End the 21st Century Jobs Fund

James Hohman

Michigan’s economy was in the tank back in 2005. The state economy lost a bunch of jobs in the recession and was not rebounding. Our lawmakers got together and passed a form of stimulus plan, the 21st Century Jobs Fund, which was the program that Gov. Jennifer Granholm promised would blow us away.

A decade later, hundreds of millions of dollars have been spent with little to show for it.

The 21st Century Jobs Fund was created to channel money into programs that invested in early stage businesses in select industries, the industries being selected by state politicians. Yet the program could not get the support of lawmakers without first redirecting money into other programs. There was tourism advertising and forestry money to placate lawmakers representing rural areas that were unlikely to have many of the favored projects, and a hodgepodge of other spending earmarked into the law.

The idea of the plan was flawed from the start. The state does not have great expertise in picking winners and losers and is even less likely to do so when the pool of options is limited.

The results of the initial program reflect this problem. It reports just 374.5 jobs at the companies receiving grants and loans. That’s not much considering the $177 million of taxpayer support offered to the projects.

While the amount offered to the companies has been reported, the actual spending by taxpayers has not. The programs’ administrators seem to treat their annual reports as marketing documents instead of required disclosures. Statutory mandates call for the programs to list how much money has been given to each company and how many jobs they produced.

Lack of transparency is not the only program of the fund. New programs seem to be created every year, each chasing a new fad, with seemingly little learned from the previous spending. The legislation itself has been amended 19 times since it began.

As it currently stands, the state is not reporting the actual taxpayer spending on eight of the 17 programs of the 21st Century Jobs Fund programs. It also is not reporting on the jobs created by six of the programs. And even when jobs are reported, they are defined in five different ways in the report.

Even what is reported ought to be taken with a grain of salt, as the state auditor general recommends. Its two audits of the fund’s programs cited a number of problems, including missing data, a problem that continues.

The legislation that created the program says that it is about diversifying the economy and creating jobs. Those are measurable goals but tough to measure when the data is hidden.

But creating jobs and diversifying the economy is unlikely to happen because the program is not set up to succeed. Its scope is not large enough to make a dent in the job creation picture. The state economy creates tens of thousands of jobs every month and loses a similar number.

The reported jobs from the 21st Century Jobs Fund programs would represent just 0.08 percent of state job creation in Michigan since it began. And there are real costs to the hundreds of millions spent in the program, money that could have had an economic impact elsewhere.

Lawmakers ought to recognize these problems and end the charade. The state should equitably wind down any investments that it has made and transfer any proceeds to the general fund.

James Hohman is the assistant director of fiscal policy at the Mackinac Center for Public Policy.