Lack of Performance Benchmarks

Benchmarks and performance targets allow policymakers and managers to explore whether a program is producing its expected outcomes. These are important tools to use as they help identify programs that are working well and those that are not. This enables policymakers to prioritize spending in ways that will produce the most efficient and beneficial outcomes for taxpayers and people who use government programs. Unfortunately, the Legislature has not effectively used these tools to measure the effectiveness of the 21st Century Jobs Fund program.

The original proposal from Gov. Granholm contained at least one real and easily measurable benchmark for performance: return on investment. The state could measure the success of the program based on whether or not its investments yielded a return. Indeed, under the original plan, the program would not have funding if it was not generating a return on investment. The Legislature modified the plan and funding source, and the result was that there was not a clear, overarching benchmark for successful performance of the 21st Century Jobs Fund. The legislation that eventually passed and created the program contained earmarks for specific institutions and organizations, but do not specify clear objectives for this spending.

For instance, the Competitive Edge Technology Grants and Loans program — the signature element of the 21st Century Jobs Fund in the early years — did not have any performance targets. Expected results from the grants were sparse. The statute made some requirements for companies that would be eligible for grants, and some guidance to the MSF for how to judge applications for the grant.[70] But the legislation lacked definitive expectation of economic results of the grants and goals program.

And although the investment programs did contain some benchmarks for performance in statute, they were poorly designed and never used. Private equity, mezzanine and venture capital funds were supposed to provide a greater return than the commercial loan portion of the loan enhancement program established by the initial law.[71] However, this original loan enhancement program that was to act as a benchmark for these investment programs was never administered in a way that would provide a performance benchmark, so even these cursory pieces of guidance were ineffective.

It should be noted that the failure of the initial legislation to create any meaningful performance benchmark did not hamper the ability of future legislatures from instituting ones. As described above, policymakers regularly created brand new programs through the 21st Century Jobs Fund. These were opportunities to create performance benchmarks to assess whether the programs would meet expectations. But the Legislature rarely required performance standards for them.

Additionally, lawmakers could have created performance benchmarks when it earmarked 21st Century Jobs Fund money for select purposes. But when it assigned new 21st Century Jobs Fund spending for particular purposes, the Legislature rarely created performance targets. In 2006, the first year money was allocated from the 21st Century Jobs Fund, the Legislature created $57.5 million worth of earmarks, but did not create any performance standards for these earmarks or reporting requirements for the money spent on these earmarks.

There are some performance-related requirements pertaining to the 21st Century Jobs Fund, however. The statute mandates that the Office of the Auditor General make a performance audit on the fund’s financial transactions and make these available online.[72] According to the department, performance audits are “to improve program performance and operations, reduce costs, facilitate decision making by parties with responsibility to oversee or initiate corrective action, and contribute to public accountability.”[73]

While this mandatory audit is useful and brings some element of transparency to how these programs are administered, it is not the same thing or nearly as valuable as performance targets or benchmarks. Setting performance targets would allow an investigation into whether the program is actually meeting its expectations and doing what it was designed to do: grow and diversify Michigan’s economy. Without measuring against these expectations, there is no real way to measure how effective the program is.

The plan for the initial allocation of money to the 21st Century Jobs Fund was to make additional annual allocations until 2015 and then reevaluate the program. Clear benchmarks would have gone a long way to determining whether the program was successful and worthy of additional taxpayer support. But a look at the 21st Century Jobs Fund’s activities shows that the program has permutated so much that the legislative intent in 2005 is irrelevant to the program’s current functioning. It is a spending program with little guidance or accountability to taxpayers.