In the June 14, 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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PPI Releases 2002 State New Economy Index
One of the most widely used barometers of states' relative positions in technology-based economies has been updated and expanded. The 2002 State New Economy Index: Benchmarking Economic Transformation in the States, published by the Progressive Policy Institute's Technology and New Economy Project (PPI) and released online this week, offers an innovation-oriented public policy framework for the states to foster success in the New Economy. States that overhaul traditional approaches to economic development and replace them with a new approach focused on boosting skills, entrepreneurship, technology and quality of life are best prepared to prosper in the New Economy, according to this new accounting of state economic transformation to the New Economy.

The 2002 Index adds four new indicators and more finely tuned measurements to assess state progress since PPI's first report in 1999. A total of 21 indicators in 2001 are distributed across five categories: knowledge jobs; globalization; economic dynamism and competition; the transformation to a digital economy; and technological innovation capacity.

Using a weighted formula of standardized scores, PPI found Massachusetts, Washington, California, Colorado, Maryland, New Jersey, Connecticut, Virginia, Delaware and New York as the top 10 performing states in the New Economy, respectively. Raw scores and relative rankings are provided in each indicator for all 50 states.

PPI argues in the study that the traditional goals and approaches to state economic development need rethinking in light of what works in the New Economy. To assure that all states meet the challenges of the New Economy, the study outlines eight key steps states can take:

2002 State New Economy Index: Benchmarking Economic Transformation in the States is available at: http://www.ppionline.org

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Maine Voters Approve $35 Million in Tech-based ED Bonds
The results of Tuesday's primary election in Maine reveal the state's voters continue to be committed to improving their economy through technology-based economic development. Winning approval at the ballot was Question 2, allocating $35 million in bond revenues for 11 specific projects - a majority of which were tied directly to research and technology-based economic development.

Maine-based biomedical research institutions will receive $5.5 million to be used to obtain matching federal funds for health research to cure disease, other medical R&D, and to retain Maine graduates by providing quality Maine jobs.

Nine million dollars will be used to construct manufacturing centers at the University of Maine and the University of Southern Maine. The product development and support facilities will enable the institutions to help Maine industries to solve daily manufacturing and engineering problems.

The Finance Authority of Maine (FAME) will receive $8 million to create and retain Maine jobs through the funding of community, regional and state business financing programs. Included in FAME's portfolio are investment tax credits and a Small Enterprise Growth Fund than can invest up to $500,000 in promising companies that demonstrate a potential for high growth and public benefit.

To facilitate job creation through the development and redevelopment of commercial and industrial buildings in rural Maine, the new Maine Rural Development Authority will be capitalized with $6 million from the bond issue.

A $400,000 slice of the bond will be used for renovation of buildings and associated infrastructure at the Schoodic Education and Research Center. State bond funds will match $4 million in federal funds to redevelop a naval base in Winter Harbor.

Four million dollars will be used to recapitalize the Municipal Investment Trust Fund to provide loans and grants to municipalities for public infrastructure to support economic development and other related purposes of the fund.

The $2 million balance of the $34.97 million bond issue will be used for four arts, tourism and security projects.

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Illinois Creates $60 Million Tech VC Fund
The Illinois General Assembly has passed legislation to encourage venture capital investment in technology businesses across the state. HB3212 creates the Technology Development Fund, which permits the State Treasurer to use up to 1 percent of the state's total investment portfolio for equity investments through Illinois venture capital firms.

The Chicago Tribune reported last Friday that the total amount of state funds available for venture capital investment will be as much as $60 million.

Eligible Illinois venture capital funds to receive monies from the new Technology Development Fund must use the state funds to place investments in technology businesses seeking to locate, expand, or remain in Illinois.

Also, state investments in any Illinois venture capital fund are limited to 10 percent of the total investments in the fund. The legislation states no more than one-third of the Technology Development Fund's balance may be invested in any given year.

HB3212 will take effect immediately after Governor George Ryan signs the act. The Governor's signature is expected as he first proposed two years ago that the state inject $800 million as tech-based VC over five years. Proponents for the fund, according to the Tribune, say the recession and declining state revenues forced the size of the effort to be scaled back.

HB3212 is available at: http://www.legis.state.il.us/legisnet/legisnet92/hbgroups/hb/920HB3212LV.html

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Ontario Launches $51 Million Biotech Strategy
Canada already has seen its number of biotech firms grow from 227 in 1997 to 400 in 2000, second only to the U.S. in biotech concentration. Last week's announcement of a $51 million (Canadian) biotechnology strategy is intended to further strengthen the Ontario's position in health research and commercialization.

Ontario's Biotechnology Strategy, outlined by Ernie Eves, Ontario's Premier, and Jim Flaherty, Minister of Enterprise, Opportunity and Innovation, includes the following highlights:

More information is available at: http://www.premier.gov.on.ca/english/news/Biotech060702.htm

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Report Defines, Identifies Leading U.S. Biotech Centers
Nine metropolitan areas have been identified as the nation's possessing the greatest concentration of the U.S. biotechnology industry in a new Brookings Institution report entitled Signs of Life: The Growth of Biotechnology Centers in the U.S. The report says the nine areas listed below in order account for: more than 60 percent of all spending on research by the National Institutes of Health; slightly less than two-thirds of all biotech-related patents; eight of every nine VC dollars invested in biopharmaceuticals; and, 95 percent of the dollars in research alliances.

The report's authors, Joseph Cortright and Heike Mayer, conclude "by almost all measures, Boston and San Francisco stand out as the strongest biotech regions in the country." They also point out while New York and Philadelphia are the traditional centers of the U.S. pharmaceutical industry, "both regions are relatively stronger" in research than in commercialization and "have actually lost share of commercial biotech activity as measured by new company formation" since the 1980s. Boston and San Francisco, in contrast, "have much higher indices of commercialization than research."

Chicago, Detroit, Houston and St. Louis were identified as Research Centers or important second tier cities in the biotech industry. Looking at 51 metropolitan areas in total, the study concluded 28 others were Median Metropolitan Areas and 10 more were found to have "no significant biotech research or commercialization."

Factors going into the assessment of which metro areas constitute biotechnology centers include: biomedical research infrastructure; NIH funding for medical schools; biotechnology related patents; venture capital for biopharmaceuticals; pharmaceutical/biotechnology alliances; life science and pharmaceutical research employment; number of biotech companies with more than 100 employees; number and share of biotech firms by establishment date; market capitalization of biotech companies; and, memberships in the biotechnology industry association.

Statistical tables present all 51 metro areas' performances for each factor. Five-page statistical characterizations of the nine leading biotech centers are included as separate appendices to the report.

Cortright and Mayer conclude the "availability of venture capital and local entrepreneurship is critical" in specific metropolitan areas emerging as biotechnology centers. A strong biomedical research presence "appears to be a necessary condition for biotechnology commercialization, but it does not seem to be sufficient."

The authors also caution that developing a new biotechnology center presents a challenge. Strategies must look beyond increasing local medical research activity, the authors suggest. "The apparent scale of research funding required for becoming a biotechnology center may be beyond the reach of most metropolitan areas. In fact, none of the 51 metro areas increased its share of NIH medical school research funding by even one percentage point during the past 15 years." Cleveland and Pittsburgh are highlighted as having increased their NIH funding the most (0.9 percent) yet losing their share of biotech commercialization activity.

Conventional industrial recruitment strategies, demonstrated by the number of states with significant marketing efforts at this week's BIO 2002 conference in Toronto, "will be of limited utility," Cortright and Mayer assert.  "There is limited evidence that biotechnology firms move from place to place... Consequently, metro areas interested in biotechnology should focus on indigenous biotech development strategies."

And finally, the authors point out, the long term nature of the biotech industry will require a decade or more before local strategies bear fruit.

Signs of Life: The Growth of Biotechnology Centers in the U.S. is available on the Brookings Institute's Center on Urban and Metropolitan Policy website: http://www.brookings.edu/urban/

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Lilly Foundation Commits Another $138M for Indiana Higher Ed
Few private foundations across the country have made a comparable commitment in size or duration toward improving a single state's ability to participate in a knowledge-based economy as the Lilly Foundation has for Indiana. The latest round, reported in this week's online Chronicle of Higher Education, promises a total of $138 million to match donations received by Indiana's accredited colleges and universities. The pledge of $3.5 million to each institution is open to 38 two-year and four-year schools.

The Chronicle reports that to be eligible for the matching donation from the Lilly Foundation, schools must commit to using the raised funds only to strengthen academic programs. Thirty schools were signed on at press time and each had received $150,000 grants from Lilly to seed their fund raising efforts.

The matching grant challenge is just the most recent effort of the Lilly Foundation to bolster the state's academic and research communities. SSTI's Weekly Digest has reported on several other significant and somewhat unique contributions to Indiana from Lilly: see Digest issues for November 2, 2001 and October 15, 1999.

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2002 FAST Solicitation Released
Through the 2002 Federal and State Technology Partnership (FAST) solicitation, the Small Business Administration (SBA) anticipates making up to 27 awards to state efforts to stimulate and encourage broader participation in Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs.

The agency has up to $2.7 million available in FY 2002 for new awards. In FY 2002, all awards made will be equal to $100,000. Each state represented in the multi-state application will not be eligible to receive an award amount exceeding $100,000.

In FY 2001, the SBA funded the first round of FAST awards to 30 states. Awards ranged from $100,000-150,000.

Both new applicants and and prior year awardees are encouraged to apply for FY 2002 funds.

A sliding scale has been established to determine each state's non-federal match requirement. The formula is based on a state's past performance in winning SBIR Phase I awards.

Under the FAST Program, proposals may be submitted on behalf of an individual state or multiple states. No more than one proposal, however, may be submitted for inclusion in the FAST program to provide services in any the state in any one fiscal year. Application must be accompanied by a Letter of Endorsement signed by the appropriate state governor or his/her authorized designee.

Proposals in response to the solicitation, released June 10, are due July 25, 2002.

The full FAST solicitation, as well as a list of FY 2001 FAST awardees and award amounts, are available at: http://www.sba.gov/sbir/ under FAST/ROP awards.

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