In the January 17, 2003 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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Tech Talkin' Govs II
Despite, or because of, the continuing fiscal crises facing nearly every state, technology-based economic development remains high on the agendas of most governors, as demonstrated in their recent speeches. Those excerpts pertaining to state efforts to build tech-based economies are provided below.

States with Inaugural Addresses during the past 10 days included Kansas, Maryland, Nebraska, New Hampshire, Oregon, South Dakota, and Vermont. Governors in Arizona, Arkansas, Colorado, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Nebraska, New Jersey, South Dakota, Washington, and Wyoming gave State of the State Addresses.

Arizona
Governor Janet Napolitano, State of the State Address, Jan. 13, 2003

"It is time to stop viewing our universities and community colleges as easy marks to balance the budget. Instead, we must recognize them as epicenters of economic development. They educate the workforces of tomorrow, and their research expands our horizons.

"It is time to coordinate our efforts to develop Arizona’s promising tech sector...To achieve the economic renaissance I envision, our economy must be powered by innovation, and be driven by the entrepreneurs and tech-based businesses that will create the high-wage jobs and clean industries we seek. Three steps are key.

"First, our public and private sectors must speak with one economic voice. To do this, I will sign an executive order this week creating the Governor’s Council on Technology and Innovation. It will focus on three areas: coordination of technology transfer from universities to the commercial sector, capital formation, and infrastructure development.

"Second, it is time to remove the single biggest obstacle to smooth technology transfer from our university campuses to the commercial sector. Arizona’s constitution prohibits universities from forming or taking equity positions in commercial ventures, which slows down their efforts to convert research innovations into viable commercial applications. Competing states do not have this prohibition, and they enjoy greater success in luring tech start-ups.

"I will submit to you a ballot referendum to repeal this article of Arizona’s constitution.

"Third, we must do a better job at attracting capital for small and growing high tech businesses. They need this capital to grow their enterprises and create more high-paying jobs for an educated workforce. I will work with the business community to attract more development capital to Arizona, particularly for new companies."

Indiana
Governor Frank O'Bannon, State of the State Address, Jan. 14, 2003

"Last month, Lieutenant Governor Kernan and I launched our Energize Indiana plan...this $1.25 billion plan does not use a single state tax dollar. But it will create high-skill, high-wage jobs in four sectors - advanced manufacturing; life sciences; 21st century logistics, or high-tech distribution; and information technology.

"It will provide venture capital for entrepreneurs, stimulate research and development, create construction jobs when we build university research facilities and match current workers with even better jobs. It will help our rural communities by providing grants and loans for economic-development investments... It also will provide scholarships for students who study in the four targeted sectors.

"We believe that Energize Indiana will, over the next 10 years, create 200,000 new high-wage, high-skill jobs in the four targeted sectors; enroll 200,000 additional students in higher education and credential programs; and grow the state's per capita income faster than the national average."

Iowa
Governor Tom Vilsack, Condition of the State Address, Jan. 14, 2003

"In the Iowa economy today, less than 30 percent of our workforce has any college experience. Iowans who learn more earn more. Our goal in the Iowa economy of tomorrow -- a high tech bio-based economy -- should be to double the number of employed Iowans with college experience. Immediate progress toward this goals should be the standard by which our work here is judged.

"Now to reach that ambitious goal requires a new, focused effort on economic development -- one that is key to life sciences, value added agriculture, advanced manufacturing, insurance, and other information solutions... a Iowa Values Fund should be created and dedicated to partnering with private investment to transform our economy. Administered and managed as a public/private partnership, the fund's investments should promote regional economic development so no part of Iowa is left behind. The fund should work closely with the Regents universities, community colleges and independent colleges to double the number of college-experienced workers in the workforce. Over the next five years, we should commit $500 million to this fund. It is that important.

"The initial investment from the Iowa Values Fund should be dedicated to making Iowa the life sciences leader in protein development and production. Developing the necessary life sciences infrastructure with an appropriate regulatory structure should be a top economic development priority of the state, allowing us to reach a goal of 100 new life sciences companies in Iowa over the next five years.

"Initial resources from the fund should also spur the development of more renewable fuel and energy of all kinds... Today, Iowa annually produces 200 megawatts of electricity from renewable energy sources -- wind, solar and biomass. By the end of the decade our goal should be to annually produce a minimum of 1,000 megawatts committed to the goal of making Iowa a net exporter of energy."

Mississippi
Governor Ronnie Musgrove, State of the State Address, Jan. 8, 2003

"Higher education has a critical role to play in bringing jobs to Mississippi. That's why I've called for the creation of a $200 million 'Brain Trust' for our universities and community and junior colleges. Under this plan, bonds would be issued - $20 million a year for 10 years - to recruit and retain the very best minds for research, development, and workforce training. We know this is the type of investment that creates more high-paying jobs for our people."

Missouri
Governor Bob Holden, State of the State Address, Jan. 15, 2003

"We must make every effort both to hold on to our good jobs and to move our state more rapidly into the new 'knowledge-based economy' of the future...I am proposing several actions today to help Missouri hold on to good paying manufacturing jobs and to help our state plan for the future. First, I am calling for a one-percentage point reduction in the corporate tax rate...Second, I want to provide the right incentives to protect the right jobs already in Missouri...We will insist these incentives be tied to important capital investments such as retooling or investing in new technologies...

"Finally, we must make Missouri a leader in the new 'knowledge-based' economy of the future. The critical foundation of this effort--the key to Missouri’s future--is--and must always be--education. And as we advance to the economy of the future, our investment in higher education becomes even more important. Investments made in our universities -- made when our economy was stronger -- were the right investments to make.  Missouri is now poised to move forward in the knowledge-based economy by focusing on innovation and the critical areas of the life sciences, advanced manufacturing, and information technology.

"Support for our universities is an investment in the jobs of the future. And that is why I also urge all businesses and corporations in this state to strengthen their commitment to higher education. Because if you are in business in Missouri, the benefits of a strong higher education system flow directly to you—from the quality of your future workforce to the research that provides advances in agriculture, technology, life sciences, biotechnology, and advanced manufacturing.

"I am taking two steps to strengthen the link between our businesses and higher education. I am appointing a Commission on the Future of Higher Education. This voluntary commission will make recommendations on how we can find ways to strengthen the link between higher education and economic growth in our state, how we can improve higher education overall in Missouri, and identify any new funding sources for our colleges and universities.

"Second, I have called for a new alliance between businesses and our universities. I have asked leaders in higher education and in the private sector to create the Research Alliance of Missouri to coordinate research and provide more access to technology for Missouri businesses...

By these two steps, we can better direct and connect higher education and the economy.  We must make our colleges, universities, and technical schools the engines that fuel our economy of the future."

New Jersey
Governor James E. McGreevey, State of the State Address, Jan. 14, 2002

"New Jersey will continue to work with our corporate partners to develop high quality summer programs for reading, science and math teachers to help our educators continue to improve...And to make sure our young people are ready to compete in this new economy we will start a technology proficiency test that will be required for high school graduation.

"We must also have the vision to ensure New Jersey's pre-eminence in education, science, and technology. Now is the time to restructure our State public research universities into a world-class system. An integrated university system will strengthen the partnership between the university and private sectors in developing new technologies that will be the engine of future economic growth. It will attract the most capable faculty and the most promising research, while strengthening the communities that surround our State universities.

"...while we produce the drugs that save lives all across the world, too little medical research into new therapies is conducted within our borders. That must change. With new partnerships between government and the health care industry, it will.

"In the next budget, we will build on these investments but we can start now by passing legislation to promote stem cell research to be done here in New Jersey."

Vermont
Governor James H. Douglas, Inaugural Address, Jan. 8, 2003

"Cutting-edge clean technologies have sprouted businesses that do not compete with the environment, but rather compete with each other to achieve a cleaner environment. Welcoming these businesses to Vermont, and encouraging their innovation and growth will allow us to promote Vermont values around the nation, and indeed around the world."

Washington
Governor Gary Locke, State of the State Address, Jan. 14, 2003

"...we must continue to create jobs with investments in education, especially by supporting industries of the future like biotechnology and software. I’m proposing $20 million in higher education funding to expand enrollments at our colleges and universities by more than 1,500 students, dedicated exclusively to such high-demand fields as engineering, computer science and health care. Our state’s businesses continue to need these critical skills."

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S&T Provides Foundation for New NC Strategy
A new strategic plan focusing on the North Carolina Department of Commerce's four cornerstones of economic development success – a globally competitive workforce, investment in science and technology, a competitive business climate, and attractive communities prepared for economic development – has been released by the state's Economic Development Board. We Are Changing the Way We Do Business seeks to flesh out Governor Mike Easley's vision "One North Carolina," which supports creating high quality jobs.

The plan is the result of the 37-member board's effort to examine over a period of 10 months key policy areas affecting the state. Public comment was invited, and each board member served on one of seven committees that addressed such areas as recruitment and retention. In the end, the board stressed improving the state's competitiveness; promoting regionalism with clear, central leadership; cultivating collaborative relationships; and responding to the urgency of North Carolina's unemployment rate, which is fourth highest in the U.S.

Seven long-term goals also were named, including:

Each of the goals are comprised of additional objectives. Allocating resources and making investments in initiatives such as expanded research programs, advanced computing facilities and industry-focused institutions would help North Carolina foster an improved business climate for New Economy companies, the plan states.

The plan suggests the University of North Carolina create a world-class portal that facilitates improved access to business and technology development resources available through the university and private sources. In return, the board promises to develop recommendations that expand direct state investment to at least $5 million per year in research activities within the university, allowing UNC to fully recover the costs.

To enhance math, science and technology education in North Carolina, the board recommends the State Education Cabinet create a task force that will serve to increase the number of workers in these occupations. The board pledges in return to work toward improving the workforce training process presently used by the state, ultimately to speed the development of technology trained workers.

We Are Changing the Way We Do Business is available at: http://www.nccommerce.com/econbrd/plans/default.asp

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Ohio Creates $100M Tech Infrastructure Fund, Approves $50M for Capital Fund
With the passage of HB 675, the FY 03-04 Capitol Budget Bill, the Ohio Legislature approved funding for a $100 million Innovation Ohio Revolving Loan Fund and a second $50 million installment for the Wright Brothers Capital Fund. Both measures are key components of Ohio's $1.6 billion 10-year Third Frontier Project — the state's largest-ever commitment to expanding high tech research capabilities and promoting start-up companies to build high wage jobs.

The revolving loan program is intended to benefit Ohio companies in such sectors as advanced materials, biosciences and information technology, financing up to 75 percent of a total project. Ranging from $250,000 to $5 million, the loans will fund fixed assets including machinery and equipment, building or leasehold improvements, computers and software. Companies doing business outside of Ohio that agree to locate within the state also will be eligible to receive assistance.

The Wright Brothers Capital Fund received its first $50 million allocation from the Ohio Legislature in July 2002. Under the program, competitive grants will be awarded to assist in the creation of globally competitive research centers focusing on new product development and commercialization. Ohio's universities, private research institutions and private sector businesses are expected to work collaboratively to expand the state's research competency.

In addition to the above measures, HB 675 created the Third Frontier Commission with its own 3-member advisory board and abolished the 25-member Biomedical Research and Technology Commission. Beginning July 1, the Third Frontier Commission will assume the functions, funding and employees of the former commission, which coordinates and administers Ohio's S&T programs.

More information on the Third Frontier Project and its initiatives is available at: http://www.ohio3rdfrontier.org/3rdfrontier/

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OneGeorgia Awards Include $1.5M for TBED
Nearly $1.5 million in grants from the OneGeorgia Authority will go toward specific initiatives promoting technology-based economic development in Georgia. The awards are part of almost $7.5 million in grants and loans being awarded to 16 of the state's most economically distressed communities.

Among the $1.5 million awarded was a $499,910 grant to the Georgia Medical Center Authority for the development of a 14,820-square-foot Life Sciences Incubator. Located in one of Georgia's premier medical research zones and partnering with the Medical College of Georgia, the incubator is expected to create up to 75 jobs within five years by spinning off entrepreneurial start-up medical companies to Tier 1 and 2 counties located in this economically depressed region.

Additional grants of $500,000 and $499,243 were made to other regions for the construction of two technology centers. The centers will nurture start-up technology companies with high growth potential.

All of the awards were made possible through Georgia's Equity Program, which helps communities and regions build the necessary infrastructure for economic development. Project awards are given through three competitive rounds annually and are capped at $500,000.

For more information on the OneGeorgia Authority, visit http://www.onegeorgia.org/.

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NSF Survey Documents Drop in S&E Doctoral Degrees
Since reaching a high point of almost 27,300 in 1998, the number of science and engineering (S&E) doctorates has dropped by 7 percent to just over 25,500 in 2001, reports a 2001 nationwide survey conducted for the National Science Foundation (NSF). The decline since 1998 has led to a rollback of total Ph.D.s to pre-1994 levels, the report states.

The data from NSF's Science and Engineering Doctorate Awards: 2001 are a compilation of detailed statistical tables derived from the nationwide Survey of Earned Doctorates, a report of data collected on doctorates conferred in all academic fields at 416 universities. NSF, the National Institutes of Health and the Department of Education are the primary funding agencies for the survey, with support from NASA, the National Endowment for the Humanities and the Department of Agriculture.

The 2001 survey of doctorates reveals the number of total Ph.D.s awarded by U.S. universities dropped to below 41,000 for the first time in nine years. Since 1995, the numbers of non-S&E Ph.D.s awarded have remained nearly constant, staying at just over 15,200 per year on average over the last six years.

Among survey highlights, women have showed slow, steady increases in obtaining doctorates in most fields. In 2001, women were awarded about 44 percent of the doctorates for all fields combined. They accounted for 32.8 percent of the total number of S&E doctorates awarded in 1997, and by 2001, they had received 9,300 Ph.D.s (36.5 percent) of the S&E total for the year.

More than 92 percent of the 40,744 receiving research doctoral degrees in 2001 returned the survey, and according to NSF, only 10 institutions accounted for 29 percent of those not responding to the survey.

NSF's Science and Engineering Doctorate Awards: 2001 is available at: http://www.nsf.gov/sbe/srs/nsf03300/start.htm

In November 2002, SSTI published an abbreviated table providing a state-by-state ranking for S&E doctorates awarded by major field. The table includes the values and state rankings for the total S&E doctorates awarded per 100,000 residents within each state, using the 2001 population estimates from the U.S. Census Bureau.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/110802t.htm

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Local Knowledge Key to Rural Cluster Strategy
Cluster-based economic development has grown in popularity, but this has not always translated well for rural regions. Many rural areas do not possess the infrastructure necessary for many high-technology industries, and most areas face two major disadvantages — an inability to achieve economies of scale and possess or create a specialized division of labor; and the relocation of the labor force away from rural areas.

Emphasizing local knowledge is a key in developing rural clusters, posits Rural Knowledge Clusters: The Challenge of Rural Economic Prosperity, a report released by the Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota. The report explores rural knowledge clusters as a model for rural economies, and while the idea of rural clusters may seem a bit inconsistent, there is evidence that these clusters do exist.

Rural clusters differ from industry clusters in that they focus on knowledge, according to the report. The metropolitan industry cluster concept includes knowledge but also focuses on agglomeration, scale economies and interindustry relationships. These final three are not prevalent in rural economies, the report contends.

The report hypothesizes that three ingredients are critical to rural knowledge clusters. First, a rural knowledge cluster must enjoy some sort of competitive advantage. This can be a rich base of skilled workers, access to markets or a local entrepreneurial culture. Second, the historical development and progression of the local knowledge base is crucial. Knowledge very rarely appears out of thin air. It can arise from two essential companies, unique conditions or other dynamics that allow local residents to be knowledgeable about market prospects for a particular product or technology. And third, relationships with both formal and informal institutions are fundamental. These institutions foster the creation, diffusion, and renewal of the local knowledge base. Universities and community colleges play a critical role, but informal institutions are important as well.

Four approaches to rural knowledge clusters are provided:

Rural Knowledge Clusters concludes clusters are not right for every place, since all rural communities are not in an equal position to adopt cluster-based development strategies. Trying to start a cluster from scratch is almost always a formula for failure. The evidence suggests to not view cluster strategies as a universal means toward rural development. The report, prepared under an award from the U.S. Economic Development Administration, can be downloaded at: http://www.osec.doc.gov/eda/pdf/U.Minn.Lit.Rev3.pdf

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Foundations Continue Funding TBED Despite Slow Economy
Many organizations are wondering if, when and how severe their budgets could be impacted by the economy and the continuing fiscal crises in the states. While foundation endowments also have taken a hit by the stock market slump, several are increasing their contributions in building local or statewide technology-based economies. Two recent examples highlight the trend and point toward a funding path few TBED efforts have fully tapped.

Danforth Foundation Commits $117 Million in St. Louis
The St. Louis Post Dispatch reported in a Jan. 9 article that the Danforth Foundation, based in St. Louis, has set aside $117 million over the next two years to support regional economic growth in the plant and biomedical sciences. The story states the foundation's board is "soley dedicated to identifying opportunities and making grants that will further research, spin off commercial opportunities and create jobs."

"If our region and state seize the opportunities, plant and life sciences can be the economic engine for St. Louis for decades to come," the foundation's chairman John Danforth said in a prepared statement, as quoted by the story. "The foundation has made this commitment as a catalyst to move the region from research leader to commercial leader in plant and life sciences."

The Danforth Foundation and Danforth family have been significant contributors to the region's goals of being a biotech center for many years. In 1998, the Foundation pledged $60 million toward a $146.4 million research center dedicated to plant science. The gift to the center, which is named the Donald Danforth Plant Science Center, included $10 million for capital and operating expenses, plus an additional $50 million over the next 10 years.

Dr. William Danforth chairs the Coalition for Plant and Life Sciences, a group of 32 business, civic, research and academic leaders convened by the St. Louis Regional Chamber and Growth Association to oversee implementation of the region's biotechnology strategic plan, developed in 2000 by the Battelle Memorial Institute.

Lilly Endowment Adds Nearly $25 Million to Rose-Hulman Ventures
The Lilly Endowment's commitment to improving Indiana's competitive position and performance in a knowledge-based economy has been documented in the Digest (see the 6/14/02, 11/2/01 and 10/15/99 issues). The latest news is a three-year $24.9 Million gift to expand Rose-Hulman Ventures (RHV), an initiative of the Rose-Hulman Institute of Technology. Lilly previously had provided $29.7 million in 1999 to create the program.

The new funding will be used to 1) expand educational opportunities by supporting additional client companies in partnership with other colleges, incubators and communities in Indiana; 2) establish a Center for the Deployment of Disruptive Technologies to ensure that students and faculty learn about the most significant technical advances that can help enterprises make transformative rather than marginal changes in their operations; 3) increase efforts to attract and retain client companies in the Terre Haute area by providing access to additional facilities in the community; and, 4) provide continued expansion of Rose-Hulman Ventures programs to enable RHV to become self-sustaining in the foreseeable future. More information on the gift is available at: http://www.rose-hulman.edu/news/articles/lilly_ventures.htm

To date, RHV has participated in 11 of the 25 largest 2001 Indiana venture capital deals (ranked by value of deal). It also has held the 6th position out of 11 Indiana venture capital firms (ranked by capital under management). RHV supports Indiana’s deals between the $50,000 and $1 million range, with investments in 2001 totaling $3 million in early stage and established technology companies.

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NSF Announces New Round of Funding for PFI Program
The National Science Foundation (NSF) plans to fund $9 million in new FY 2003 awards under the Partnerships for Innovation (PFI) Program, according to the program solicitation's recent release. To promote PFI, NSF will sponsor 15-25 partnerships among academe, government and the private sector that explore new approaches to innovation.

The purpose of the program, as defined in the PFI solicitation, is threefold:

Applicants are asked to focus on one or a combination of three activities: (1) research, technology transfer, commercialization, (2) workforce education or training, and (3) establish the infrastructure to accomplish or enable innovation. Nonprofit institutions, private sector firms, state and local government entities, trade and professional associations, entrepreneurs, venture capitalists, and federal laboratories are eligible under the PFI program, but all partnerships must include academic institutions as the lead and private sector organizations as partners.

Since FY 2000, the PFI program's initial funding year, nearly $34.5 million has been awarded to colleges and universities across the country. In all, 59 awards have been distributed in 35 states and Puerto Rico. Past awards have led to projects resulting in such societal benefits as improved healthcare and greater computer communications capacities.

Applicants may submit an optional letter of intent by February 27 or turn in a full proposal by April 9. Cost sharing at a level of 10 percent of the requested total amount of NSF funds is required for all proposals. For more information, visit the PFI program solicitation at: http://www.nsf.gov/pubs/2003/nsf03521/nsf03521.html

In addition, SSTI has prepared a table of all PFI award-winners arranged by state, listing project titles and award amounts for each awardee. The table is available at: http://www.ssti.org/Digest/Tables/011703t.htm

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New Govs Usher in New S&T Personnel
SSTI continues a series begun in last week's Digest, highlighting key economic development and science & technology positions being filled by some of the nation's 24 new governors. Many of these individuals are expected to help set the state's tech-based economic development agenda and determine budget cuts, reorganization plans or program eliminations.

In addition, President Bush has announced Charles McQueary of North Carolina will be his nominee to be undersecretary for science and technology at Homeland Security. Dr. McQueary is the retired President of General Dynamics and a former member of the Board of Directors of the National Defense Industrial Association.

Alabama
Neal Wade, vice president of economic development for a Florida real estate corporation, has joined the cabinet of Alabama Governor Bob Riley as director of the Alabama Development Office.

Maryland
Governor Robert Ehrlich, Jr. is appointing Aris Melissaratos to be the new secretary of the Maryland Department of Business and Economic Development. Melissaratos is a venture capitalist

Massachusetts
Governor Mitt Romney named Robert Pozen, Vice Chairman of Fidelity Investments and President of Fidelity Management and Research Company, to serve as chief for Commerce and Labor.

Minnesota
Matt Kramer, vice president of marketing for Syntegra USA, is Governor Tim Pawlenty's pick to be the Commissioner for Trade and Economic Development

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