Read the Mackinac Center's new study on the 21st Century Jobs Fund online at mackinac.org/s2016-05
After a decade of testing and more than $1 billion in spending, why can’t Michigan’s 21st Century Jobs Fund demonstrate that it has been successful in creating jobs in the 21st Century? This is a lesson for lawmakers as they are tempted to spend more taxpayer dollars on business projects.
Gov. Rick Snyder recently created the Build the 21st Century Economy Commission, with the hope that it will develop a “vision of Michigan’s economic future.” Its work should look first at what happened with older job creation projects.
Michigan residents in 2005 were feeling left out of national economic recovery after being hit hard by the 2001 recession. The state had lost a net of 285,800 jobs and they were not being replaced. State politicians — Republican and Democrat alike — felt like they needed to do something to create jobs.
What they came up with was the 21st Century Jobs Fund, $1 billion to spend on improving the economy. They agreed that the industries of the future were in life sciences, advanced automotive manufacturing and materials technology, homeland security and alternative energy. In addition, the state was going to partner with investment funds to start new projects, and perhaps even make a little profit from financing young companies. Then-Gov. Jennifer Granholm famously promised that we'd be "blown away" by the program's success.
It was a bad idea from the start. Selecting business projects that will take off and employ people is a difficult task, even for people risking their own money. It’s far more difficult for politicians spending other people’s money.
The 21st Century Jobs Fund immediately became a political football and needed special earmarks to ensure its passage. Logging wasn’t exactly what lawmakers had in mind as the jobs of the future, but the Michigan Forest Finance Authority received millions of dollars anyway. The tourism industry, likewise, was deemed part of the state’s plan for the economic future and it, too, required a payoff.
While the jobs fund was never setup to succeed, lawmakers kept changing their minds about what it was supposed to do. They originally thought that the state’s economic development boards would decide where to allocate the $75 million per year available from the fund, but decided not long afterward that they would rather determine the allocations themselves. The statutes guiding the fund have changed 19 times, providing inconsistent guidance to annual spending.
Reporting on the program was atrocious. Lawmakers tried, though. They required some information to be disclosed — how taxpayer dollars were being used, who was getting them and how many jobs would be created, among other things. But the program administrators rarely shared this data, even when it was required by statute. Lawmakers have not yet asserted their mandate to the bureaucrats managing the program, but they ought to.
Yet additional transparency would only show that the program does not have the right strategy in the first place. The state is constantly adding and losing jobs. In the most recent quarter, 218,548 jobs were created and 192,282 jobs were lost. That is a turnover of around one out of every 16 jobs. In contrast, the 21st Century Jobs Fund claims it helped create roughly 5,000 jobs created over the 10-year life of its programs. Michigan has created plenty of jobs in the 21st century, but few of them came from the 21st Century Jobs Fund.
State policy cannot improve the economy by picking a handful of winners and luring them with money paid by everyone else. In contrast, broad-based reforms improve the business climate for all.