Programs with Results: 20-Year Investment in Ben Franklin Pays Off Big for Pennsylvania

Convincing politicians to make a multi-year investment in a state's economic future is challenging, particularly when commitments made in one budget cycle or administration can be forgotten or ignored so easily in the next legislative session. The FY 2003-04 funding struggle for Michigan's $50 million-per-year-for-20-years life science initiative provides ample evidence: $50 million dropped to $45 million and eroded to $32.5 million because of budget problems. For FY04, the governor has requested only $20 million for the line item and added several other demands on the shrinking pot of funds.

Getting a state's General Assembly to stick to it for 20 years, as Pennsylvania's Ben Franklin Technology Partners (BFTP) has seen since 1982, takes strong gubernatorial and legislative leadership across terms, administrations and parties — and results worthy of the increased public funds.

And BFTP has delivered, according to an independent impact analysis. The analysis reported that  $311 million in public investments, resulted in 23 to 1 return on the public investment, or a $7.9 billion impact on the Pennsylvania economy (in constant 1996 dollars).

The BFTP analysis addresses one of the most common complaints about impact studies on public TBED programs: the perceived or real bias inherent to client self-reporting. Skeptics argue that, in concern for any political fallout or repercussions, TBED clients are likely to inflate positive results, attribute too much to the program services, or not report negative results in response to surveys. Using a quasi-experimental design that incorporates a "control group" of similar companies that had not received BFTP assistance, the study was able to isolate program impacts from other factors that influence a company's performance and use case studies to assess BFTP's specific role in a firm's success.

Results from the BFTP clients and control group were then compared to estimate the direct impact BFTP had on the state economy through several measures.

BFTP has invested in more than 2,500 companies since its first direct equity placement in 1989; 76 percent of the deals were with companies employing less than 50 people at the time of the initial BFTP investment. The results of these investments, according to the study are impressive:

• Every public dollar invested through BFTP returned almost $23 in additional income in the state.
• The state has collected more than $400 million in additional tax revenue as a direct result of BFTP, at least $91 million more than the state invested. The study estimated the present value of additional state tax receipts per dollar of state investment in BFTP to be $1.15.
• Average annual salaries at BFTP clients is 28 percent more than the average annual salary for all private, nonfarm industries in Pennsylvania.
• BFTP investments, in aggregate, generated 35,579 additional job-years in client firms between 1989 and 2001. "On average, BFTP clients employed three more people in each year following funding than they would have in the absence of the BFTP investment."
• Through multipliers to assess the indirect effect of the direct benefits of the program, BFTP can be said to have indirectly resulted in the creation and sustenance of 57,526 additional job-years. The net total result of 93,105 job years generated yields an average cost per job of $3,342 for state taxpayers, the study argues. [Although it could be argued that since the program directly results in a net growth in tax revenues, the true cost to the taxpayers is zero.]

A Continuing Record of Achievement: The Economic Impact of the Ben Franklin Technology Partners was prepared as part of BFTP's 20th anniversary celebration this year. More information on the program is available at http://www.benfranklin.org/. Requests for copies of the BFTP study should be directed to Terry Singer at tsinger@benfranklin.org.