State’s $1b initiative said to yield economic strength
By Robert Weisman | GLOBE STAFF MARCH 26, 2013
Halfway through a decade of investment promised by Governor Deval Patrick’s 10-year, $1 billion life-sciences initiative, launched in 2008, the state has spent only about a third of the money targeted to promote the biotechnology and medical device industries in Massachusetts.
But the authors of a report set to be released Tuesday by the Boston Foundation, a philanthropic group, say the effort has helped stimulate a key sector of the state’s economy, creating more than 8,000 jobs through capital grants, tax incentives, and business loans.
They urge state government leaders to continue funding the initiative in the face of stepped-up competition from other life-sciences hubs, such as California, Maryland, and New Jersey.
Northeastern University economists Barry Bluestone and Alan Clayton-Matthews, who wrote the report, noted the Massachusetts approach has focused on building an “ecosystem” of start-ups that can work with the state’s research universities and teaching hospitals.
They said the $300 million spent by the state so far has spurred more than $1 billion in spending by private companies. Those businesses include eight of the world’s 10 largest pharmaceutical companies that have set up shop in the state — and created thousands of additional jobs — to buy what Bluestone calls “a front row seat” in the arena of cutting-edge biomedical research.
“Here is a sector that grew right through the recession,” Bluestone, the director of Northeastern’s Dukakis Center for Urban and Regional Policy, said in an interview.
“If we’re competing with all the other life-sciences regions, the question is, ‘Has the life-sciences initiative succeeded in getting us to the top of our game?’ And the answer is yes.”
The report comes as the Patrick administration seeks the next annual round of funding from the Legislature to bankroll the initiative. It is likely to renew debate on the effectiveness of economic development incentives in encouraging businesses to expand or move into the state.
While the data are nine months old, the report shows the state distributed $301.5 million in grants, loans, and tax breaks through the Massachusetts Life Sciences Center between 2008 and June 30, 2012. At that pace, the state would have to pick up the pace of investments in coming years to hit the $1 billion target — requiring lawmakers to authorize additional annual funding. The center has spent about $359 million as of this week, according to officials.
The 8,000 jobs created, as cited in the report, are fewer than the 8,750 estimated by the center last year, a figure that included temporary construction jobs. In 2008, when the initiative was launched just before the economic slowdown, the governor suggested it could generate 250,000 jobs over 10 years — a projection that was not mentioned in the Boston Foundation report.
Susan R. Windham-Bannister, president of the Waltham-based center, said the initiative’s job-creating performance should be assessed in the context of the economy.
“Given how quickly everything changed in the recession, we all had to recalibrate our expectations,” she said. “We have grown, and grown very aggressively, despite the bad economy. That’s something we should feel very good about. And we’re not done yet.”
Critics of government incentives say it’s hard to gauge how effective they are because some jobs created in a state thanks to such incentives move elsewhere later, and others may have been located there without grants or tax breaks.
“From a national perspective, this makes no sense,” said Arthur J. Rolnick, senior fellow at the University of Minnesota’s Humphrey School of Public Affairs. “You’re just taking jobs from one state and moving them to another. It’s diverting public money from roads and bridges.”
Rolnick acknowledged that “from a local perspective, if your governor is good at stealing jobs, it may be that the economic benefit outweighs the costs. But you don’t know if these jobs are coming anyway. If I’m a business and I know I’m coming to Boston, I’ll call up your state officials and say, ‘I’m thinking about coming to Boston’ and see if I can get some incentives.”
Donald Klepper-Smith, chief economist for DataCore Partners, an economic research firm in New Haven, said state officials should recognize that life-sciences jobs are portable.
The drug giant Pfizer Inc., for instance, has moved research jobs to the Boston area from Groton, Conn., while the British pharmaceutical company GlaxoSmithKline PLC last week disclosed that it is moving research jobs from Cambridge to Philadelphia.
“The question is: Do these economic incentives have staying power?” Klepper-Smith said.
At the same time, he conceded, “In this economy, every job counts. When you look at biotech and pharmaceuticals, these are important jobs because of their direct and indirect economic impact.”
Bluestone has been a critic of government incentives to lure energy, video game, and film companies to Massachusetts.
But he said interviews with more than a dozen life-sciences executives and scientists convinced him that this initiative made sense for the state. While life-sciences employment has increased 12 percent nationally in the past 12 years, Massachusetts has seen a 27 percent growth in the biotechnology and medical technology sectors, he said.
“We’ve now eclipsed all other states — and that has happened in the past five years — in terms of employment growth,” Bluestone said. “This was making a bet not on an individual company but on an entire industry that has the potential for becoming a major supercluster. It was like betting on the auto industry in 1910.”