The Gongwer Blog

LEO Budget Includes $100M For R&D Tax Credit

By Nick Smith
Staff Writer
Posted: February 12, 2024 11:54 AM

A $100 million research and development tax credit was one of the highlights in the governor's proposed economic development budget released Wednesday.

Governor Gretchen Whitmer's Department of Labor and Economic Opportunity budget recommendation totaled $1.8 billion ($228 million General Fund). The budget proposal would be a 31.2 percent gross reduction (72.4 percent General Fund reduction).

The governor also provided for an additional $191 million in one-time spending ($131 million General Fund). This would include $60 million restricted funds for the Michigan Innovation Fund, $25 million General Fund for the Build Ready Sites Program to develop sites for future economic development projects, and a $20 million General Fund boost to the Going Pro Talent Fund program.

Additionally, the proposal notes the $500 million state restricted funds for the Strategic Outreach Attraction and Reserve Fund, which continues the program.

The Legislature previously earmarked up to $500 million to the SOAR Fund through the 2024-25 fiscal year.

Whitmer also recommended $150 million General Fund to continue funding energy projects targeting carbon-free energy sources.

The proposed LEO budget also included a $100 million research and development tax credit, which the governor mentioned in her State of the State address.

For the Business Attraction and Community Revitalization program, the governor recommended $100 million ($40.7 million General Fund) in ongoing spending. Another $20 million General Fund in one-time funding to bolster this funding was also recommended.

"These investments will create jobs and develop high-quality places that attract residents and spur economic growth," the budget documents said.

The proposed Going Pro one-time monies would be in addition to $54.8 million ($45.2 million General Fund) in ongoing spending for Going Pro. The one-time funding is intended to expand employer-based training.

Whitmer's proposal also included $50 million in restricted funds for the Housing and Community Development Program. The money would go toward downtown revitalization and building more affordable housing.

A total of $50 million in state restricted funds was proposed for ongoing funding to the Revitalization and Placemaking Program, which focuses on the rehabilitation of underutilized, blighted and historic structures.

Whitmer proposed $20 million in one-time General Fund for a Michigan marketing initiative intended to build on the Pure Michigan campaign to push for workforce attraction and labor retention along with drawing people to the state.

The governor recommended one-time funding of $20 million General Fund for talent solutions, which would be used for addressing current and future workforce needs.

The proposal also included funding for a pilot program related to legislation passed last year . A Community and Worker Economic Transition Fund pilot would receive $10 million General Fund under the governor's recommendations in a 2024 supplemental.

Last year, an Office of Worker and Community Economic Transition was signed by the governor as part of the renewable energy policy package (See Gongwer Michigan Report, November 28, 2023).

The governor recommended $5.9 million ($1.25 million General Fund) to expand vocational rehabilitation services through Michigan Rehabilitation Service and the Bureau of Services for Blind Persons. Focus HOPE would receive $1 million General Fund in one-time funding under the governor's budget proposal.

Whitmer recommended immigration and legal services spending of $8 million one-time General Fund for case management, transportation, legal services and language access supports.

Further one-time General Fund spending was recommended for global talent and retention ($4 million) and the Michigan Growth Office ($4 million).

The governor also recommended $5 million for the Arts and Cultural Program, $5 million for the Community and Neighborhood Initiative and $2.5 million for Rural Prosperity Grants, all one-time General Fund spending.

Sen. Mary Cavanagh (D-Redford Township), chair of the Senate Appropriations LEO and MEDC Subcommittee , said Republicans have suggested similar numbers to the $100 million research and development tax credit in the past. She added there are several economic tools available to the state to help spur small and larger business growth.

She also referenced questions raised by lawmakers during the budget presentation about housing and transportation needs statewide. Cavanagh said through further spending and the development of regional partnerships, those issues can be resolved.

"We could do more on housing, and I think you're going to see that in the Senate budget," Cavanagh said.

Cavanagh said she anticipates the LEO budget to look like what was passed out of the Senate last year.

"A little bit more toward total investments, so placemaking and making sure that we have a little bit more of grant funding to ideas rather than specific corporations or companies or even small businesses," Cavanagh said.

Senate Appropriations Committee Chair Sen. Sarah Anthony (D-Lansing) told reporters economic development will be looked at "through a progressive lens."

"We want to be attracting and retaining corporations, industries that are going to make Michigan a top 10 state, but we have to do so through a lens of making sure we're lifting up our communities, lifting up individuals, making sure that wages are competitive, that we're investing in areas that want large corporations in their communities," Anthony said. "We want to be mindful. Economic development just for economic development's sake is not the name of the game."

Sen. Mark Huizenga (R-Walker), minority vice chair of the Senate Appropriations LEO and MEDC Subcommittee , said one LEO budget item he is supportive of funding at a higher level is Going Pro. He said the program helps workers improve their skills and can help them gain or retain employment and helps employers in the process.

"It's an incredibly good program," Huizenga said. "We know it works well and continues to support people in retraining them. … That's a time-tested tool I could certainly get behind, and I hope we continue to do a lot more of that."

He also questioned the effectiveness of the SOAR program.

"States tend to chase shiny, pretty things," Huizenga said. "I think SOAR has actually not been as good as an outcome … it seems like a lot of the stuff was rushed through very quickly without really truly vetting what's going on."

Huizenga pointed to the downsizing of the Ford Motor Company's proposed electric vehicle plant in Marshall as an example (See Gongwer Michigan Report, November 21, 2023).

"I'd like to see us do more with incubators, in finding ways to encourage growth," Huizenga said, pointing to existing work being done at some of the state's public universities. "The spirit of entrepreneurism is one of the fundamental things about our state and our country, and we should probably be doing more to foster that."

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