Bachmann: Perry used jobs fund to reward backers

[October 06, 2011]  AUSTIN, Texas (AP) -- Rick Perry brags that Texas has created more than 1 million jobs during his 10 years as governor, trumpeting the state's hands-off regulatory climate and business-first policies. But another part of his jobs agenda, the part that promotes investing state money in private companies, is drawing new criticism as he runs for the Republican presidential nomination.

Rival Michele Bachmann recently likened one of the deals subsidized by the Texas Enterprise Fund to Solyndra, the California energy company that went bust after receiving a $528 million loan from the federal stimulus program.

Perry's state fund "gave $35 million and a grant to a private company and there were donors in that private company," Bachmann said, referring to Perry campaign contributors. Though the company promised to create jobs, "they didn't create any," she said.

The criticism lays bare a larger battle among conservatives about whether the government should let the free market reign or use public money to boost jobs. More specifically, the deal Bachmann attacked illustrates the murky complexities of private ventures that not only involve risk but also donations to political campaigns.

Perry spokesman Mark Miner declined to discuss the deal in question, which was with a precursor to Lexicon Pharmaceuticals. What matters, he said, is that overall "the fund has created more than 59,000 jobs and capital investment of more than $14.7 billion." Bachmann, he said, was "just throwing garbage at the wall to see if it will stick."

From the first grant announcement in June 2003 through August 2011, the fund had distributed more than $439.5 million to 89 firms -- from giants like 3M Co. and Home Depot Inc. to a Houston company called Alloy Polymers, which promised to create 52 jobs.

The firms have indeed pledged to create a total of 59,000 jobs, but it's unclear how many have so far met their targets. The state says figures for this year are unavailable. Lucy Nashed, a spokeswoman for the governor's office, said 30,749 jobs had been created by the end of 2010.

Perry's previous political opponents have alleged that Texas Enterprise Fund deals are part of a culture of "crony capitalism," funneling taxpayer dollars to politically connected firms with little guarantee that jobs get created. The charge has never gained much traction in Perry's races in Texas, but his presidential rivals hope it will have an impact on voters elsewhere.

Perry says the fund, created in 2003, has been a powerful deal-closer for businesses looking to expand. Texas House Speaker Joe Straus and Lt. Gov. David Dewhurst, fellow Republicans, also sign off on grants, but the governor's office oversees cutting individual deals and distributing money. All firms who fail to meet jobs targets are supposed to pay penalties.

The company Bachmann was referring to, Lexicon Genetics, received $35 million in 2005 to produce two copies of an embryonic stem cell library created from a genetically modified mouse and to deliver them to the Texas Institute for Genomic Medicine. It pledged to create 1,662 jobs by the end of 2011, but its workforce of more than 600 has fallen to 290 today -- with 70 of them based in New Jersey, not Texas.

Alice Stewart, a Bachmann spokeswoman, said the Lexicon deal shows "once again, Gov. Perry agrees with President Obama."

"The governor admits that he supports the same failed stimulus policies as the president," she said.

Lexicon spokesman Wade Walke said that since 2005, the company has made a strategic shift away from labor-intensive research and development; hence, the job cuts.

"We basically went from a company that was based in research development to a company focused on drug development," Walke said. He said the original contract called for Lexicon to reimburse Texas $14.2 million if it didn't fulfill the promised job allotment by the end of 2011.

But the firm renegotiated in 2008 to push back the job deadline to at least 2016. Nashed said firms that don't meet their job targets are required to pay penalties before they can renegotiate the terms. Lexicon kept the $14.2 million and was allowed to renegotiate its contract after paying $16,000 in penalties.

The new agreement also shifted most of the responsibility for creating jobs between 2007 and 2011 to the Texas A&M University System, which is absorbing the nonprofit Texas Institute for Genomic Medicine.

Jason Cook, a spokesman for the system, said the renegotiated contract would create more jobs in the state's biotech sector overall.

Questions about the Lexicon deal were raised by Bill White, the Democrat Perry defeated in the 2010 race for his third full term as governor. White's campaign said the award was an example of "pay-to-play" since Lexicon's top investors in 2005 -- Bob McNair, William McMinn and Gordon Cain -- were all large donors to Perry's campaign that year. According to White's campaign, the three owned about 16.5 percent of the company and donated nearly $325,000 to Perry around the time Lexicon received the funding.

Republican Sen. Kay Bailey Hutchison also tried to make the fund an issue in her primary election challenge to Perry last year.

Miner defended the fund, saying that "because of the policies of the governor and Legislature, Texas continues to be a destination for companies wanting to relocate, expand and create jobs."

Debra Medina, who was a tea party candidate for the Texas governorship in 2010, said that "whether one company or another went gangbusters after getting this money isn't really the issue."

"It's about the government picking winners and losers with taxpayer dollars," she said.

Bills this past session in the Texas Legislature sought to terminate the fund or at least shift control away from the governor's office -- but neither was approved.

[Associated Press; By WILL WEISSERT]

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