After Michigan's budgets had to be cut recently, some legislators are trying to limit future state liability by either capping and winding up a venture capital fund that invests in startup companies.
A bipartisan group of Michigan House members recently introduced two bills that aim to cap expenses the state might have to pay related to the Venture Michigan Fund. The fund was created in 2003 as an effort to lure more startup businesses to the state. It works by giving money to venture capital managers who focus on investing in Michigan-based startup companies. The money came from banks, guaranteed by tax vouchers from the state. Two rounds of lending from banks to the Venture Michigan Fund, worth a total of $450 million, invested about $150 million in 41 Michigan startups, according to a report from the nonpartisan House Fiscal Agency. The rest of the $450 million was set aside for interest and other expenses related to running the program.
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The banks fronted the money, but now the time is coming for the state to pay its part. The state will owe $140 million related to the first round of funding over the next three years.
Some legislators are wary of letting that tab rise any further going forward, especially at a time when this year's state budget already had to be cut.
One bill introduced last week would prevent the Venture Michigan Fund from entering into any new agreements or making any new investments, effective immediately. Another bill would close the fund in 2018 instead of in 2054 as originally planned. Together, the bills would effectively prevent the fund from receiving any of an additional $150 million it could put toward making new investments, because that money would also put the state on the hook for more payments in the future.
House Appropriations Committee Chairman Al Pscholka, a Republican from Stevensville, is one of the bill sponsors. He said that while the program is "working as it was intended," how it was set up might not have been the best policy.
"This fund was enacted with good intentions, but the reality of using Michiganders' money to buy economic investments just isn't sound policy or good government," Pscholka said in a statement.