In the March 2, 2001 Issue:

Copyright State Science & Technology Institute 2002. Information in this issue of 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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Economic Slowdown Reflected in State Budgets  
With the slowdown in the economy, there is widespread concern about the kind of painful belt-tightening which occurred in the states in the early 1990s. Because of this perception and the rapid change in so many states’ fiscal situations, the National Conference of State Legislatures (NCSL) released this week a new survey to update its January 4, 2001, State Fiscal Outlook for 2001. NCSL found that 33 states -- down from 44 reported only seven weeks earlier -- still report that revenues are on target or above forecasted levels for the current fiscal year. The likely reason for the 11-state decrease is lower than anticipated November and December revenues. Medicaid and increased funding for education are the two main expenditures pressuring states’ budgets. 

States most affected by the slowdown are located in the South and in the Great Lakes region: Alabama, Arkansas, Indiana, Kentucky, Michigan, Mississippi, North Carolina, Ohio, South Carolina, Tennessee, and Virginia. 

Most states report they will not need to cut their FY 2001 budgets to keep them in balance; however, 11 have implemented or are considering budget reductions to current year allocations. Five states already have tapped their “rainy day funds” to end the year in the black, and another six are considering the option. 

Eight states (Alaska, California, Hawaii, New Hampshire, New York, Oregon, Utah, and Wyoming) reported their spending on target and receiving higher-than-expected revenues. Some states, such as Alaska, Louisiana, Oklahoma, New Mexico, Texas, and Wyoming got a boost from higher than anticipated natural gas tax receipts. 

According to NCSL, most states expect to experience a maintenance-only budget for FY 2002 with few new initiatives and modest spending growth. Ten states, however, reported tax increases are under consideration for next year. 

For more detailed information on state FY 2001 expenditures, budget cuts, reserve funds, tax changes, and growth rates for FY 2002 budgets, review State Fiscal Outlook for 2001: February Update from NCSL at http://www.ncsl.org/programs/fiscal/upsfo2001.htm 

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President Creates Working Group on Federalism  
On February 26, President Bush issued a memorandum to 21 departments, agencies and other executive offices to create an Interagency Working Group on Federalism. The group is to: 

a) Identify initiatives that promote principles of federalism, such as: 

(b) Draft a new Executive Order on Federalism, which will require departments and agencies in the executive branch to adhere to principles of federalism; 

(c) Consult, as appropriate, with state and local officials on issues pertaining to federalism, including, but not limited to, the issuance of the new Executive Order on Federalism. 

The group must report its recommendations to the President within six months. 

More information is available from: http://www.whitehouse.gov/news/releases/2001/02/20010226-13.html 

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FAST Update  
Release of the first solicitation of proposals for the new $3.5 million Federal and State Technology Partnership (FAST) has been delayed until the end of March, according to attendees of the National Small Business Innovation Research (SBIR) Conference held in Tulsa this past week. SSTI's March 1 presentation regarding FAST (a 16-slide Powerpoint file) is available by email request to skinner@ssti.org

Independently, SSTI sources indicate that the President's FY 2002 budget request is reported to include $3.5 million for the FAST Partnership and $1.5 million for the Rural Outreach Program. The continuation level of funding for both programs marks a shift in the SBA's practices during the Clinton Administration of zeroing out programs created by Congressional initiative. The additional year of funding, if approved by Congress, also allows states better ground for designing new programs to assist small businesses in commercializing technology, planning to meet FAST matching requirements, and making hiring commitments. 

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Incubators: Proven Tools for Tech-based Economic Development  
The headlines of many tech and business publications scream of massive Internet incubator layoffs, closures, and restructuring. The rapid rise and fall of these organizations has left some local tech-based economic development practitioners wondering if encouraging the growth of incubator facilities is a worthwhile strategy to pursue. Closer scrutiny of the incubator phenomenon of the last few years, however, reveals many communities and states are increasing their investments in facilities to encourage technology start-ups at the same time for-profit incubators are closing. 

Whether it is called a technology incubator, business accelerator, or innovation center, the real difference seems to lie in the orientation or goals of the entity: is it intended to make money for its private investors or is it organized as a not-for-profit to encourage local technology business growth? The dire headlines and talk of incubator crashes all refer to for-profit accelerators formed in the past two years to cash in on the dot-com craze. When the craze crashed, so did many of these get-rich-quick entities. 

On the other hand, the number of non-profit technology incubators -- those with a true economic development emphasis -- continues to explode. A daily sweep of newspapers around the country reveals at least one story each day related to creating or expanding another nonprofit incubator. A few recent examples illustrate the point: 

Little Rock, Arkansas: Arkansas Bioventures an incubator project of the University of Arkansas for Medical Sciences received $1.5 million from the Economic Development Administration to support the construction of a 20,000 sq. ft. facility to encourage the growth of medical technology and biotechnology businesses. 

Macon, Georgia: the 12-year-old Allied Enterprise Center is expanding its programs to help existing businesses outside the incubator, to launch smaller companies to address some of their manufacturing needs. 

New Albany, Indiana: the city is in the early stages of finding capital to convert the former Grand Theater into a high tech business incubator. 

Norman, Oklahoma: In April, the Norman Economic Development Coalition will open eTec – the Emerging Technology Entrepreneurial Center to support business growth and commercialization of technology coming out of the University of Oklahoma. 

Rural Utah: Governor Mike Leavitt has requested $250,000 to support the creation of high-technology incubators in rural areas around the state. 

Richmond, Virginia: Capital One Bank gave the Southside Community Development and Housing Corporation a grant of $225,000 to create a 10,000 sq. ft business incubator and entrepreneurial training center. 

Huntington, West Virginia: a $5 million technology incubator is proposed to anchor the city’s new 95-acre technology park. City officials are looking to use federal funds to support the center’s construction. 

Madison, Wisconsin: The nonprofit Genesis Development Corp. is securing funds to turn a small shopping center on the south end of town into a technology incubator. The city has committed $655,000 of its federal Community Development Block Grant (CDBG) funds to the project. 

In addition to federal funding from sources like the Economic Development Administration and CDBG, local tech-based economic development practitioners looking to create or strengthen a tech incubator program may wish to check out any of the incubator titles in the SSTI bookstore and to contact the National Business Incubation Association (NBIA). Based in Athens, Ohio, NBIA is a member-based organization dedicated to strengthening local business incubation efforts around the country. A wealth of information and resources are available at their annual conference, training institutes, and website: http://www.nbia.org/ 

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Useful Stats: NSF Releases State S&E Profiles  
The National Science Foundation has published online the latest edition of the annual series: Science & Engineering State Profiles: 1998-99. By presenting one-page statistical summaries for each state, the District of Columbia, and Puerto Rico, Profiles provides rankings, state and US figures for easy reference across 30 science and engineering statistics as well as the distribution of federal R&D obligations by department and performer. 

Additionally, the report includes population, per capita income, and workforce figures, permitting easy calculation of per capita statistics and rankings across the states. For example, SSTI has prepared the accompanying 50-state table presenting for comparison the number of patents issued to state residents in 1999, the average number of patents issued per member of the state’s civilian workforce, the average number of patents per doctoral scientists and doctoral engineers in the state, and the R&D dollars spent in the state per patent issued. 

Profiles can be downloaded at: http://www.nsf.gov/cgi-bin/getpub?nsf01317 

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Creating Tomorrow’s Workforce: An Evaluation of School-to-Work  
With the 1994 School-to-Work Opportunities Act sunsetting this year and the increasing importance of developing a skilled workforce for a tech-based economy, many are asking if the initiatives launched or expanded by the Act have been successful. According to School-to-Work: Making A Difference in Education, a new report from the Institute on Education and the Economy at Columbia University, early results are encouraging, but there are areas for improvement given the opportunity presented by reauthorization. 

To prepare their findings the Institute reviewed the findings and conclusions of more than 130 local, state, regional, and national studies completed on School-to-Work programs. A complete bibliography is included at the end of the document. 

Accomplishments 
According to the report, employer engagement in school-to-work is at record levels. By 1997, “three years after passage of the Act and before all states had received funding, more than one-quarter of all firms employing 20 or more people were members of partnerships. . . Most employers report that students are positive, valued workers.” 

The study also found School-to-Work student participants are less likely to drop out of school than non-participants, school attendance and grades improve, and many broaden their career options by going on for post-secondary education. 

Challenges Identified 
The report identifies several areas for possible improvement and further study: 

The complete report can be downloaded from: http://www.tc.columbia.edu/~iee/

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