Lawmaker questions Jobs Fund process
BYLINE: Amy Lane
LANSING --
Michigan's 21st Century Jobs Fund has come under fire, with a Republican senator questioning past awards and looking at taking money away for the next round.
Senate Economic Development and Regulatory Reform Committee Chairman Alan Sanborn, R-Richmond Township, said he would like the Legislature to gain control of the $34.1 million that could be allocated in the Jobs Fund's next round of awards. He made the comments last week after calling attention to project funding that he said illustrated wasteful and questionable government spending.
Sanborn cites ties between members of a state board that approved the awards and entities that received the grants or loans. For example, he points to University of Michigan former or current staff, graduates, or spinoff technologies employed by companies that received Jobs Fund awards; Wayne State University connections with the Karmanos Cancer Institute, TechTown and others that received funding; Michigan State University spinoffs that received funds; and other connections, such as NextEnergy's presence on the board and receipt of an award.
Sanborn says the connections represent conflicts of interest. He said that based on his office's research, some $96.4 million of the $135 million awarded in the Jobs Fund's first round went to entities with some sort of tie to members of the Strategic Economic Investment and Commercialization Board.
But Mike Shore, chief communications officer for the Michigan Economic Development Corp., said the Jobs Fund laws set forth a process that ``guarantees absolute integrity'' in the awards, prevents favoritism and shields against conflicts of interest.
A Republican-sponsored bill that was part of a 2005 legislative package creating the Jobs Fund requires board members to disclose any conflict of interest and in such instances, prohibits them from discussing, considering or voting on awards or being present in the meeting room.
The legislation also prescribes the SEIC board's 19 members: Two state officials; seven members representing business with expertise, knowledge, skill or experience in business, venture capital investments, business finance or technology commercialization; two members represented by the then-Republican House and Senate leaders; and members representing the Van Andel Institute, MSU, UM, Wayne State, Western Michigan University, Michigan Technological University, another public university, and Automation Alley.
Public Act 215 also specifies that the competition, among many things, would include a preference for collaborations between institutions of higher education, Michigan nonprofit research institutions, Michigan nonprofit corporations, and businesses.
The SEIC board acts on proposals that have gone through an independent peer review process by the American Association for the Advancement of Science.
Shore said the SEIC board's composition reflects the fact that ``you need people with expertise in new technologies, particularly the four technology sectors that are targeted by the 21st Century Jobs Fund.''
He said that in addition to board members recusing themselves, the process is overseen by a chief compliance officer and assistant Michigan attorneys general. Sanborn's office disputes the presence of a compliance officer at the time the votes were taken.
Sanborn's office said that on one project, so many members recused themselves that a board quorum no longer existed to vote. But Shore said that 11 members, one more than the 10 needed for a quorum, were present to vote on the project.
Sanborn also questioned one project, since dissolved, that was approved for an award and highly recommended in the AAAS process. Sanborn said the company essentially existed only on paper at the time, but Shore said the company was created by scientists to license a technology, and it folded after it was unable to acquire the intellectual property.
``One of the hopes of the whole strategy is to get people with expertise to leave whatever comfy circumstances they currently have, and venture forth,'' Shore said. ``Had they gotten the intellectual property ... they would have been positioned to make a real live business out of it that would employ people and that would generate income in the state of Michigan.''
Sanborn in 2005 voted against the securitization of tobacco settlement money for the Jobs Fund and against the Jobs Fund's creation. Now, he wants the Legislature to look at whether it has authority to obtain the $34.1 million remaining from the program's initial appropriation, ``and see if it can be steered toward putting some duct tape around the budget.''
The SEIC board has requested the board of the Michigan Strategic Fund allocate the $34.1 million for the next round of competition. The MEDC expects to start a second round this year and make awards by year-end.
The SEIC board has approved changes in the next round: Michigan individuals will be able to join AAAS members in reviewing the scientific and commercial potential of project applications, and proposals seeking Jobs Fund money will be charge a yet-to-be-determined application fee.
The board has also indicated its intent to limit competition to projects involving commercialization and applied research. In the first round, the categories of basic research and commercialization support services were also part of the competition, representing about $5 million and $37 million of awards, respectively.
The idea is to put the state's ``limited dollars toward those projects closest to commercial success,'' said Jeff Mason, the MEDC's senior vice president of technology development, in a recent interview.
The state has so far closed on 73 grant and loan agreements out of the original 84 project awards.
Amy Lane: (517) 371-5355, alane@crain.com