The centerpiece of Texas Gov. Rick Perry’s technology record might be tough to square with his promises of fiscal responsibility.
Perry has made lean government a linchpin of his candidacy, boasting that he has used his line-item veto to cut $3 billion in proposed spending.
But a state technology fund created six years ago at Perry’s behest has become controversial in Texas because of complaints about waste, fraud, and abuse, along with criticisms of reckless spending.
The idea behind the Texas Emerging Technology Fund is to provide venture capital-style funding to young companies for research and development, to encourage innovative firms to grow and create jobs in Texas. It has promised about $200 million of taxpayer money to fund 133 companies since its inception.
It is one of the reasons that Perry called Central Texas “the next Silicon Valley” in a June speech to venture capitalists.
“In Texas, we understand that high-tech companies don't just happen overnight but are a product of forethought, sound vision and planning, and strategic investments by both the public and private sectors,” Perry said.
But an investigation by the Dallas Morning News last year found that $16 million from the fund has been awarded to companies with investors or officers who are major Perry campaign donors. Meanwhile, $27 million went to companies founded or advised by six of the fund’s advisory board members. The investigation also uncovered a lack of transparency and accountability in the fund, which the paper described as “shrouded in secrecy.”
Politicians in the state took notice and strongly criticized the program. State Rep. Mark Strama (D), who chaired the committee that oversees the fund, called for an investigation. Perry said at the time that funding decisions were unrelated to campaign donations.
The controversy has the potential to become a presidential campaign issue because voters are particularly interested in responsible spending this year, according to Bruce Edward Walker, managing editor for tech issues at the conservative Heartland Institute, a think tank.
“Any time a governor institutes any type of spending program that lacks transparency, it could become a campaign issue and it should become a campaign issue,” Walker said. “I definitely think the electorate will be interested in looking at the very nitty-gritty details of every candidate’s past accomplishments and shortcomings.”
Michael Quinn Sullivan, the president of Texans for Fiscal Responsibility, slammed the fund earlier this month. "The problem with these kinds of funds is that even when they're used with the best of intentions, it looks bad. You're taking from the average taxpayer and giving to someone who has a connection with government officials,” Sullivan told The Wall Street Journal.
Lucy Nashed, deputy press secretary in the governor’s office, said fund recipients go through a detailed application process. Each application is “reviewed by dozens of individuals, and voted on multiple times by multiple groups of people in separate industries, separate locations, and separate roles,” Nashed said. The process “has proved to be thorough and effective, and the TETF has been recognized as an active funder of small, early-stage technology firms in our state’s venture marketplace.”
Nashed frames the program as a pro-jobs measure.
“Here in Texas, we've fostered an environment that encourages individuals to risk their capital and create innovative, groundbreaking technologies that have the potential to impact lives, not just in our state, but around the world,” she said. “This culture of innovation will help make Texas the nation’s next hub for collaboration and competition in the development of groundbreaking technologies."
Ralph Hellmann, senior vice president of government relations at the Information Technology Industry Council, said the act of creating a spending program does not clash with Perry’s promises for fiscal restraint.
“R&D spending is still going to be under the gun at the federal level even if Perry is elected. He’s a fiscal conservative, so I don’t think anyone should be under the impression that we’ll see a massive surge in R&D spending if he’s elected,” Hellmann said.
Bill Allaway, president of the Texas Taxpayers and Research Association, said the effectiveness of the fund is in “the eye of the beholder” and that some conservatives might see it as a worthwhile project.
“I don’t think you can say the idea of lean spending is the government shouldn’t spend anything,” Allaway said.