In the January 11, 2002 Issue:

Copyright State Science & Technology Institute 2003. 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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SSTI analysis
BMDO End-run Costs SBIR $73.8M
While 2002 marks the 20th anniversary of the creation of the Small Business Innovation Research (SBIR) Program, it also may be remembered as the first time an agency successfully finagled its way out of SBIR's requirement that 2.5 percent of extramural R&D be awarded to small technology companies.

SSTI sources report the Ballistic Missile Defense Organization (BMDO) managed to insert in the FY 2002 Defense Appropriations Act language rescinding 49.6 percent — $73.8 million — of the agency's SBIR obligation for FY 2002.

The SBIR program typically awards up to $750,000 directly to small firms for research and development leading to the commercialization of new technologies. BMDO is one of eight defense components required to participate in the small-business set-aside.

Newly renamed the Missile Defense Agency, BMDO received a substantial increase in its overall research, development, test and evaluation line item, which would have resulted in the organization's SBIR program growing from approximately $80 million in FY 2001 to $148.8 million for the current fiscal year. With the rescission, the program will have $75 million available in FY 2002, a decline of $5 million over FY 2001.

Based on past BMDO SBIR activities, the impact of the $73.8 million cut will be felt across much of the U.S, as companies in 34 states received Phase I awards from BMDO in FY 2001 (complete statistics and lists of winners are available on the BMDO SBIR website: http://www.winbmdo.com/). Proposals for the FY 2002 Phase I solicitation are due next Wednesday, Jan. 15.

The long-term impact from the economic development resulting from commercialization of SBIR funded technologies would be much larger and broader than the SBIR awards, alone.

The stealth manuveur through the conference committee on the final days of the 2001 session caught proponents of the SBIR program, as well as the Small Business Administration and House and Senate Small Business Committees, completely off guard. Most were not aware of the clause until after New Year's Day.

While disturbing to much of the SBIR community, sources tell SSTI that say BMDO's move is not altogether surprising. Similar attempts to excuse the Department of Commerce, National Science Foundation, and National Institutes of Health from SBIR responsibilities were thwarted in 1999, 1998 and 1996, respectively.

Many program supporters report BMDO's rescission provides only the latest evidence of the strong dislike for the SBIR program that exists within most of the federal agencies — with the exception of the individual agency SBIR program offices.

Ironically, BMDO's own economic analysis of its SBIR investments said, "The return on investment of BMDO SBIR compares to that of a venture capitalist. In this study, we calculate an annualized internal rate of return (IRR) of roughly 46 percent had BMDO hypothetically taken an equity investment in the few BMDO SBIR-funded firms that went public after at least one BMDO SBIR award." [Source: Can SBIR Measure Up? on the BMDO SBIR website under Reports.]

President Bush signed the Defense Appropriations Act yesterday. At Digest press time, there remains no official recognition or notice of the rescission on the BMDO, Defense or SBA SBIR websites.

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Tech-Talkin' Governors: The 2002 State of the State and Budget Addresses
Each year, SSTI looks at the various addresses given by the nation's governors at the beginning of the year. While the aftermath of September 11 weighs heavily in the content of this year's State of the State addresses, the important role tech-based economic development plays for strengthening state and local economies during a recession has not been overlooked by many governors.

Not all news is positive, however. As nearly every state confronts less-than-anticipated revenues and the resulting budget deficits, tech-based economic development initiatives face fiscal challenges.

Over the next few weeks, the SSTI Weekly Digest will highlight those portions of the speeches concerning programs, policies, and issues immediately affecting the tech-based economic development community. This week's addresses include:

California
Gray Davis, 2002 State of the State Address, January 8, 2002
http://video.dot.ca.gov/state/index.html

Colorado
Bill Owens, 2002 State of the State Address, January 10, 2002
http://www.state.co.us/owenspress/2002_state_of_state.htm

Florida
Jeb Bush, Education Budget, January 8, 2002
http://sun6.dms.state.fl.us/eog_new/eog/library/releases/2002/january/
ed_funding-01-08-2002.html

Idaho
Dirk Kempthorne, State of the Budget Address, January 9, 2002
http://www2.state.id.us/gov/mediacenter/speech/sp02/20020BudgetMsg.html

Minnesota
Jesse Ventura, Budget Request, January 10, 2002
http://www.finance.state.mn.us/

New York
George Pataki, 2002 State of the State Address, January 9, 2002
http://www.state.ny.us/sos2002text.html

South Carolina
Jim Hodges, Budget Address, January
http://www.state.sc.us/governor/ then click on "Budget 2002-2003"

West Virginia
Bob Wise, 2002 State of the State and Budget Address, January 9, 2002
http://www.state.wv.us/governor/2002sos.htm

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Heavy Job Loss Forecasted for 2002, Study Finds
Some of the biggest tourist destinations in the U.S. — Las Vegas, Reno, Atlantic City, Orlando and Honolulu — and the biggest cities — New York, Los Angeles and Chicago — will suffer heavy job losses as a result of the Sept. 11 terrorist attacks, according to a new study from the Milken Institute.

Metropolitan Economies in the Wake of 9/11 includes a detailed analysis of those industries and metropolitan areas hardest hit by Sept. 11 and examines the overall U.S. economy in light of the attacks and recession.

Las Vegas, expected to have nearly 5 percent fewer jobs in 2002 than it would have had without the attacks, will suffer more than any other metro area, the study says. Myrtle Beach, S.C., and New York City are second and third, respectively, with projected declines of 3.6 percent and 3.42 percent.

The remaining top 10 hardest hit (with percentages in parentheses) are: Reno (3.15), Atlantic City (2.98), Orlando (2.85), Wichita, KA (2.81), Flagstaff, AZ (2.61), Honolulu (2.57) and Forth Worth (2.45).

New York City will see the most job losses in 2002 — nearly 150,000 fewer than it was expected to have in 2002 prior to the events of Sept. 11 — according to the report. Second-worst hit will be Los Angeles, with 69,000 jobs predicted to be lost this year. Chicago is third with a projected loss of more than 68,000 jobs.

All told, the Milken Institute finds that metropolitan areas across the U.S. will lose an estimated 1.64 million jobs this year as a direct result of the Sept. 11 attacks, and almost half of the jobs will come from the air transportation, hotels, amusement and dining industries. The report also predicts that the U.S. economy will remain in a recession until the second quarter 2002.

The study looked at all 315 metro areas in the U.S. and analyzed their economic trends prior to Sept. 11. Milken Institute scholars then examined hundreds of industries in those cities to see what has happened since the terrorist attacks. Using its economic models, the Milken Institute compared before-and-after scenarios to forecast the long-term employment losses expected in each metro as a result of the attacks.

In addition to the report, the Milken Institute has provided tables in the following categories:

To receive a copy of Metropolitan Economies in the Wake of 9/11 and obtain access to the tables above, please visit: http://www.milkeninstitute.org/poe.cfm?point=presrel

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Freedom CAR Sheds Light on Fuel Cell Technology
Against a backdrop of futuristic vehicles at the Detroit Auto Show on Wednesday, Secretary of Energy Spencer Abraham and executives of Ford, General Motors and DaimlerChrysler announced a new cooperative automotive research partnership between the U.S. Department of Energy and the U.S. Council for Automotive Research (USCAR).

Under the new program, Freedom CAR (Cooperative Automotive Research), the government and the private sector will fund research into advanced, efficient fuel cell technology, which uses hydrogen to power automobiles without creating pollution.

A part of the President's National Energy Plan, Freedom CAR is intended to promote the development of hydrogen as a primary fuel for cars and trucks and help reduce U.S. dependence on foreign oil. America's transportation sector presently is 95 percent dependent on petroleum, with transportation consuming 67 percent of the petroleum used in the U.S.

The long-term results of the cooperative effort, Abraham said, will be cars and trucks that are more efficient, cheaper to operate, pollution-free and competitive in the showroom.

Freedom CAR replaces the Partnership for a New Generation of Vehicles (PNGV) program begun in 1993 under the Clinton administration. Abraham's remarks and a fact sheet on Freedom CAR is available at: http://www.energy.gov/HQPress/releases02/janpr/pr02001.htm

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Analysis Reveals Disparity in Access to Postsecondary Education
A student’s opportunity to gain access to and afford a college education varies significantly from state to state, according to a report recently issued by Lumina Foundation for Education.

Unequal Opportunity: Disparities in College Access Among the 50 States, a study of 2,887 degree-granting colleges, classifies each college by admissibility and affordability and examines differences in the patterns within and among states for different types of institutions and different groups of students.

Institutions are defined as admissible if they are open to college-qualified students with test scores and grades that place them in the 25th to 75th percentiles of college-bound high school graduates from their state.

In assessing affordability, the study focuses on college expenses and family resources and the extent to which federal, state and institutional aid help meet financial need for specific types of students. If the sum of these potential financial sources met the estimated expenses, the college was considered affordable.

These two measures — affordability and admissibility — are combined to classify each institution in terms of its accessibility.

The analysis produced several key findings:

A private, independent foundation based in Indianapolis, Lumina Foundation for Education addresses issues in financial access, educational retention and degree/certificate attainment, and opportunities for underserved students through research, grants for innovative programs and communication initiatives.

Unequal Opportunity: Disparities in College Access Among the 50 States includes state-by-state summaries of college-accessibility rates and is available at: http://www.luminafoundation.org/monographs/states/pdfs/Web.pdf

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Reports Surface SBA, HHS Challenges
Two reports released lated in 2001 by the U.S. General Accounting Office (GAO) highlight challenges presently faced by the Small Business Administration (SBA) and the Department of Health and Human Services (HHS).

In Current Structure Presents Challenges for Service, the GAO addresses the issues posed by SBA's current organizational alignment and presents "information SBA should consider in determining if and how to reorganize." Such issues, including ineffective lines of communication and confusion over the mission of district offices, are said "to impede the efforts of SBA staff to effectively deliver services." The GAO report does not make recommendations to SBA; however, the report calls the restructuring efforts of other federal agencies "a framework and a set of steps and considerations that may prove useful to SBA."

The GAO addresses a different issue in Biomedical Research: HHS Direction Needed to Address Financial Conflicts of Interest, namely that some collaborations are concerned with research investigators or institutions being overly interested in "the financial rewards of the research, compromising its integrity and the safety of human subjects." Such financial interest is said to promote a conflict of interest among the collaborations. In its report, the GAO examines how academic research institutions are implementing HHS' regulations governing individual investigators' financial interests and how conflicts of interest are being managed. Presently, HHS' method of handling conflicts in biomedical research is limited in its ability to preserve research integrity and protect human subjects, the report says. The GAO recommends that HHS "undertake efforts to communicate best practices for institutions...(and) develop specific guidance or regulations" to prevent further conflicts.

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State and Local Tech-based ED RoundUp

Albany, New York
Health Reseach Inc., a branch of the New York State Department of Health, is looking to move its Pharmacogenomics Institute to a vacant laboratory in Rensselaer Technology Park, according to a recent article published in the Times Union. The 25,000-square-foot building that housed the Virogenics Corp., a vaccine-research company that left in 2000, has not been officially purchased. The state expects to lease the site when the Rensselaer County Industrial Development Agency closes on the purchase.

Cambridge, Massachusetts
The Massachusetts Institute of Technology (MIT) recently announced the creation of the Deshpande Center for Technological Innovation, established through a gift from Jaishree Deshpande and Desh Deshpande. Their $20 million gift will set off the initial phase of the center, which will be a part of MIT's School of Engineering. The center will will be dedicated to supporting research on novel technologies in collaboration with the high technology and venture capitalist communities of New England and will support undergraduate education in engineering practice. A press release on the center is available at: http://web.mit.edu/newsoffice/nr/2002/deshpande.html

Morgantown, West Virginia
The Blanchette Rockefeller Neurosciences Institute at West Virginia University recently announced a $15 million gift from the Rockefeller family to expand its neurosciences research and neurological therapeutics development programs. The gift, which was given by Sen. John D. Rockefeller IV (D-WV) and numerous family members, will comprise the founding endowment for the Institute, which was established in 1999 as the world's first major research institute focusing on human memory. The purpose of the Institute's research is to prevent, diagnose, treat, and cure neurological, psychiatric, and other cognitive disorders affecting the human brain, with an emphasis on Alzheimer's disease. The Institute is named after the senator's mother, who died of complications from Alzheimer's in 1992.

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