In the December 22, 2000 Issue:

Copyright State Science & Technology Institute 2002. Information in this issue of the SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.

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Congress Passes FAST; SBIR Reauthorization
The most common component of state tech-based economic development efforts -- technical and financial assistance to small, technology firms competing for federal research funding -- got a much needed boost last Friday with Congressional approval of legislation creating the Federal and State Technology Partnership (FAST). Equally important for proponents of better state outreach for the Small Business Innovation Research Program (SBIR) was a $3.5 million initial appropriation for FAST.

As one of the most thoroughly studied federal technology programs, SBIR has been found to be an effective instrument for accelerating innovation and commercialization by small businesses. For more than a decade most state science and technology programs have encouraged involvement in SBIR through outreach and technical assistance. Several states offer financial incentives for proposal development and matching grants for SBIR awards.

The FAST Partnership, crafted in the Senate Small Business Committee under the leadership of Senator Christopher "Kit" Bond (R-Mo.), has several design features to accommodate the unique characteristics of states' existing SBIR outreach efforts. For instance, eligibility is open to all 50 states and to any entity in a state; only one proposal is allowed per state, however, and it must include the Governor's endorsement. The flexibility addresses the fact that lead SBIR assistance organizations vary among states to include universities, state agencies, nonprofit technology-based economic development organizations, or some combination of the three. Requiring a Governor's sign off is meant to preclude funding new or marginal efforts that are duplicative of the state's existing outreach programs or are not integrated with the state's tech-based economic development system.

The Small Business Administration, which is required to administer FAST in partnership with the National Science Foundation and the Department of Defense, anticipates releasing the first FAST solicitation by early March.

SBIR assistance efforts in many states also will benefit from a $1.5 million appropriation for the SBA's existing Rural State SBIR Outreach (RSSO) Program. RSSO focuses on twenty-five states and territories under-performing in SBIR competition. SBA allocated only $500,000 for the program in FY 2000.

Language creating FAST was nested in reauthorization of the $1.2 billion federal SBIR Program. SBIR has been reauthorized until the end of fiscal year 2007. The SBIR legislation, contained within H.R. 5667, can be viewed on-line at: http://thomas.loc.gov/home/omni2000/omni2000.html

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New Markets Initiatives Pass
On its final day of work, the 106th Congress passed two new programs to encourage community development and reinvestment: the New Markets Tax Credit and the New Markets Venture Capital Program.

The New Markets Tax Credit will provide 30 percent tax credits on a present-value basis to investors in economic development projects in low-income areas; community development venture capital funds would be a major beneficiary of this credit. Credits for up to $1 billion of investments will be available in 2001.

The New Markets Venture Capital Program, to be administered by the Small Business Administration (SBA), will provide $30 million in technical assistance grants and up to $100 million in guarantees for investment matching funds to community development venture capital funds.

The Community Renewal and New Markets Act combines Rep. Jim Talent's (R-Mo.) American Community Renewal Act (ACRA) with President Clinton's New Markets Initiative. The legislation will create 40 Renewal Communities with targeted, pro-growth tax benefits, regulatory relief, savings accounts, brownfield site clean-up, and home-ownership opportunities. At least 20 percent of the communities identified by the SBA must be located in rural areas.

Communities must apply for renewal community status which requires high poverty rates and a local commitment to reduce local regulations, zoning restrictions and tax rates. The selected Renewal Communities would receive a combination of tax, regulatory, and other targeted programs. The tax benefits of Renewal Communities would address the principal hurdles facing small businesses when they are just getting started -- raising capital and maintaining cash flow.

The text of the legislation, H.R. 5661 and H.R. 5662, can be found at: http://thomas.loc.gov/home/omni2000/omni2000.html

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States Prepare for Tighter Budgets
Several years of record growth in tax revenues are apparently over for many states, according to Fiscal Survey of the States, released jointly by the National Governors’ Association and the National Association of State Budget Officers on Monday.

Just as many corporations are lowering profit expectations and the stock market takes a nose dive, Governors and legislators in many states are preparing for tighter than expected budgets. Most state coffers are expected to grow, however, but at lower than anticipated rates.

“While the data show positive fiscal health through the time period, tightening of budgets will become more apparent when governors present their fiscal 2002 and fiscal 2003 budget recommendations over the next months,” according to the report’s executive summary.

The survey included budget figures from actual fiscal 1999, preliminary actual fiscal 2000 and enacted fiscal 2001. Twenty-nine states responded to the survey.

Among the factors cited for the darkening budget picture are projected lower tax revenues and outlays for Medicaid, which accounts for nearly 20 percent of all states’ budgets.

Spending on public education grew by 9.1 percent from fiscal 1999 to fiscal 2000, as elementary, secondary and higher education investments consumed one-third of all spending from all funding sources and almost one-half of general fund spending.

For the first time, the semi-annual report also examined state budget expenditures on information technology (IT). States’ use of information technology has rapidly increased over the past five years, the report said. The average annual state IT expenditure is $200 million.

IT highlights included:

Some states, most notably California, still see rosy revenues ahead. On Wednesday, California Republicans proposed $3.5 billion in tax cuts in response to an anticipated state budget surplus of $10.3 billion over the next 18 months. The proposal includes $265 million in tax credits to businesses for investments, research and development, and purchases of cleaner-burning diesel fuel engines.

More information on the latest Fiscal Survey of the States can be found at: http://www.nasbo.org or http://www.nga.org

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Colorado Exploring Incentives for Math and Science Teachers
Colorado leaders want to encourage more college students to go into science and teaching and two recent proposals, coming from Governor Bill Owens and the state's Commission on Higher Education, are designed to do just that.

In Owens' proposed FY 2002 budget for education, announced on Dec. 6, $51.3 million will be allotted in teacher pay incentives to allow principals to reward outstanding teaching, to offer recruitment bonuses to encourage Colorado's best teachers to serve in schools with unsatisfactory academic performance, and to offer recruitment and retention bonuses in hard-to-recruit subjects including math, science and special education.

Also, the Commission on Higher Education has proposed $2,000 in loan forgiveness per year to those college students who choose to teach in science, math, and special education. Students would be eligible for three years of debt relief, up to $6,000 total. For a position to be classified as difficult to fill, it must have had fewer than five applicants.

According to Jeanne Adkins, Director of policy and planning for the Commission, the new teacher encouragement program is a five-year pilot project with the goal of serving 1,226 new teachers with first-year funding set for $500,000.

Additional information on the Governor's education proposals can be found at: http://www.state.co.us/owenspress/12-06-00a.htm

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USDA Offers $18 Million for Rural ED
Funding totaling $18 million is available during FY2001 through the U.S. Department of Agriculture to assist in economic development projects in rural areas. The Rural Economic Development Grants program has $3 million available, while the Rural Economic Development Loans program has $15 million.

Funds must flow through Rural Utilities Service-financed telephone and electric utilities, but they can be used for a broad variety of economic development projects, including incubators, revolving loan funds, project feasibility studies and technical assistance, and projects to provide education and training to rural residents to facilitate economic development.

For Fiscal year 2001, the maximum dollar award for zero interest loans is $450,000 and the top dollar amount for grants is $200,000. For more information on the programs, visit USDA’s website at http://www.rurdev.usda.gov/rbs/busp/bprogs.htm

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DOEd Previews SBIR Topics
The Department of Education has announced its FY 2001 Small Business Innovation Research (SBIR) program solicitation topics. The Phase I solicitation release date is Jan. 26, 2001 with a closing date of April 19, 2001. The agency also will be increasing Phase I award levels this year to $60,000.

The Phase I topics can be reviewed at: http://www.ed.gov/offices/OERI/SBIR/news.html

Interested parties can be placed on the mailing list for hardcopy by calling the Department's RFP Information Line at (202) 708-6498 and requesting "SBIR RFP Number ED-01-Q-003".

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