Legislators played dirty budget games in their lab, and the results might cause a complete meltdown of science foundation arizona.
To listen to Republican Representative Sam Crump of Anthem speak, you would think that every major business leader throughout this state, plus the entire Republican-led legislature, former Democratic Governor Janet Napolitano, and current Republican Governor Jan Brewer were part of a conspiracy to throw away taxpayer money on “corporate welfare” that they disguised as a science foundation.
To listen to some of the four freshmen Republican lawmakers Crump got to join his campaign, you would think that Arizona was wasting millions each year on a “boondoggle” (pointless or wasteful work) and a “slush fund” (a secret piggy bank used for bad things).
If all of this sounds patently ridiculous, it’s because it is. If you instantly thought something must be wrong with this picture, you’re far smarter than the cabal that forced the legislature last January into robbing every cent of the 21st Century Fund that finances Science Foundation Arizona. SFAz, created in 2006, brings together business, government and scientific leaders to invest in math and scientific research that could benefit the state for years to come.
These heady-with-power newbies – Crump is in his second year, the rest took office in January – even boasted that they had stared down their own party and their own governor, declaring they wouldn’t vote for any state budget unless they got rid of the fund.
If there were any cheers, they came only from those who had no clue what Science Foundation Arizona was or what it did.
I’ll tell you who wasn’t cheering: most of the embarrassed Republicans in the statehouse; all of the appalled Democrats in the statehouse; Governor Brewer; every important CEO in this state and their board of directors; every scientist at all three major state universities; anybody who wants Arizona to become a state where college kids can find good jobs; and anyone who thinks we can become more than the “service economy” of low-paying, dead-end jobs that now characterizes much of our workforce.
Some say what Crump & Co. did hit a new level of crassness; it was a stunning case of “willful ignorance” and an example of “meaningless meanness.”
Insiders say some of those freshmen lawmakers now realize they were “misinformed” about what the foundation was and are now working with the majority of Republicans to set things right.
Crump, however, is not one of them. While I was willing to give him the benefit of the doubt that he just misunderstood the fund and the foundation – after all, he’s still a new public official (and also a lawyer toying with the idea of running for Arizona Attorney General) – he tells me he still believes he did the right thing.
“Absolutely I continue to be opposed,” he wrote to me in an e-mail. “This sort of program always sounds great and they convince people that it is an ‘investment’ and will attract thousands of high-paying jobs. Despite the fact that the evidence of any such results is typically flimsy, nothing trumps the fact that this is venture capital investing with taxpayer dollars.”
He went on to question why we’re investing in the things the foundation funds – advancements in science and math – rather than something else, and then added, “I notice that much of the group’s work is in partnership with the universities. I think that is where research dollars should be – the universities. So let’s put it there and not in the hands of this private corporation.”
Margaret Mullen, chief financial officer for Science Foundation Arizona, can hardly believe her ears. “Calling us ‘corporate welfare’ is ridiculous – we’re not even a corporation,” she protests. “We’re a nonprofit foundation that can only fund university or nonprofit research. We get money from corporations, we don’t give them money.” And what about the words “boondoggle” and “slush fund”? Mullen just shuts her eyes and purses her lips, as if she’s forcing herself not to say what’s really on her mind.
The 21st Century Fund and Science Foundation Arizona grew out of the most widespread and smartest public-private partnership Arizona has ever seen. In 2006, farsighted business leaders started the drum beat that this state couldn’t rely on just tourism and real estate and needed a “third leg of Arizona’s economy” – scientific research that would advance Arizona’s economy and provide high-paying jobs.
Three powerful groups led the way: Greater Phoenix Leadership (representing 105 top companies with more than 250,000 employees); the Southern Arizona Leadership Council; and the Flagstaff 40. They worked with Governor Napolitano and the legislature. They created a five-year plan, with the CEO groups promising to pay all operating funds and the state pledging $100 million, with every dollar matched by private funds.
Their efforts created Science Foundation Arizona with some important safeguards: They would only fund research that would expand Arizona’s future and create high-paying, in-state jobs.
The first two funding years went fine, but last November, the state asked Science Foundation Arizona for a favor: “They knew they were in financial trouble, and they asked if we would allow them to delay the state payment until later in the year, rather than when it was due, and I agreed,” says Mullen, who describes herself as “a lifelong Goldwater Republican.”
By January, the state owed Science Foundation Arizona $18.5 million for work that had already been done (like most state contracts, you do the work, submit a bill and get paid). But on January 31, the legislature acquiesced to Crump & Co. and withheld the $18.5 million owed to the foundation to help reduce the state deficit.
“We were never thinking anyone could breach a contract like that,” Mullen says, adding that this move has damaged the state’s reputation with everyone who does work with Arizona. “A private business wouldn’t do it, an individual wouldn’t do it, it never occurred to anyone state government would do it.”
The foundation sued the legislature, saying this breach of contract was unconstitutional, unethical and illegal. A Maricopa County Superior Court judge agreed last summer, also awarding them interest and attorney fees. The interest amounts to $5,061.62 per day – or $1.85 million a year – and legal fees already are nearly a half million dollars. But the lower court can’t force the legislature to pay up, so the foundation went to the Arizona Supreme Court. That court declined to hear the case in October, so at press time, the foundation was going through the Arizona Court of Appeals.
Some in the statehouse are working furiously to be sure the foundation gets its money. One of them is a leading conservative Republican, Representative Bill Konopnicki. He’s serving his fourth term representing Safford, where he has 30 years of business experience. It was Konopnicki who wrote the bill creating the 21st Century Fund, and he supports its work to this day.
He tells me he was “shocked” when he first heard of a rogue plan to destroy the fund and came to realize that “Sam Crump doesn’t want to be confused with the facts.”
He adds: “I believe this was led by a lot of misinformation and an effort to get headlines quick. Most of these freshmen who signed on with Crump had no idea what the foundation was or what it did. Crump was feeding them misinformation, and they were gullible enough not to get the facts for themselves.”
The freshmen Republican lawmakers were Representative David Stevens of Sierra Vista, Frank Antenori of Tucson, Steve Montenegro of Litchfield Park and Carl Seel of Anthem. I e-mailed all of them. Only Montenegro responded: “My position has not changed. I do not think that state funds should be spent on these types of programs while we grapple with closing a $3 billion budget gap.”
Konopnicki says some of the others have had a change of heart. “I do believe they’ve had their eyes opened and see the value [of the Foundation] and are ready to help solve the problem in the future,” he says.
House Minority Leader David Lujan, an attorney who’s also contemplating a run for Attorney General, says Democrats immediately opposed stripping the fund during legislative action, but they were ignored. “This is pretty typical of what we see in the legislature these days – the lack of a long-term vision for the state and opposition to investing in the future. And that’s what the Science Foundation does.”
A few facts to set the record straight:
• Science Foundation Arizona has given $50.4 million in grants that labs have used to leverage an additional $109.8 million that pays for research, 757 well-paying jobs and 255 student research positions.
• For every dollar funded to the foundation, $2.18 in income has been leveraged from other sources.
• The foundation’s Student Discovery Program on math and science has served 54,517 high school students and 581 teachers throughout Arizona, with 88.8 percent of students surveyed expressing more interest in advanced courses.
• One of the foundation’s grant recipients is The Critical Path Institute in Tucson, which has partnered with 14 drug companies to get drugs to market faster. The firm has so much potential that Maryland is trying to lure it away with a $30 million offer. “We lose this and we lose the possibility of 60,000 six-figure jobs,” Mullen warns. “We lose the links to the pharmaceutical companies, we lose the training opportunities for students and we lose the confidence of industry.”
• The foundation funds a solar institute to develop more effective, efficient and affordable solar systems and research into skin cancer.
And then there’s the project to create jet fuel from green algae. Imagine making fuel from a renewable substance that doesn’t pollute and will never run out. That’s what Dr. Milton Sommerfeld and his partner, Dr. Qiang Hu, are doing at ASU’s Polytechnic campus in the East Valley. They’re accelerating the growth of algae – it needs only water and sunlight to grow – and extracting its fat cells to make fuel.
“This is a solar energy product – we call ours ‘green solar energy,’” Sommerfeld says. This fat has myriad possibilities, in fact: Another fortune can be made in what its lubricating qualities mean to cosmetics.
Sommerfeld is really close to having this all nailed down – he’s now perfecting the refining process to make algae fuel viable on the market. Of course, he’s not alone. Exxon is already running national television ads touting its own research into turning algae into jet fuel.
The stakes are very high: Whoever gets this product to market first will reap tens of millions in royalties; whoever builds these refineries will create thousands of jobs and tons of taxes. This is no time to lag behind.
“The Science Foundation [Arizona] grant was crucial,” Sommerfeld notes. “But now [with the funding cuts] we’re struggling; it’s slowing us down. We’re doing this research for Arizona. We didn’t do it to have this technology go to another state. This is a good fit for Arizona, but someone else could get it first, and we’d be missing an opportunity.”
Arizona is poised to miss lots of great new opportunities as long as some lawmakers refuse to care enough to get their facts straight