Study Recommends Ending Michigan’s 21st Century Jobs Fund

The program has failed even by its own measurements

Thursday, Sept. 15, 2016

Contact:
Chantal Lovell
Media Relations Manager
989-698-1914

MIDLAND — A study released today by the Mackinac Center for Public Policy calls on policymakers to discontinue Michigan’s 21st Century Jobs Fund, which it found to be lacking in transparency and direction and ultimately ineffective as an economic development tool.

The new report, titled “An Evaluation of Michigan’s 21st Century Jobs Fund,” examines the history of the program and its effort to create jobs and grow Michigan’s economy. It has been in place since 2006 and currently spends $75 million per year of taxpayer money. Among the major problems identified with the program are its possible violation of Michigan’s constitutional ban on the state investing in private companies; its tendency to base decisions on political rather than economic calculations; its lack of clear and consistent performance benchmarks; and the program’s failure to meet legislative reporting and transparency requirements.

James Hohman, author of the study and assistant director of fiscal policy at the Mackinac Center, said the 10-year-old 21st Century Jobs Fund program fails even by its own standards.

“The originators of this program wanted a self-sustaining economic development fund that would create 72,000 jobs,” Hohman explained. “A decade later, hundreds of millions are gone and only 6,500 jobs are claimed as a result of this spending. Even then, state auditors have warned about the quality of data in the reports on this program and the administrators of it have not complied with transparency requirements.”

In researching a program like the 21st Century Jobs Fund, Mackinac Center analysts would typically conduct an in-depth review of its economic impact to measure effectiveness. However, such review is impossible in this case because program’s reporting is inconsistent and incomplete.

“You cannot be a job-creation program when you can’t even tell us how many jobs you’ve created,” Hohman said. “Based on the information that we do have, it is highly unlikely the 21st Century Jobs Fund is worth the cost to the taxpayers who fund it.”

Though state statute mandates annual reporting by the fund, its activities are either not fully reported or done so inconsistently. Hohman identified multiple discrepancies in reporting by the 21st Century Jobs Fund and found many areas where information is not disclosed or expunged from reports.

For example, information about the Centers of Energy Excellence — an initiative of the 21st Century Jobs Fund — has not been reported since 2013. Individual recipients of funds are not disclosed in nine programs, and some completed projects have been removed from the reports altogether. Some initiatives approved in board meetings of the 21st Century Jobs Fund directors are not included in any legislative reports.

Hohman explained that, even under the most optimistic assumptions, the impact that the 21st Century Jobs Fund program has had on the state economy is negligible. From 2005 to 2015, the total amount of economic activity in Michigan was $4.5 trillion. The fund’s 2015 report to the Legislature indicated all its investments, awards and leveraged funds over that time amounted to $4.85 billion. Even assuming that none of the subsidized projects would have happened without state support, the fund’s contribution still only represents 0.08 percent of Michigan’s total economic activity. The jobs the fund claims to have created amount to just 0.15 percent of employment in the state.

Given the 21st Century Jobs Fund’s potential constitutional violation, lack of direction and inability to demonstrate a positive impact on Michigan’s economy, Hohman recommends lawmakers either eliminate the program and use the money for something else, or, short of that, at least require the program to be fully transparent with the taxpayer money it is provided.

“This is not economic development,” Hohman said. “This is a shell game that requires hundreds of millions of taxpayer dollars to stay afloat under the guise of job creation.”

Read the full study here: http://www.mackinac.org/archives/2016/s2016-05.pdf.

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About the Mackinac Center for Public Policy
The Mackinac Center for Public Policy is a nonpartisan research and educational institute dedicated to improving the quality of life for all Michigan residents by promoting sound solutions to state and local economic policy questions. As a free-market think tank, the Mackinac Center is guided by its belief in free markets, individual liberty, limited government and the rule of law. Founded in 1988, it is headquartered in Midland, Mich. For more information, visit www.mackinac.org.