"It's a scam," said Colorado state Treasurer Mike Coffman, speaking of a similar bill passed in Colorado. "I don't think there's anyone who thinks this is a good deal for Colorado, with the exception of those companies who lined their own pockets."

George Lipper, who studied similar legislation for the Iowa Department of Economic Development and helped defeat the bill there, called it a "raid on state treasuries."

The concept was originated in Louisiana, whose legislature spent $631 million on the program from 1989 to 1999. A 1999 study commissioned by the state called the program "expensive and inefficient" and said "the greatest and most immediate beneficiaries of the CAPCO program are CAPCO companies and their owners."

A state study in Missouri found 66% of the funds generated by the venture capital program there "were not being used for the intended purposes of providing capital for start-up or expanding Missouri businesses."

A legislative audit in Colorado noted that "CAPCO programs are a most inefficient means for the state to raise venture capital" and questioned whether any jobs created were attributable solely to that financing.

In Wisconsin, according to an analysis by the state audit bureau, the $50 million program had generated just 157 jobs by March, more than three years after the allocations began.

The Colorado audit also noted the capital firms had spent $471,503 on lobbyists in Colorado... In addition, said Coffman, the firms' legal costs came out of the state allocation.

"It's a crummy deal for the taxpayers," said Julia Sass Rubin, a Rutgers University professor of public policy, who has spent five years researching these kind of subsidies and helped defeat a similar proposal in Rhode Island.