21^st Century Jobs Fund

Official Policy
Adopted May 24, 2005

The Ann Arbor Area Chamber of Commerce supports "in concept" Governor Granholm’s Jobs for Michigan Bond Proposal.  The Chamber has many questions about the details of the proposal, but believes the proposal is important enough for the Ann Arbor area and the State of Michigan that it  should move forward.  We urge the Governor and legislature to work out the details and put it on the ballot in November.

Background

• The Jobs For Michigan Bond Proposal would authorize the State of Michigan to sell up to $2 billion in bonds that would be used to pump $200 million/year for ten years into four high tech areas—< i>life sciences, alternative energy, advanced manufacturing and homeland security—via four initiatives:
• • Research and Commercialization Fund:  more money would be invested in commercially viable research and in companies/organizations that help commercialize research
  • Venture Capital/Seed Funding:  funds would be invested in companies that need initial funding in order to then attract angel investors and venture capital
  • Talent Attraction:  efforts would be made to provide entrepreneurial training and attract entrepreneurs from out of state
  • Federal Funding Matching Program:  assist in leveraging federal research and technology funding
• Not more than 35% or less than 20% would be invested in life sciences (35% would meet the original commitment made by then Governor John Engler of $1 Billion over twenty years).  Not more than 10% would be invested in basic research.
• The State of Michigan would be able to utilize up to 15% of bond proceeds to take equity positions in companies.  The State would be required to use private investment management companies to invest those dollars in a company.  (this change would require an amendment to the State Constitution)
• The program would be modeled after the Michigan Life Sciences Initiative, utilizing independent peer review to rank potential investments.
• The State projects 72,000 jobs(both directly and indirectly) would be created by this proposal
• If the Bond Proposal passes, it would most likely replace the Tech Tri-Corridor funding.
• The State would have three options to pay back the bonds—r eturns from investments it made with the initial bond funds, tobacco settlement funds or state appropriations.

• The proposal has the potential to help Michigan transform its economy, and  Michigan is well-positioned to create jobs in these four high-tech areas. 
• Michigan has a low debt burden which makes a bond of this scale feasible.  Most Bond Firms rate Michigan one step down from the highest rating.  Michigan ranks 26th in the nation in debt per capita (based upon a 2005 Moody's Ranking).  Even adding in the $2.0 billion, we would only move up to 21st in the nation in debt per capita
• The Funding is needed:
• • Many good projects are currently going unfunded in the Tech Tri Corridor Initiative
  • Michigan is missing the management talent and entrepreneurs needed to grow these sectors of our economy
  • Additional venture capital/seed funding is needed to grow startup companies and keep these companies in Michigan
  • Additional funding is needed to fully leverage federal funding opportunities
• Program would be focused on growing high tech businesses and jobs in Michigan.

• The Ann Arbor area could benefit significantly if $2 Billion is invested in life sciences, alternative energy, advanced manufacturing and homeland security in the State of Michigan 
• In the absence of any other proposal to address the state’s economic future, this appears to be an option worth considering

• The total cost of the bond proposal over ~25 years would be $3.6-$3.9 billion
• Bond issues are more appropriate for infrastructure and capital projects where you have a tangible asset
• The State of Michigan should not take equity positions in companies and the State Constitution should not be amended to make this possible. 
• The State has other funds, such as pension funds and University endowments, it could use to make these kinds of investments
• The proposal is risky.  There is no guarantee of added jobs.  It is too diversified with too many priorities.   There is not enough accountability—no sense of when or where the money will be spent or what the measurable objectives are
• Job creation is the responsibility of the private sector
• There are better alternatives.  The State could bond for funds to be used for similar purposes and could be distributed via our Universities
• If Michigan can afford this proposal, it can afford tax cuts instead