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(In March 17 item, corrects paragraph 10 to say shipyard is in Newport News, not Norfolk)
JUPITER, Florida In October 2003, Jeb Bush unveiled one of the largest economic projects in Florida history: a $500 million plan to bring Scripps Research Institute to the state and build a biomedical hub he said would generate nearly 50,000 jobs in 15 years.
As governor, he described it as a "seminal moment,” comparable to Walt Disney World's arrival in Florida in 1971, which brought billions of dollars in tourism, spawned tens of thousands of jobs, transformed the economy and created the world’s most-visited vacation resort.
Today, as Bush leads possible Republican candidates in the 2016 race for the U.S. presidency, the missed projections and mixed results of his signature economic policy as governor — a biotechnology gamble that has yet to pay off — illustrate problems he could face in explaining his own record while promoting a vision of “real conservative success."
By nearly all measures, the plan to transform bedroom communities into biotech corridors by attracting Scripps and other research institutes has fallen short of expectations, despite $1.3 billion in state, city and county funding.
Making an early case for his presidential ambitions, Bush has stressed that government shouldn’t be in the business of picking winning industries and that market forces should do that job.
"I’m not here to take sides and I don’t think the government should either," he said in a speech on Feb. 4.
But his Florida record tells another story.
Bush passed a $310 million incentive package through the state legislature in 2003 to entice California-based Scripps to open a branch in Jupiter, a small coastal town of 55,000 people in affluent Palm Beach County, which invested another $203 million.
The money funded the salaries of scientists over 10 years and paid for a 350,000 sq.-ft research facility on the Florida Atlantic University campus and other start-up costs.
It marked the start of a policy to diversify Florida’s $800 billion economy by pumping money into big non-profit research institutes and betting that “clusters” of biotech startups and pharmaceutical companies would form around them on the back of scientific discoveries, bringing in venture capital and high-paying jobs to six counties across the state.
Scripps was the first step.
It would create 6,500 jobs in 15 years, Bush said, with 2,800 at Scripps alone and 3,700 at spin-off companies, while increasing Florida's gross domestic product by $3.2 billion in that same period. Another 44,000 jobs would be created as other biomedical groups built around the Scripps location, leading to the creation of nearly 500 biotechnology companies.
Three years later, Bush set up an “Innovation Incentive Fund” that would use state money to propel the biotech industry. It spent $456 million to lure seven more non-profit life-science institutes and a biotech company, New York-based IRX Therapeutics Inc, to Florida over the next five years.
With cities and counties kicking in matching funds, Florida spent a total $1.32 billion, according to data collected by Reuters from each recipient of state and local subsidies.
By the end of last year, the investments, including the funding of Scripps, had generated 1,365 jobs, the data showed, just under a quarter of the original projection of 6,000 direct and indirect jobs by 2019 and far from the more ambitious target of 44,000.
Wages for the jobs are high, but so, too, is the cost to Florida’s taxpayers at about $1 million per job.
Documents obtained by Reuters from Scripps Florida Funding Corp, which oversees the state's payments to Scripps, show that direct and indirect contribution to Florida’s economy from the institute totaled $52.5 million in 2013, far from the originally projected $3.2 billion by 2019.
The state itself acknowledges that the Innovation Incentive Fund, set up during Bush’s second term as governor, “does not break even” when calculating a return based on economic benefits, including “tangible gains or losses to state revenues,” according to a 2014 report by Florida’s Office of Economic and Demographic Research.
“STRATEGIC ONE-TIME INVESTMENTS”
Florida and biotech industry officials say the investment has reaped scientific dividends and the 9-year-old Innovation Incentive Fund still has time to succeed with a goal to produce break-even economic benefits within a 20-year period.
The institutes were “strategic one-time investments that have yielded tremendous results for the state,” said Bush’s spokeswoman, Kristy Campbell. “Florida's investment in recruiting world-class research institutes to the state has diversified the economy, created high wage jobs and contributed to significant scientific research advances,” she said.
Scripps, for instance, has made advances in Florida toward a blood test to diagnose Alzheimer’s disease before symptoms appear, it says. Its Florida labs have also discovered a compound that might protect brain cells against Parkinson’s disease and identified a pathway in the brain that regulates vulnerability to nicotine addiction, it adds.
Scripps declined to say whether it agreed with Bush’s 2003 projections. Its promises to the state were more modest and have been met, it said. It agreed to hire 545 workers in Jupiter by Dec. 31, 2013. Today it employs 547.
Bush’s 2003 projection of Scripps’ economic impact was produced by the Florida-based Washington Economics Group, whose president, Antonio Villamil, was a senior commerce official in the administration of Bush’s father, President George H.W. Bush. Washington Economics Group did not respond to requests for comment.
STRUGGLING TO MEET TARGETS
Other recipients of the funds have struggled to meet state targets.
IRX, which develops cancer-treatment therapies, had promised to move its headquarters to St. Petersburg, Florida by 2011 but is still based in New York, say state officials who used a claw-back clause to recover some of the $1.6 million IRX received. IRX declined to comment.
Torrey Pines Institute for Molecular Studies, which promised the state in 2006 that it would create at least 189 high-wage jobs over 10 years in the coastal city of Port St. Lucie, has scaled back workers since 2011. Today, it employs 74, it said.
Democrats have said the biomedical money should have been spent on other programs such as education.
“We have lots of impoverished communities in Florida that didn’t see that money,” said Dan Gelber, a Miami-based attorney and former Democratic state lawmaker who voted against giving money to Scripps in 2003. “It was economic development money, so there were a lot of possible uses for that money.”
It’s unclear whether the issue will pose a political headache for Bush but his economic record as governor will be scrutinized should he finally declare his candidacy for the presidency.
The use of subsidies could also provide fodder for free-market, anti-government-spending Republicans who exert a strong influence in small states that hold early nominating contests to select the party’s presidential candidate.
"People will ask why were some of these massive incentives given when the results are mixed," said Matthew Corrigan, author of “Conservative Hurricane: How Jeb Bush Remade Florida.”
MISJUDGING SCALE OF WORK
Some problems are beyond the state’s control. The 2008 financial crisis hurt the biotech industry nationwide. Sharp, long-term federal budget cuts known as "sequestration" caused the National Institutes of Health, the world’s biggest funder of scientific research, to reduce its funding of grants for biomedical research institutes since 2012.
But the state also appeared to misjudge the scale of work needed to commercialize research and the difficulty of luring venture capital from bigger centers such as Boston, San Diego and San Francisco that have consolidated their dominance with a critical mass of top universities, hospitals, big biotech companies and hundreds of startups.
"When the governor went after these institutes to come to Florida, we didn’t realize the amount of infrastructure that needed to be in place," said Kelly Smallridge, president of Palm Beach County's Business Development Board.
"You don’t just go and pluck two institutes and put them in a county and expect the industry overall to thrive and for companies to flock here," she said of Scripps and the Max Planck Florida Institute for Neuroscience, both in Palm Beach County.
Today, Florida remains a marginal player when it comes to biotech’s lifeblood – venture capital. The state remains far out of the top 10 states that attract the most venture funding. Since 2002, it has received less than 0.7 percent of the venture investments in biotech.
Of the six companies spun out of Scripps in Florida, only two remain in the state and one no longer operates.
(Additional reporting by Howard Schneider in Washington and Sarah McBride in San Francisco, editing by Ross Colvin)
(In March 17 item, corrects paragraph 10 to say shipyard is in Newport News, not Norfolk)
By Nathan Layne, Ned Parker, Svetlana Reiter, Stephen Grey and Ryan McNeill