Scripps Florida gets over $1 million per subsidized job

When subsidizing businesses to move to an area, paying $100,000 per job is generally considered quite high. But in wooing biotech-research facilities and companies, Florida has been paying much more than $1 million — repeat, far more than $1 million — per job. With the state and its municipalities in bad fiscal shape, some officials are screaming “No more!”

The big push began in 2003, when then-Governor Jeb Bush seduced La Jolla’s Scripps Research Institute with almost $600 million in various kinds of incentives, both from the state and from Palm Beach County. The facility, which opened in 2009, now has 400 employees. Do the math: far, far more than $1 million per employee. By 2014, Scripps boasts that it will have 550 employees —still more than $1 million per job.

Before long, two more San Diego biotech research tanks lapped up fat subsidies to put branches in Florida. Sanford-Burnham Medical Research Institute raked in $310 million to set up shop at Lake Nona in Orlando. It opened in 2009 and now has 191 employees —again, far, far more than $1 million per job. The institute says that it will have 300 employees in five years. But they will still be costing Florida more than $1 million per job.

Also in 2009, the Torrey Pines Institute for Molecular Studies opened in Port St. Lucie. Subsidy: $86.5 million. Employees today: 87. Surprise! A hair under $1 million per employee.

During the past several months, Florida legislators battled over a budget deficit of around $3.6 billion. The 2011–2012 budget was finally resolved early this month through steep cuts to such spending as education. During the debate, solons pointed to those past biotech subsidies. Senator Gwen Margolis of North Miami Beach said that the state was shoveling out $1.5 billion in biotech subsidies (to San Diego imports plus institutions from elsewhere) to create 1100 jobs. That’s far over $1 million per job. “It doesn’t seem like it panned out too well,” she growled.

“Are we absolutely sure we’re getting a good return on investment for all the things we are doing?” asked Senator Don Gaetz of Niceville. Palm Beach County Commission chairman Burt Aaronson doubted that he and his fellow commissioners would have approved the Scripps deal “if we knew any of this [the economic downturn and fiscal squeeze] was coming.”

Even Eric Ushkowitz, director of bioOrlando, a unit of the Metro Orlando Economic Development Commission, conceded to the New York Times, “We can’t spend another billion dollars to recruit research institutes.”

Not surprisingly, those biotech institutes are shifting the argument away from promised jobs. Scripps says that the state is investing in innovation and discovery. When biotech companies nurtured at Scripps start producing drugs, there will be a gush of royalty monies coming Palm Beach County’s way, says Scripps. Sanford-Burnham says that in only two years of operations, its scientists have produced 55 papers and 21 invention disclosures and brought in 155 contracts and $45 million in grants. (Torrey Pines didn’t respond to my questions.)

Early this month, the University of Florida put out a news release gloating that the number of biotech companies in the state had surged 21 percent since 2008, while the biotech industry over the same period nationwide had lost 15 to 25 percent of its publicly held companies. Biotech investment soared 37 percent to $158 million last year in Florida, while it was flat across the country.

“The biotechnology industry has weakened across the U.S.” while flourishing in Florida, exulted the university. But didn’t these data make Florida just a little bit queasy? The state has plunked $1.5 billion into biotech subsidies, but around the country, the industry is showing weakness. Won’t that make it harder for the whopping subsidies to pay off? How will Florida attract more research institutes, companies, and scientists if the industry itself is flagging? Alas, the university didn’t respond to my questions.

The Biotechnology Industry Organization is holding its international convention June 27 to 30 in Washington, D.C. The subjects to be discussed aren’t reassuring. Biotech companies face “a more uncertain future in the current business environment,” says the accounting firm Ernst & Young, which follows the industry and will lead off the session. Biotech companies operate in a “capital-constrained, risk-averse, high-scrutiny environment.” Hmm.

On March 16, John Craighead, director for investor relations and business development of the Biotechnology Industry Organization, said tersely that the stock market’s valuation of biotech stocks “stinks.”

The biotech hubs such as San Diego, San Francisco, and Boston — along with parvenus such as Florida — all hope that the 21st Century belongs to biotech, as predicted long ago. After decades of yearly losses, the United States biotech industry collectively made profits for the first time in 2009. Venture capital is very tight now but could loosen up. The initial public offering market could once again get hot. The Food and Drug Administration could be less tight-assed about approving new drugs. Maybe health will return to the industry.

But why the subsidies? What’s wrong with free-market capitalism? In the 2005 book The Great American Jobs Scam: Corporate Tax Dodging and the Myth of Job Creation, author Greg LeRoy showed that the promise of good jobs and higher tax revenues in exchange for massive subsidies is false. Such payments just fuel bidding wars between states and localities. When a company or research institution wants to set up shop in a new location, it opens up a sack and invites states and cities to drop in money.

What happens? Tax receipts for the winning bidder drop precipitously. Services erode and education, in particular, suffers. The company that took the subsidy has a difficult time recruiting new employees and getting its own employees to transfer to the new location. (As noted above, Florida is already cutting education to help maintain its biotech subsidies.)

The subsidy game is similar to the pro sports racket. And the phony economic claims are the same. For example, the recipient of largesse touts “new jobs” being created, rather like Padres ballpark promoters boasting of all the hamburger-flipper and hot-dog-sales jobs that would be magically formed. But the jobs were only moving from Qualcomm Stadium. It’s the same with Florida’s research institutes. How many employees are simply moving from another job in the area? And how many research jobs are simply being stolen from another place? Say, San Diego.