added, “leadership and the governor's office are going to put together a proposal that maybe represents their best idea of how we can get to a compromise.”

2. Potential revisions to paid sick time laws and tipped minimum wage

Michigan’s new paid sick time law takes effect Feb. 21, leaving employers to set up compliance systems this fall. The change follows a Supreme Court ruling over the “adopt and amend” move by the Republican legislature to enact it — preventing a ballot initiative — in lame duck 2018. 

Business groups, including the Michigan Chamber, Detroit Regional Chamber, the  Small Business Association of Michigan and the Grand Rapids Area Chamber of Commerce are advocating for structural changes in the rules from the Legislature. They say it’s their top priority.

“Our ask is not to reduce the benefit,” said Calley of the Small Business Association of Michigan. “We want to make it possible for a business owner to just run their business.”

SBAM is seeking some key changes, including an exemption for employers that already offer a plan that’s better than the new rule, and a minimum of four hours for each absence. It also is asking for an exemption for temporary and seasonal workers, and an average 20-hour workweek threshold for the benefits. 

Conversations with legislators so far are going well, Calley said. Many seem to understand arguments that the benefits of the regulations could be achieved for a worker without mandating strict provisions.

Similar discussions are taking place among legislators and the state restaurant industry, which is expected to be most affected by the elimination of the tipped minimum wage over several years starting in February. This, too, was due to the 2018 “adopt and amend” move.

Republicans introduced bills to reverse the tipped minimum wage elimination and address sick time. They were referred to committees.

Calley said he’s hopeful that the Legislature will adapt the plan in a way that retains most of the provisions of the law while increasing the ability of an employer to schedule staff under the law. 

“My biggest fear is that it won’t happen,” he said. 

Some Democrats are skeptical that it’s needed. Wegela, who was reelected on Tuesday, said he doesn’t plan to vote on changes.

“We’ll do just fine with how it’s written,” he said.

Calley, former Republican lieutenant governor in the Snyder administration,  said the Republican win of the House majority doesn’t guarantee that changes can be made between the swearing-in and before the law takes effect on February 21, if the proposal isn’t addressed in lame duck.

New terms rarely “get off the ground so quickly to pass major legislation,” he said. 

3. Tax credits for job creation, research and development

Bipartisan legislators express support for R&D tax credits, with the building blocks for offering them still in the House Committee on Economic and Small Business Development. 

The bill “would allow us to diversify our economy by attracting a knowledge-based economy,” Block said. 

At the same time, lawmakers are considering a proposal to grow higher-wage jobs by allowing some businesses to keep income taxes of newly hired workers rather than sending the money to Lansing. 

The High-wage Incentive for Regional Employment (HIRE) bill package would expand economic development tools in the state by adding a $100 million annual payroll tax capture option.

The move is an attempt to spread the benefits of incentives across industries and state locations. Businesses with as few as 25 employees could qualify, representing the professional service industries and others  — like agriculture, technology, energy, and tourism business expansions — that now don’t easily qualify for Michigan subsidies.

The bills would function like an updated version of the former Good Jobs For Michigan program initiated in 2017 under Gov. Rick Snyder. 

However, qualifying companies would have to propose creating at least 250 jobs with pay at 125% of an area’s median annual wage, or at least 25 new jobs at 150% of the area’s median wage. 

4. Local preemption

Senate Bill 170 advanced legislation that would allow local municipalities to adopt their own laws governing employers’ relations with their employees, like wages and benefits.

That has not been allowed in Michigan since Snyder, a Republican, signed so-called “Death Star” bills in 2015. 

The recent Democrat–proposed bill came out of the Committee on Labor in fall 2023, with a party-line vote, but hasn’t advanced. 

Business leaders expected a vote last year, and now Calley and Block said they worry that it could reemerge and head to a vote with little vetting. The potential exists for a “patchwork” of local employment laws.

The worker-centered Economic Policy Institute said in 2023 that preemption can interfere with local governments’ ability to set job quality standards. 

“Blocking these local policies results in wage suppression for all workers and contributes to maintaining racial and gender pay gaps,” the group said during committee testimony.

5. Data center tax breaks

A pair of bills that date back to 2023 could boost Michigan’s chances to compete for the building boom in the data center industry. 

Proponents say Michigan is losing multibillion-dollar projects to neighboring states. Detractors say these projects bring environmental risks and aren’t worth the public investment. 

Democrats in the House passed Senate Bill 273 by a vote of 56-41 with Republican assists after the caucus could not agree to exempt large data centers from sales and use tax. Doing so would cost the state $90 million through 2065, according to the Senate Fiscal Agency. Criteria for receiving the tax break includes adding 30 jobs paying 150% of local median wage.

Companion legislation House Bill 4906 was pulled from the House floor on Sept. 25 when it didn’t have enough votes to pass. 

Reports from Crain’s Grand Rapids indicate Microsoft has bought nearly 600 acres across two sites in Kent County for potential data centers.

6. Polluter pay laws

Democrats last fall introduced legislation to hold industrial polluters more accountable for cleaning up contamination.

Under a series of seven bills, the proposals would strengthen cleanup standards, require pollution-prone companies to carry insurance to cover cleanup costs, and make it easier for Michiganders to sue polluters who may have compromised their health.

The legislation followed Bridge Michigan’s special report that exposed the long-lasting damage left behind in Michigan communities where auto companies and their suppliers have closed their doors, leaving contamination and vacant buildings in their wake.

Business groups, including the Michigan Chamber. oppose the proposed changes, saying they’re likely to make it more expensive to do business in Michigan.