In the February 15, 2002 Issue:
- State Fiscal Conditions Continue Downward Spiral, Survey Says
- Changes Proposed to Improve ATP
- Tennessee Unveils New Economy Strategy
- Strategic Plans Target Workforce in San Diego Region
- TEDCO, DBED Study Shows Origins of Maryland Entrepreneurs
- Initiative to Strengthen Presence of Life Sciences in Central Indiana
- Tech-talkin' Govs: State of the State Addresses and Budget Requests
- Useful Stats: 4th Quarter VC Data by State
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.
Subscription to the SSTI Weekly Digest is free. If you are reading a forwarded copy of this issue and would like to receive your own copy each week directly, please subscribe at: http://www.ssti.org/Digest/digform.htm Requests to unsubscribe should be sent to sstiwd@ssti.org.
State Fiscal Conditions Continue Downward Spiral, Survey Says
The number of states reporting cost overruns, budget cuts and use of their fiscal reserves has grown significantly over the last three months, according to a report released last week by the National Conference of State Legislatures (NCSL).
State Fiscal Outlook for FY 2002 - January Update addresses budget problems in FY 2002 and looks at fiscal developments affecting FY 2003 budgets. Data collected from state legislative fiscal offices by NCSL indicate that more than three-quarter of the states have implemented budget cuts or holdbacks and more than half are tapping their rainy-day accounts.
All but five of the 50 states report that revenues are below projections. The future offers little hope for a quick recovery, as 37 states already report budget gaps in next year's revenue forecasts. Tax proposals to help balance FY 2003 budgets are under consideration in 19 states.
Fifteen states already have tapped reserve funds, the report says, with another 10 reporting that they may have to take such action to balance their budgets. At least eight states have, or will, consider using tobacco settlement funds to meet their state's balanced budget requirements.
The report, the third issued by NCSL since October, says 30 states have implemented other belt-tightening measures, such as hiring freezes, delaying tax cuts and delaying, reducing or canceling capital projects.
On a positive note, the report held that five states — Louisiana, North Dakota, Texas, West Virginia and Wyoming — have revenues on or slightly above target. Wyoming has revised its forecast up slightly, due to higher than anticipated sales and use tax revenues.
State Fiscal Outlook for FY 2002 - January Update is available for free to NCSL constituents and for $25 to non-constituents. Please call Lisa Houlihan at (303) 830-2200 ext. 160 to order a copy. A press release, including a link to the report's executive summary, is available at: http://www.ncsl.org/programs/press/pr020207.htm
Changes Proposed to Improve ATP
Royalty payback requirements and expanding roles for universities are among the changes outlined by the U.S. Department of Commerce in The Advanced Technology Program: Reform with a Purpose. With goals of improving the Advanced Technology Program (ATP) and providing "stability" — making the program more palatable to its perennial Congressional detractors — the Department of Commerce has identified six structural changes within ATP.
Since its first competition in 1990, ATP has provided $1.8 billion in funding for more than 580 projects supporting early-stage, high-risk research. For much of its history and despite several independent evaluations, the program has seen protracted appropriations battles with the House of Representatives. Even the President's FY 2002 budget request, the first submitted by the Bush Administration, proposed a funding hiatus for ATP while the program was reviewed. (Congress appropriated $185 million for ATP in FY 2002.)
While giving a nod to ATP critics, the high-profile release of Reform with a Purpose by Commerce Secretary Don Evans and National Institute of Standards and Technology Director Dr. Arden Bement reveals the department's desire to put the ATP controversy behind it. Further reflection of this desire is the President's FY 2003 budget request of $107.9 million for the program. Nearly one-third of the request, $35 million, would be available for new awards.
The specific reforms are:
- Allowing universities to lead ATP joint ventures.
- Allowing universities to negotiate with joint venture partners over the rights to hold the intellectual property that results from research.
- Limit large companies' participation in ATP to joint ventures.
- Reinvest a percentage of revenues derived from awards back into ATP to fund additional high-risk research and help stabilize the program. To accomplish this, ATP-funded companies that achieve successful commercialization would pay an annual royalty to the government of 5 percent, up to 500 percent of the amount of the original award.
- Modify ATP project management activities and selection criteria to ensure that the program does not fund product development and marketing.
- Determine, when appropriate, whether additional private-sector, non-proprietary input would improve the ability of ATP's selection boards to assess funding requests. "Although ATP uses a competitive peer-review process in selecting research projects for funding, its selection panels sometimes consider funding requests without complete information on planned or ongoing private-industry research in the technological areas under consideration."
The full report is available on the ATP website at: http://www.atp.nist.gov/atp/secy_rept/evans_rpt.htm
Tennessee Unveils New Economy Strategy
Earlier this week, Governor Don Sundquist and the Tennessee Technology Development Corp. (TTDC) released the New Economy Strategy, a broad plan to improve the state's economic viability through science and technology. The strategy encompasses many new initiatives to complement TTDC's existing portfolio of tech-based economic development efforts.
Using six focus groups across the state, the planning process drew input from more than 175 people involved in research, economic development, science, and technology.
Specific recommendations are organized to address five objectives:
- Build an Entrepreneurial Culture in Tennessee — calls for entrepreneurial education, angel investment networks, angel investment tax credit, increased venture capital investment, and continuing the annual venture capital forum.
- Turn Ideas into More Tennessee Companies and Higher-Quality Jobs — streamline the university and lab tech transfer practices; increase tech licenses granted by universities and federal labs; develop more tech incubators and networking; pursue more SBIR awards; and provide matching funds for university-industry and federal R&D, tech firm recruitment and expansion.
- Create a Strong Tennessee Talent Pool — offer college scholarship assistance, talent marketing campaign, and tech career fairs.
- Connect People with Technology Opportunities — support regional tech councils; support local tech initiatives; develop a statewide tech resource inventory; continue tech image marketing campaign for the state; broaden tax credits for tech industry inclusion; and create a tech CEO roundtable.
- Establish a Special Focus on Life Sciences — nurture a state biotech association, regional life science councils and incubators, increase lab space availability, and train a larger life science workforce.
Governor Sundquist's FY 2003 budget request includes $5 million for TTDC to begin implementing the plan.
More information is available at: http://www.tennesseetechnology.org/
Strategic Plans Target Workforce in San Diego Region
The San Diego Work Force Partnership recently released four strategic plans as a blueprint to prepare San Diego's workforce to compete in the changing global economy. Initiated as part of a broader Regional Workforce Development Strategic Planning Initiative, the plans reflect the concerns of area businesses for developing and maintaining skilled workers.
San Diego Regional Technology Alliance, a nonprofit organization, and San Diego State University completed the plans, which evaluated workforce development trends in four local industry clusters — biosciences, computer and electronics, software and computer services, and visitor services.
To study and formulate recommendations for the clusters, the plans' focus was to identify cluster employers' current training needs, data needs for educators and employers, and strategies to improve ongoing communication between educators and employers.
Key findings suggest that regional workforce committees be created around each industry to improve communication between industry and education.
Other conclusions recommend:
- constructing a training collaborative to allow small- and medium-sized employers access to affordable training for their employees;
- developing a regional database of training providers so that employers know where they can find training and what programs are available for their employees; and,
- conducting a study on training return on investment to quantify how investment in training is most effective.
The plans were funded through a U.S. Department of Labor Skill Shortages Grant awarded to the San Diego Work Force Partnership in 2000. Copies of the plans may be obtained by visiting: http://www.sdrta.org/sdrta/clusterdata/index.htm
TEDCO, DBED Study Shows Origins of Maryland Entrepreneurs
The Maryland Technology Development Corp. (TEDCO) and the Department of Business and Economic Development (DBED) recently presented the first part of a two-phase study by the Johns Hopkins Institute for Policy Studies entitled The Genealogy of Maryland Entrepreneurs.
Phillip Singerman, executive director of TEDCO, and David S. Iannucci, Maryland Secretary of DBED, provided the information Feb. 4 during the fifth annual State of Technology in Maryland Summit in Annapolis.
Highlights of the first phase of the study reveal the following about the history of Maryland businesses:
- Maryland pillar companies and entrepreneurs have produced and financed successive generations of new companies.
- The state's business cycle has seen inventors and founders evolve to management teams with the infusion of new capital.
- Research institutions, including universities and federal labs, have resolved intellectual property issues to move commercialization forward.
- Immigrants have made significant contributions throughout the state's history.
The initial research reviewed Maryland companies in each of six high-tech industry clusters identified by the Department of Labor: chemicals and energy; high tech machinery and instruments; defense and aerospace; biomedical and biotechnology; research and development; and information technology.
“These factors tell us what technology foundations we should invest our resources in as well as how to best take advantage of the state's more than 45 major research universities, federal labs and agencies,” said Marsha Schachtel, the study's principal author. “Additionally, through this research we can clearly see that company closings or consolidations in some instances turn out to be positives, producing more entrepreneurial energy that stays within the state.”
The second phase, to be completed this year, will compare growth patterns of start-up companies and determine suggestions for policy and economic development practices.
TEDCO’s mission is to foster the development of a technology economy that will create and sustain businesses throughout all regions in the State of Maryland. To view the PowerPoint presentation used to deliver the first part of The Genealogy of Maryland Entrepreneurs, visit: http://www.MarylandTEDCO.org.
Initiative to Strengthen Presence of Life Sciences in Central Indiana
Leaders of Central Indiana's top research, academic and economic development organizations announced on Wednesday an effort to develop the region as a world-class center for the life sciences industry.
The Central Indiana Life Sciences Initiative — led by the Central Indiana Corporate Partnership (CICP), the City of Indianapolis, Indiana University, Purdue University and the Indiana Health Industry Forum — will seek to increase the number of jobs, businesses, and research opportunities in the life sciences industry in Central Indiana through four goals:
- Leverage sufficient investment capital for life sciences projects.
- Retain and attract a critically skilled life sciences workforce.
- Strategically market the region as a world-class health and life sciences hub.
- Develop successful collaborations, including a downtown research community.
CICP will head the Initiative with staff support provided by the Mayor's Office and IHIF. Initial funding of nearly $1 million comes from CICP and the City of Indianapolis. The city's contribution of $750,000 was negotiated through changes to an incentive settlement with Sallie Mae, which purchased the former Indianapolis-based USA Group.
The Initiative comes on the heels of a February 2002 study by the Battelle Memorial Institute which observes that Central Indiana has significant existing assets to be a major world player in life sciences. The life sciences sector grew 40 percent faster than any other industry in the state over a seven-year period in the 1990s, according to the study.
The Initiative will be led by a core group, including Indianapolis Mayor Peterson, CICP President David Goodrich, Eli Lilly and Company Chairman, President and CEO Sidney Taurel; IU President Myles Brand; and Purdue President Martin Jischke. This group will work with other regional leaders to guide the Initiative.More information on the Central Indiana Life Sciences Initiative, including the Battelle study, is available at: http://www.cilsi.com
Tech-talkin' Govs: State of the State and Budget Addresses
This is the fifth installment in the "Tech-talkin' Govs" series which provides highlights of programs, policies, and issues included in the Governors' addresses related to tech-based economic development.
Connecticut
John G. Rowland, Budget Address, February 6, 2002
http://www.state.ct.us/governor/news/budget2002.htm
- Announced "21st Century UCONN," a second ten-year $1 billion bond schedule of rebuilding and revitalizing the University of Connecticut.
Ohio
Bob Taft, State of the State Address, February 5, 2002
http://www.state.oh.us/gov/MajorSpeeches/sos2002.htm
- To address the brain drain, provide workforce investment money to help create 10 new graduate retention programs throughout Ohio by the end of the year.
- Third Frontier Project — invest $1.6 billion over the next ten years to provide better research facilities and create new centers of innovation. The Project includes:
- $500 million over the next 10 years for the Technology Action Fund and the Biomedical Research Fund. Derived from the state's tobacco settlement funds and approved by the legislature earlier, these dollars will support early stage capital and the development of leading-edge products.
- As part of this year's Capital Budget, the first installment of a $500 million effort to finance facilities and equipment for globally competitive centers of research. Named after the Wright brothers, this capital program will provide break-through research capabilities for today's inventors.
- Voter approval will be sought next year for a $500 million bond program to recruit top academic researchers, endow chairs and bring state-of-the-art products to market.
- A new $100 million Innovation Ohio Fund will help finance targeted industries with high-growth potential based on regional priorities. This fund will support advanced manufacturing techniques to help existing companies become more productive and profitable.
Pennsylvania
Mark Schweiker, Budget Address, February 5, 2002
http://sites.state.pa.us/PA_Exec/Governor/budgetadd.html
- Proposed reinvesting Pennsylvania Industrial Development Authority dollars to ready today's workforce for tomorrow's workplaces through endowment of workforce leadership grants. This will help stakeholders build faster and more flexible training programs. Called for legislation to fundamentally reform the state's workforce-development system.
Tennessee
Don Sundquist, State of the State Address, February 4, 2002
http://www.state.tn.us/governor/sos2002/sos2002.htm
- Proposed a New Economy Strategy to turn the ideas coming out of the state's high-tech institutions into more Tennessee companies and more Tennessee jobs, keep the best and brightest in the state and entice those who have already left to come home. (see related article in this issue of the Digest)
Wyoming
Jim Geringer, State of the State, February 11, 2002
http://www.state.wy.us/governor/sos2002.html
- Recommends authority of the Wyoming Business Council be extended by eliminating the sunset date of 2003.
- Supports adding an unspecified amount of money to the Workforce Training Account fund to continue training employees
- Proposes matching funds through bond authority to establish a Technology Incubator on the University of Wyoming campus.
Useful Stats: 4th Quarter VC Data by State
Two independent surveys of venture capital investments made during the fourth quarter of FY 2001 suggest an end to downward trends in the flow of money and number of VC placements.
MoneyTree™ Survey
The fourth quarter 2001 results of the MoneyTree™ survey measuring venture capital activity across the country are now available online. This is the first survey conducted since the merger of the two most widely known quarterly investment surveys, the PricewaterhouseCoopers/Venture Economics MoneyTree™ Survey and the quarterly survey conducted by the National Venture Capital Association.
With total investments of $7.1 billion, the fourth quarter data provides evidence that the VC community's reluctance to invest, which started in the third quarter of 2000, was finally reversing itself. Figures for both the total number of deals and total investments were higher than the third quarter.
According to the report's highlights, the biotech and software industries showed the most strength, respectively capturing 14 percent and 22.5 percent of the fourth quarter investments.
SSTI has prepared the accompanying table to present the fourth quarter 2001 MoneyTree™ results by state. Data for the number of deals, total amount invested, and average deal size are included in the table.
As a result of the merger, the MoneyTree™ survey results are now offered on three websites: http://www.pwcmoneytree.com, http://www.nvca.org, and http://www.ventureeconomics.com.
Growthink Survey
The Growthink Private Equity Funding Reports for the Fourth Quarter 2001 found the number of companies securing investments grew compared to the third quarter, while the total value of investments declined slightly. The new report profiles 760 companies that received more than $8.1 billion during the final three months of 2001. For comparison, investments during the third quarter totaled nearly $8.4 billion in only 702 companies.
Growthink found the New York City metro region experienced the greatest decline, while still capturing $509 million through 42 deals. The top 10 metro areas for VC investments — the San Francisco Bay Area, Boston, New York, Washington D.C., San Diego, Austin, Dallas, Irvine/Santa Ana, Denver and Pittsburgh — accounted for nearly 72 percent of the total activity for the quarter. Falling out of the top 10 from the third quarter were Los Angeles and Chicago.
Growthink reports only private, U.S. based companies that receive equity investments of $300,000 or more. The company does not collect information on venture capital investments in public companies, debt financing or other areas. The fourth quarter survey, including data by geographic region, state, metro area, and industrial sector, is available in individual sections or in its entirety from Growthink at: http://www.growthink.com
State Science & Technology Institute
5015 Pine Creek Drive
Westerville, OH 43081
Phone: (614) 901-1690
Fax: (614) 901-1696
Email: ssti@ssti.org© 2003 State Science and Technology Institute. All rights reserved.