PhillyDeals: Capital punishment: Seed dough dying out

Harrisburg in July is not quite as muggy as Philadelphia. But it's nasty enough. The air conditioners hum like taxpayers screaming.

This is the dowdy city on the wide but shallow Susquehanna where our Gov. Rendell and our state reps are likely to spend what ought to be summer recess, past the July 1 balanced-budget deadline, toward the threatened mid-July payless payday that would shut state offices.

Rendell gave up another $500 million in budget cuts Friday. Less cash for the free-spending empire-builders up the river at Penn State. Less for libraries, and mental health.

And less state budget money for Ben Franklin Technology Partners of Southeastern Pennsylvania, which invests in very small firms, in hopes they'll grow, hire Pennsylvanians, and feed taxes to Harrisburg.

Pennsylvania pumped $50.7 million into the Ben Franklin Technology Development Authority Fund this year. Rendell wants to budget only $35 million for Ben Franklin next year. The Republicans who run the state Senate want to budget just $20 million.

How much should the government spend? Half the fund goes to Ben Franklin Technology Partners, which has been here 20 years. That is long enough for a sober accounting. But instead, Ben Franklin put out a report last winter by the Pennsylvania Economy League purporting to show how $140 million, invested in 592 companies in 2002-06, has ended terrorism, cured cancer, and reversed global warming, making it possible to walk uphill from Strawberry Square to the Capitol with a budget book and a senator's secretary under each arm, no sweat.

Actually, the report claimed Ben "boosted the Pennsylvania economy (Gross State Product) by $8.7 billion after adjusting for inflation," and raised "more than $517 million in additional state tax revenues," while creating "32,832 job-years" that "otherwise would not have existed."

That's not real. The authors estimated, and extrapolated, and multipliered, using what the Economy League's Rich Stein told me were "quasi-experimental" techniques.

I asked the Ben Franklin people for a list of the 592 firms that received the $140 million. They sent a list of 381 firms and $74 million. The missing were "a typographical error," and they only used 310 as a study base anyway, said Ben Franklin spokesman Jaron Rhodes.

When Rendell threatened to cut the budget Friday, I sorted the list by size and called the seven biggest recipients. One, Caracal Inc., of Ford City, has shut down. The rest live:

Plextronics Inc., of Pittsburgh, employs 70 people making electronic fabric and has won a military contract and $40 million in mostly private investment atop Ben's $1 million, said spokeswoman Lori Lecker. I'm not sure Ben Franklin can say those jobs would "not otherwise have existed," except in the sense that ideas, unlike babies, can have many fathers. Not profitable yet.

mSpoke Inc., also of Pittsburgh, employs 10 in its online media-service business, says chief executive officer Sean Ammirati.

The Neat Co., of Philadelphia, digitizes paper records, employs 60, and has raised millions in private capital after Ben's $800,000, said spokeswoman Rachel Poor.

Health Market Science Inc., a health-care data firm in King of Prussia, employs 140, has raised $17 million in mostly private capital and is profitable, said spokesman Rick Padron.

Fluorous Technologies Inc. is a Pittsburgh chemical firm. Not hiring and wouldn't talk with the boss away.

Aethon Inc., a Pittsburgh firm that makes hospital robots, has 75 workers and raised $30 million in capital, says CEO Aldo Zini. Less than $1 million is from Ben Franklin. But "if it wasn't for their investment, we wouldn't be here. They backed us when venture capital wouldn't," Zini told me.

Another believer is Glenn Rieger, partner at private investor NewSpring Capital in Radnor. "Ben Franklin money is critically important," Rieger told me. "It's the money that keeps the lights on and the doors open for the first year or two.

"This region is critically short on early-stage investors," Rieger said. "They may not all be paying income tax. But the employees are. The state of Pennsylvania would be cutting their nose off to spite themselves if they cut off Ben Franklin."