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Rep. John Picchiotti (R-Fairfield)
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For Immediate Release

Date: 07/16/12

Was Governor right to veto R&D bonds?

To the Morning Sentinel

By Rep. John Picchiotti

A few weeks ago, Governor LePage vetoed a bill that would have potentially put the people of Maine $20 million in debt through spending on mostly university research grant projects. Republicans do not oppose funding for research and development (R&D) as long as the jobs created are permanent ones and taxpayers are getting a strong value for the debt they assume.

The problem is, in the past, taxpayers' money has been generally squandered on government projects that have offered very little return on investment. From 2007 to 2011, more than $26 million has been allocated to the Maine Technology Asset Fund (MTAF). However, only 289 jobs were created at a cost of over $92,000 per job. It needs to be noted that many of these jobs are not permanent, but temporary research jobs. That's a high bill for Mainers to pay for temporary employment.

Let's take a closer look at this financial black hole. More than 80 percent of the $53 million spent in recent years on publicly financed R&D has gone directly to the University of Maine System and non-profit organizations. The private sector—the real engine of job creation and innovation—received only 20 percent. Nearly half of all MTAF grant applications come from the University of Maine System.

We all agree that Umaine Orono is a good school that plays a critical role in our economy by training young people for the jobs of the future and turning them into productive citizens. Looking at the evidence, however, it is hard to conclude that the tens of millions of bonded R&D money spent there has been used as efficiently as possible with economic development in mind.

In fact, many of the grants effectively stifle economic development instead of encouraging it. For example, $1.28 million was awarded by MTAF to Umaine Orono for an "Autonomous Marine Survey." The MTAF project description begins, "Marine research data is critical to the planning of coastal economic development and resource management." In other words, the data gathered by the survey will help determine what can't be done in terms of economic development and fishing on the coast.

It is true that environmental protection, within reason, is important. Perhaps this survey is ultimately necessary - perhaps not. But it is disingenuous to purport this grant as something that will promote economic development and permanent, private sector jobs.

What about the 20 percent of funding that has gone toward the private sector? Let's take Ocean Renewable Power Company as an example. That organization was awarded over $2 million in MTAF funding for a tidal energy project. Even if successful, this particular project will deliver energy at a higher cost than traditional energy sources. The company itself has said that the price of power from their project would be 21.5 cents per kilowatt hour and increase from there by two percent per year, or a total of 32 cents per kilowatt hour by the end of the proposed 20-year power purchase agreement.

If put into effect, Mainers would spend $16 million more over 20 years on this energy source than they would on a traditional energy source for the same amount of power. The last thing Mainers need is higher energy costs. This project may involve lots of research, but it's hard to see the development.

Naturally, we all want more jobs. Most of us are willing to let government make strategic investments to create some of those jobs. Nonetheless, for too long, no regard has been given to the outcome of such investment. As a result, Maine has gone deeper into debt with little to show for it.

Governor LePage was right to veto the R&D bond, and the House was right to sustain that veto. There are 46,000 small businesses in Maine. It is they, and not the university system, that need help right now. It is the small businesses that will create permanent jobs. Instead of putting the people of Maine further into debt for temporary jobs at a cost of $92,000 apiece, why not expand the availability of low-interest business loans or create grants for innovative private businesses?

The real benefit to Mainers who take on R&D debt comes not from a university grant for a dubious project. The payoff comes when commercialization happens, a product is created, revenues increase and expenses decrease. That is real investment. ###

State Rep. John Picchiotti (R-Fairfield) serves on the Insurance and Financial Services Committee.

Jay Finegan
Maine House Republicans
Tel: (207) 287-1445