News Story

State Program Awards $67 Million, Creates One-Third of Projected Jobs

Lax oversight of grant recipients also cited by Auditor General report

A state program awarding 12 grants totaling $67 million in taxpayer dollars created only a third of the projected jobs.

The Centers of Energy Excellence (COEE) program was supposed to create 1,746 jobs by the end of 2012. Yet according to the latest 21st Century Jobs Fund Annual Report, only 588 of these jobs had been created as of February 29, 2012.

"The definition of insanity is having our state government continue to selectively fund areas of the private economy and be surprised that the outcomes aren’t good," said Wendy Day, president of Common Sense in Government.

Former Gov. Jennifer Granholm announced the program in July 2008. It offered state government funds to match private and federal funds invested in alternative energy companies, with the goal of job creation in the alternative energy industry.

“Creating jobs in the alternative energy industry in Michigan is a major component of our aggressive strategy to build a diverse and global 21st century economy,” the former governor said.

COEE grantees were supposed to gradually receive funding over time after accomplishing milestones that are decided upon as part of the grant agreements. This apparently did not happen.

According to the Auditor General, the Michigan Strategic Fund (MSF) does a poor job of ensuring milestones are met before paying grant recipients. In an audit of all 21st Century Jobs Fund programs, which included the COEE program as well as four others, nine of 28 randomly selected recipients of MSF funds could not provide sufficient documentation to the Auditor General to support 20 of 245 reported milestone achievements. 

Additionally, the Auditor General found that the MSF “did not sufficiently document its review of eligibility requirements for the Centers of Energy Excellence (COEE) Program … we sampled eight of 27 proposals and noted that MSF did not document its review of eligibility requirements in any of the eight proposals reviewed.”

Martin Dober, Vice President of Entrepreneurship and Innovation for the Michigan Economic Development Corp., told Michigan Capitol Confidential that recipients of COEE funds were required to go through an application process. Dober said that a checklist documenting the application process was to be implemented following the Auditor General's findings, but the program has since been discontinued. The state previously committed $7.6 million, which still will be awarded.

The COEE program is administered by the Michigan Strategic Fund, which claims to hold “broad authority to promote economic development and create jobs.” Funding for the program comes from the 21st Century Jobs Trust Fund, which funds similar programs previously reported on by Michigan Capitol Confidential.

One of the initial grants went to Mascoma Corp., which was awarded $20 million in September 2008 for a project that was to create 70 jobs.

In 2007, Gov. Granholm said, “Mascoma's decision to choose Michigan … puts Michigan on the leading edge of technology that will create good-paying jobs for Michigan citizens.”

While Mascoma has received the full $20 million, only three jobs have been created in over three years.

Similarly, A123 Systems was awarded $10 million in November 2008 for a project that was to create 750 jobs. The company, which received special attention from President Obama and was awarded a $249 million grant from the federal government, laid off over 100 workers in November while rewarding executives with excellent severance packages.

"If politicians had to invest their own money before mine or any other taxpayer, I think that would stop a lot of this corporate welfare that is bound to fail," Day said. 

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.