Legislature raids 21st Century Jobs Fund to pay today's bills
BYLINE: Rick Haglund, Gazette Detroit Bureau
Gov. Jennifer Granholm's ambitious effort to create thousands of high-tech jobs for a vibrant new economy is clashing with the dire fiscal realities of the current 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 off efforts to raid its coffers in order to balance a state budget that's perpetually in the red.
"In terms of using the 21st Century Jobs Fund to balance the state budget, 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."
In September the fund awarded $126.3 million 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 have been given out this year, although $42 million remains of the initial $400 million appropriated from the state's share of the federal tobacco settlement.
(The $400 million included $115 million in projects earmarked by the Legislature and $109 million in venture capital and money for the Michigan Economic Development Corp., the state's economic-development arm, to administer the program.)
Instead of a new round of funding this year, $12 million was allocated to help communities retain Pfizer Inc. workers who are losing their jobs in the closing of the drug-maker's 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.
Victim of budget
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 already is estimated 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 on May 25.
The conflict between using tobacco-settlement funds to help create new industries or to balance a budget crippled by declining tax revenues 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 21st Century Jobs 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, the state should aid any company that meets certain growth criteria.
Such "second-stage" companies would employ 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 fund provides, 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 trying to create jobs in life sciences, alternative energies, advanced manufacturing and homeland security.
Will it hold?
Lou Glazer, president of the Ann Arbor-based think tank Michigan Future Inc., said he thinks Michigan would reap more benefits by spending 21st Century Jobs Fund money on education and in producing more talented workers.
"But at least this is an investment in the future," Glazer said. "Public investment in the future is absolutely essential to grow Michigan's economy."
Beginning Oct. 1, the 21st Century Jobs Fund is expected to start getting another $600 million in tobacco funds in an eight-year payout.
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."
For more about the 21st Century Jobs Fund, go to www.michigan.org/medc/ttc/21stCentury.
Rick Haglund is a Detroit-based business writer for the Kalamazoo Gazette. He can be contacted at (248) 540-7311 or Ricklund@aol.com