Update: The article has been edited to include reference to a second audit conducted.
We have often argued that government agents are not economic developers, though they often engage in the practice. And despite repeated boondoggles and bad policies, the practice continues.
The latest example comes from USTAR—the Utah Science Technology and Research initiative at the University of Utah. Created in 2006, the Utah legislature passed Senate Bill 75 that allocated $179 million to USTAR along with $15 million in ongoing annual funding. Its purpose, in theory at least, is to “enhance Utah’s economy with high-paying jobs and keep the state vibrant and competitive in the Knowledge Age.”
But like many other economic ideas originating from and controlled by the government, this one’s a dud. A recent audit highlighted severe mismanagement and underperformance on USTAR’s part. Here’s just one of many problematic aspects, as reported by the Salt Lake Tribune:
In a January report, the organization said it had created 3,380 jobs, but about 60 percent of those no longer existed — they were construction gigs at already-completed research facilities. The number of research-based positions, meanwhile, was based on projections rather than actual jobs and auditors could confirm only a fraction of those had actually been created and filled.
The organization also claimed to bring in $463 million in contracts, sponsored research and private donations. But more than half that money, about $268 million, was either over-reported, hardly involved USTAR or represented contracts that hadn’t yet paid out.
USTAR is receiving over $20 million annually from the state, and has been the recipient of over $90 million in federal and other grants.
That means the state has “invested” over $300 million in USTAR since its inception, with the promise and in the hope of seeing high paying jobs result. USTAR claims to have created over 3,400 jobs but the audit showed that over half of them were temporary construction jobs. So, at best, 1,700 jobs have been “created” (who’s to say that they would have never existed absent USTAR’s efforts?), meaning that over $176,000 has been required of Utah taxpayers for every job created.
In addition to the legislative audit mentioned above, USTAR contracted Tanner LLC to conduct an additional audit. In an op-ed, former Lieutenant Governor (and newly hired USTAR chairman) cites this second audit, writing that “USTAR is operating ahead of schedule in most of the key areas of job growth, external funding, new companies, and increased tax revenue.”
Where USTAR falls short, of course, is in the creation of jobs—achieving only one third of what was promised in a revised estimate after a decreasing in funding. Senator Scott Jenkins responded that a “culture of untruth and lies [has] come out of [USTAR]. You’ve presented us with ROI figures that were wrong. You’ve personally—not the current chair, but previous ones—have personally lobbied me and fed me, literally, with food and other untruths that I feel somewhat offended about because it’s turned out that they’re not right. And it wasn’t one year or one report—it was a series of years and a series of reports and I believe to some extent that this has been a culture that has been generated to prop up USTAR and make it look good.”
“If I was an investor right now today,” he added, “I think I’d probably still pull my money out.” It’s unfortunate for those taxpayers who agree that they are compelled to help finance this organization.
Whenever the federal government has engaged in similar debacles, there has been no shortage of media attention and public outcry from citizens concerned about government waste, poor policy making, and violations of the proper role of government. We believe that Utah and its political subdivisions should not be treated differently.
While some legislators have expressed concern with USTAR, with a few of them seeking to deny USTAR its funding, most of them appear to be content to rely on more promises from new leadership that there will be “more accountability.”
It’s difficult to overemphasize the degree to which taxpayers are being fleeced to benefit a few researchers, staffers, and others who are profiting without fulfilling their duty to actually create jobs. It’s also interesting to see such widespread support for government-based “job creation” from Utah’s predominantly conservative legislature, where many of its members rail against similar actions on part of the federal government.
Government exists to protect life, liberty, and property. While we share in the desire to see a strong economy with plentiful employment opportunities, our commitment to free enterprise requires us to oppose the forcible investment of taxpayer dollars into inefficient, unproductive, and improper ventures. USTAR should be immediately defunded and disbanded.
