Associated Press

AUSTIN, Texas – Rick Perry brags that Texas has created more than 1 million jobs during his 10 years as governor, trumpeting the state's hands-off regulatory climate and business-first policies. But another part of his jobs agenda, the part that promotes investing state money in private companies, is drawing new criticism as he runs for the Republican presidential nomination.

Rival Michele Bachmann recently likened one of the deals subsidized by the Texas Enterprise Fund to Solyndra, the California energy company that went bust after receiving a $528 million loan from the federal stimulus program.

Perry's state fund "gave $35 million and a grant to a private company and there were donors in that private company," Bachmann said, referring to Perry campaign contributors. Though the company promised to create jobs, "they didn't create any," she said.

The criticism lays bare a larger battle among conservatives about whether the government should let the free market reign or use public money to boost jobs. More specifically, the deal Bachmann attacked illustrates the murky complexities of private ventures that not only involve risk but also donations to political campaigns.

Perry spokesman Mark Miner declined to discuss the deal in question, which was with a precursor to Lexicon Pharmaceuticals. What matters, he said, is that overall "the fund has created more than 59,000 jobs and capital investment of more than $14.7 billion., the three owned about 16.5 percent of the company and donated nearly $325,000 to Perry around the time Lexicon received the funding.

Republican Sen. Kay Bailey Hutchison also tried to make the fund an issue in her primary election challenge to Perry last year.

Miner defended the fund, saying that "because of the policies of the governor and Legislature, Texas continues to be a destination for companies wanting to relocate, expand and create jobs."

Debra Medina, who was a tea party candidate for the Texas governorship in 2010, said that "whether one company or another went gangbusters after getting this money isn't really the issue."

"It's about the government picking winners and losers with taxpayer dollars," she said.

Bills this past session in the Texas Legislature sought to terminate the fund or at least shift control away from the governor's office -- but neither was approved.