Budget mess puts jobs fund in peril; Robbing 21st Century program to plug one hole in state deficit 'totally irresponsible,' life-sciences supporter s

DETROIT -- Gov. Jennifer Granholm's effort to create thousands of high-tech jobs for a new economy is clashing with the fiscal realities of the moribund economy.

The 21st Century Jobs Fund, the centerpiece of Granholm's economic recovery plan, is a 10-year, $1 billion effort to fund research and new companies in the areas of life sciences, alternative energies, advanced manufacturing and homeland security.

But the fund, which gave out its first awards to universities, researchers and entrepreneurs last year, is fighting efforts to raid its coffers to balance a state budget perpetually in the red.

'Mortgaging our future'

"We're simply mortgaging away our future," said Stephen Rapaundalo, executive director of MichBio, an Ann Arbor-based trade group representing life-sciences companies. "It's totally irresponsible to use that for such a short-term gain."

The fund awarded $126.3 million in September to 78 companies and organizations in a competitive process conducted by the American Association for the Advancement of Science. The group recommended projects it believed were the most scientifically sound and had the best chances for commercial success.

No research and commercialization awards were made this year, although $42 million remained of the initial $400 million appropriated from the state's share of the federal tobacco settlement.

Instead of a new round of funding this year, $12 million was allocated to help communities retain Pfizer workers who are losing their jobs because of the company closing its Ann Arbor research facility. Another $30 million was allocated to a Choose Michigan fund that would provide additional incentives to high-tech firms being wooed by other states.

But late last week, the Legislature voted to take that $30 million and use it to help fill an $800 million hole in the current state budget year ending Sept. 30.

Budget Office spokesman Greg Bird said the administration and Legislature intend to restore the $30 million in next year's budget. But the 2008 budget is estimated already to be $1.8 billion in the red.

An earlier bill passed by the state Senate would have taken nearly $300 million from the 21st Century Jobs Fund to balance this year's budget. But the bill was taken off the table after the Senate and House agreed on a budget-balancing plan May 25.

The conflict goes back years.

Gov. John Engler created the Life Science Corridor in 1999, committing $1 billion of tobacco settlement funds to create jobs in health care, biotechnology and other medical-related industries.

But Granholm slashed funding for the corridor when the economy went south in 2001. She then split the remaining money among three legs of her Tri-Technology Corridor: life sciences, advanced manufacturing and homeland security.

In 2005, the Legislature, with broad bipartisan support, passed Granholm's 21st Century Jobs Fund, which added alternative energy as a jobs-development priority.

While most agree it's too soon to judge the fund's success, some are critical of the state's approach. Rather than limit funding to four high-tech industries, one business-development expert says state should aid any type of company that employs between 10 and 100 employees and have sales of between $1 million and $50 million.

Many of them could quickly produce more jobs, but need nontraditional funding like the 21st Century Jobs Fund, said Mark Clevey, vice president of the entrepreneurial development center at the Small Business Association of Michigan.

"All of these companies have potential for growth, and there's 40,000 of them in Michigan," Clevey said.

Clevey and others say governments historically do a poor job of picking successful new industries. And they say virtually every state is concentrating on creating jobs.

Beginning Oct. 1, the 21st Century Jobs Fund is expected to get another $600 million over the next eight years in tobacco funds.

But based on past funding raids, state officials fear Michigan may be getting a nationwide reputation as a risky place to start a new business or commercialize research.

"We want to be able to hold firm to our commitment to create a great 21st century economy," said Cindy Douglas, vice president for development at the Michigan Economic Development Corp. "But if you decide not to fund year two, what's going to happen in years four, five and six?"

Republican Senate Majority Leader Mike Bishop likes the 21st Century Jobs Fund, according to spokesman Matt Marsden. But Marsden said the current financial situation in Michigan is so dire that programs addressing the future must take a back seat.

"We didn't expect to find ourselves in the fiscal crisis we're in" when the Legislature approved the 21st Century Jobs Fund, he said. "There won't be any jobs if we can't fund education and the streets aren't safe."