Funding cuts threaten economic bright spot; Some want to divert money for job investments to state's general fund
GRAND RAPIDS -- A state legislator wants to rethink the millions of dollars Michigan invests to create high-tech jobs and wonders if the money would be better spent shoring up the cash-strapped general fund.
But a local business development official said the 21st Century Jobs Fund is a no-brainer, exactly what up-and-coming businesses need.
Funded by the state's share of damages awarded in the national tobacco litigation settlement, the Jobs Fund last year granted $137 million to universities, independent researchers and entrepreneurs attempting to create jobs in high-tech businesses. Gov. Jennifer Granholm wants to spend $1 billion over 10 years to redirect Michigan's sputtering manufacturing economy.
The year-old fund is fulfilling its mission, said Dante Villarreal, regional director of the Small Business & Technology Development Centers based at Grand Valley State University. In his case, the money is enabling more technology-business counselors to help the start-ups springing to life around the state.
In 2006, the centers got a $2 million grant to add counselors uniquely savvy in the high-technology sector.
"Without them, we're limited to brick-and-mortar type services," Villarreal said, referring to more traditional business and manufacturing models. "These (high-tech) companies cannot get financing from the banks, because their intellectual property is worth nothing to bankers. They need angel investors, venture capital. That's what our technology consultants do."
Last year, 85 companies and organizations shared $137 million in loans and grants aimed at creating new technologies in advanced manufacturing, life sciences, alternative energies and homeland security.
Funding this year has been delayed amid questions about who gets awards and whether the cash should go toward the state's looming budget deficit instead. The state general fund is $940 million short this year.
Scuttle the program?
The delay could undermine one of the Democratic governor's few economic bright spots.
The state has $34.1 million to distribute in the program this year. Michigan will receive an additional $75 million a year from the tobacco settlement between 2008 and 2015.
But State Sen. Alan Sanborn, R-Richmond, who previously voted against creation of the fund, is investigating it as chair of the Senate's Economic Development and Regulatory Reform Committee. Sanborn says he does not like what he has seen.
"We spent the money recklessly; we spent it irresponsibly," said Sanborn, who claims 71 percent of the
$137 million awarded last year went to universities, their employees and those connected to universities.
The money is approved by a 19-member Strategic Economic Investment and Commercialization Board, which includes five university presidents.
That amounts to cronyism and conflicts of interest, Sanborn said.
However, supporters point out the law that established the jobs fund required the university presidents to be board members, and they say university presidents recused themselves from projects involving their institutions.
The state also contracts with the American Association for the Advancement of Sciences to recommend projects for funding.
"The process was done with absolute integrity," said spokesman Mike Shore of the Michigan Economic Development Corp., which administers the program.
Sanborn also complains there is little oversight of how the awardees use the money.
Recipients last year had to list the number of jobs they anticipated creating. Among the 85 proposals funded, the total job estimate was 3,900. There has been no accounting yet of jobs created, although many are long-term projects.
Several Democratic senators have charged Sanborn is on a witch hunt.
Overseeing commitments
Shore said the MEDC also has hired John Walter, a former top white-collar crime investigator from the state attorney general's office, to oversee whether companies follow through on job and investment commitments.