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Economy & competitive position/Public sector

Job-creation push spawns flurry of numbers, opinions

Comparing various kinds of economic development initiatives for their impact on jobs and economic growth often isn’t easy.

And that’s especially true for two primary incentive programs Michigan has used in recent years; the Michigan Economic Growth Authority and the 21st Century Jobs Fund.

MEGA was a fairly straightforward tax credit program used from 1995 until earlier this year. Gov. Rick Snyder ended the program as part of his overall tax reform strategy.

The 21st Century Jobs Fund was created during the administration of Gov. Jennifer Granholm, using $1 billion in federal tobacco litigation settlement funds primarily to aid the growth of new companies in the life sciences, advanced manufacturing, homeland security and clean energy industries.

Snyder is expanding the program to make all types of businesses with a technology or innovation component eligible for assistance.

He also has added a number of new Jobs Fund programs aimed at promoting entrepreneurship and business innovation.

Which has been more successful — MEGA or the Jobs Fund? Various studies and audits paint a mixed picture.

Angelou Economics, which earlier this year conducted a study of the state’s incentives for the Michigan Economic Development Corp. found that MEGA resulted in more announced jobs, some 35,100, in 2010 than in any other state.

But a 2010 audit by the state Auditor General, the latest available, found that only about 28 percent of new jobs announced in MEGA awards ultimately were created.

“MEGA was most successful in creating press releases,” said Charles Owens, director of the National Federation of Independent Business-Michigan.

But the program was effective in retaining jobs, though, saving 98 percent of jobs that were threatened had investments supported by MEGA tax credits gone elsewhere, the audit found.

The average cost per announced job was $20,506 in the 530 MEGA projects approved through 2009, according to the state audit.

Jobs Fund’s results are murky

Assessing the success of Jobs Fund programs is more difficult.

The latest Auditor General’s report in 2010 said it was too early to assess the success of six of the Jobs Funds 13 programs.

That’s because most of those were initiatives in which the Jobs Fund made long-term equity investments directly into companies and with venture capital funds.

For example, the Jobs Fund’s Pre-Seed Capital Fund II invested $6.2 million directly into 47 companies, creating or saving 156 jobs.

Ned Staebler, who oversaw the Jobs Fund under Granholm, said its value went beyond job creation.

“More than 1,500 companies were helped. Nine hundred patents were filed and 350 products were commercialized. Those are all really good things,” said Staebler, who now is vice president of economic development at Wayne State University.

Most of the criticism of Jobs Fund’s job-creation performance has come from two business loan competitions in 2006 and 2008.

The “Competitive Edge Technology” program lent companies about $130 million and created 1,199 jobs, according to the MEDC’s 2011 annual report to the Legislature.

That’s a whopping $108,400 per job. But MEDC officials say that number is misleading because they expect to get most, if not all of the loan money back.

A number of Jobs Funds programs, including the Competitive Edge Technology competition, the Michigan Supplier Diversification Fund and the Centers of Energy Excellence fund have been eliminated.

Rick Haglund has had a distinguished career covering Michigan business, economics and government at newspapers throughout the state. Most recently, at Booth Newspapers he wrote a statewide business column and was one of only three such columnists in Michigan. He also covered the auto industry and Michigan’s economy extensively.

1 comment from a Bridge reader.Add mine!

  1. Duane

    ““MEGA was most successful in creating press releases,” said Charles Owens, director of the National Federation of Independent Business-Michigan.”

    That would suggest to me that the primary audience is the media and since they don’t seem to do anything with the releases except to quote them then maybe the programs are doing what the Governors have been wanting for decades.

    I wonder if reporter or the news agencies routinely (or even randomly) verfied what is in the releases and made that the story. It would seem if the story became about the errors in the releases then we might start seeing a shift from quantity of releases to accuracy. But that is back to the question of whether the reporters or news agencies really care about accuracy and are more interested in easy space filling.

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