Recent headlines and new research remind us that when state and local governments bet on specific industries or companies, taxpayers usually lose.
In 2008, Massachusetts launched an initiative that authorized the state's Life Sciences Center to invest $1 billion over a decade ($500 million in grants, $250 million in loans and another $250 million in tax credits) to expand life-sciences-related employment and support research, development, manufacturing and commercialization.
One company that benefited from that largesse was Organogenesis, a biotech firm with operations in Canton, Mass., that was looking to more than double its local workforce. But the Boston Globe recently reported that the company now employs fewer people in Massachusetts than it did in 2009, when it received $7.4 million in grants from the Life Sciences Center.
A new study demonstrates that what happened with Organogenesis is not an anomaly.
In the lead-up to passage of the legislation that created the Life Sciences Initiative, then-governor Deval Patrick said that it could create 250,000 Massachusetts jobs over a decade. The new study, published by the Pioneer Institute, a Boston-based think tank, shows that more than five years into the program the state was about 245,000 jobs short. (I am affiliated with Pioneer Institute as a senior fellow and edited the study.)
The study found that the Life Sciences Center had disbursed nearly $557 million of the $1 billion as of the third quarter of fiscal 2014. To minimize concerns about bias, study author Greg Sullivan, a former Massachusetts inspector general, duplicated the methodologies used in four recent studies of the state's life sciences industry. The varying methodologies produced job creation numbers that ranged from 3,657 to 6,107 since the initiative launched at the beginning of 2009. The average of the four approaches was 5,010 jobs. Based on that number, Massachusetts taxpayers paid more than $111,000 per job.
The closer you look, the more disturbing the numbers become. During the period examined in the Pioneer study (the beginning of 2009 through the end of the third quarter of fiscal 2014), overall job growth in Massachusetts was 8.4 percent. Under only one of the four methodologies did life-science job growth exceed that level. Averaging the four methodologies yields a 6.9 percent growth in life-science jobs. So, thus far at least, an investment of more than a half-billion dollars in the life sciences has likely yielded a slower rate of job creation than that produced by the state economy as a whole.
In life, it's critical to know what you don't know. The time has come for state and local governments to recognize that they don't know how to pick winners in the private-sector marketplace. If government leaders can't come to this realization on their own, perhaps voters should nudge them.