In the April 18, 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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EDA Offers $228M for State & Local Economic Development
The Economic Development Administration (EDA) has announced it has $228.12 million available for grants to support state, regional and community efforts to create wealth and minimize poverty by promoting a favorable business environment to attract private capital investment and high skill, high wage jobs through world-class capacity building, infrastructure, business assistance, research grants and strategic initiatives.

EDA encourages only those investment proposals that will significantly benefit areas experiencing or threatened with substantial economic distress. Distress may exist in a variety of forms, including, but not limited to: high levels of unemployment, low income levels, large concentrations of low-income families, significant declines in per capita income, substantial loss of population because of the lack of employment opportunities, large numbers (or high rates) of business failures, sudden major layoffs or plant closures, military base closures, natural or other major disasters, depletion of natural resources, and/or reduced tax bases.

Most of the funding ($203.7 million) is available under Public Works and Economic Development Facilities Assistance program. The remaining funds are distributed through Planning Assistance for Economic Development Districts, Indian Tribes, States, and Other Development Organizations; Technical Assistance-Local Technical Assistance, National Technical Assistance, and University Centers; Trade Adjustment Assistance; and, Economic Adjustment Assistance programs.

Potential applicants must submit a pre-application proposal to the appropriate EDA representative for the area or regional office. Upon review of the preproposal, the EDA representative may recommend submission of a full proposal.

Generally, all proposals should seek to enhance regional competitiveness and support long-term development of the regional economy. Further priority will be given to proposals that:

1. Stimulate innovation and regional competitiveness:

a. Reflect strong leadership committed to regional economic development;
b. Encourage a formal organization structure and process for working on economic issues and maintaining consensus;
c. Encourage a common vision and collaboration among firms, universities, and training centers to implement a regional strategy;
d. Establish research and industrial parks that encourage innovation-based competition;
e. Implement cluster- and innovation-focused business development efforts; and,
f. Develop or implement coordinated economic and workforce development strategies.

2. Upgrade core business infrastructure such as:

a. Transportation infrastructure
b. Communications infrastructure
c. Specialized training program infrastructure

3. Help communities plan and implement economic adjustment strategies in response to sudden and severe economic dislocations (e.g., major lay-offs and/or plant closures, trade impacts, defense restructuring, or disasters).

4. Support technology-led economic development:

1. Reflect the important role of research and development capacity of universities in regional economic development; and
2. Create and support technology transfers.

5. Advance community and faith-based social entrepreneurship in redevelopment strategies for areas of chronic economic distress.

More details and EDA regional contact information is available in the April 9 edition of the Federal Register at: http://www.access.gpo.gov/su_docs/fedreg/frcont03.html

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SBIC Bill Could Have $200M Impact on VC Availability
U.S. Senator Olympia Snow (R-Maine) recently introduced a bill to boost the flow of venture capital to small businesses by allowing tax-exempt entities, such as pension funds and university endowment funds, to invest in Small Business Investment Companies (SBIC) without incurring unrelated business taxable income.

S. 855, or the Small Business Investment Company Capital Access Act of 2003, is an approach to inject needed investment money into the economy while providing a stable, diversified and secure investment vehicle for tax-exempt pension and endowment funds. Industry experts believe the bill could boost capital available for SBICs by $200 million in the first year alone, according to the National Association of Small Business Investment Companies.

"Passage of this bill will dramatically increase the amount of investment capital available to America's Main Street — the sector that creates approximately two-thirds of net new jobs," said Snowe, Chair of the Senate Committee on Small Business and Entrepreneurship. Senator Kit Bond (R-Mo.), the Committee's former Chairman, and Senator Chuck Grassley (R-Ia.), Chairman of the Senate Finance Committee, are cosponsoring the bill.

Under current law, nonprofit organizations cannot invest in debt-investment type SBICs without incurring tax liability. As a result, an estimated 60 percent of the private capital potentially available to SBICs is effectively locked out of the marketplace. By removing the barrier currently in the tax code, nonprofit pension and endowment funds could invest their assets in SBICs, which are backed by federal guarantees.

As available private equity has shrunk over the past few years, the SBIC Program has taken on a larger role in providing venture capital to small firms that need investments in the $500,000 to $3 million range. SBICs are government-licensed, government-regulated, privately managed venture capital firms created to invest only in original issue debt or equity securities of U.S. small businesses.

S. 855 is available at http://thomas.loc.gov/.

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Illinois Governor's Budget Outlines TBED Activities
Speaking to a joint session of the House and Senate, Illinois Governor Rod Blagojevich recently presented his first budget, one that addresses a $5 billion budget crisis.

In economic development, while Governor Blagojevich wants the state to be proactive in keeping Illinois competitive in the global economy, the $1.77 billion planned for the Department of Commerce and Economic Opportunity (DCEO) reflects a $576 million, or 25 percent, decrease over the FY 2003 level. Central to the governor's plans are creation of the $200 million Illinois Opportunity Fund that would use private investments to bring venture capital to the state; development of six new Centers for Entrepreneurship around the state to provide, training, tools and resources to help businesses get started; and the consolidation of 30 economic development and job training programs within DCEO, which is projected to save $16 million.

Governor Blagojevich's budget also calls for DCEO to aggressively promote the development of new technologies for renewable energy resources. The department's energy division would receive more than $31 million to foster the state's ethanol, wind and solar power industries. Recycling programs would get $14 million.

An additional $17 million in state funds is proposed to leverage $126 million in federal money over the next five years to complete the Center for Nanoscale Materials at Argonne National Laboratory. One of only five in the country, the facility is expected to initially attract approximately $200 million in nanoscience and nanotechnology research.

The governor's $52.4 billion budget for FY 2004, compared with an estimated $52.8 billion in appropriations for the current fiscal year, includes an increase of $700 million in General Revenue Fund appropriations. Overall, however, spending is down $345 million from the current fiscal year — the first time since 1981 that state expenditures will have declined.

More information on the FY04 Illinois budget request is available at http://www100.state.il.us/.

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Georgia's Rural Divide Program Threatened in Budget Battle
The FY 2004 budget passed by the Georgia Senate last week eliminates all $32 million the House approved for the OneGeorgia Authority, the state's loan and grant program targeting rural tech-based and traditional economic development. Created in 2000, the OneGeorgia Authority was anticipated to spend $1.6 billion over 25 years (one-third of the state's tobacco settlement funds) to assist the state's most economically challenged areas based on unemployment and poverty rates. Governor Sonny Perdue had requested $70.8 million for OneGeorgia in his FY04 request.

The authority's two primary funding vehicles – the Economic Development, Growth and Expansion (EDGE) Fund and Equity Fund – already have supported projects across the state for high tech manufacturing business expansion, life science and other technology-based incubators, traditional infrastructure, research and industrial parks, and speculative facilities.

A Senate amendment to restore at least $14 million for the Authority failed narrowly on a 26-28 vote before final passage of the state budget last Friday. The versions of the budget approved by the House and Senate are radically different from each other according to Georgia press accounts and are in conference committee for reconciliation. The Augusta Chronicle reports that the Governor does not like either version.

More information on the OneGeorgia Authority is available at: http://www.onegeorgia.org/

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SW Penn Tech Sectors Still Growing, PTC Reports
The Pittsburgh Technology Council recently issued its annual State of the Industry Report, which reveals that in spite of an extended national recession that began in 2000, the region’s technology industries have held their own, at least through the mid-point of the current economic downturn. The report covers the 13-county southwestern Pennsylvania region and presents industry statistics for 2001, the last year for which complete data is available from government and other sources.

Commissioned by the Council and conducted by Carnegie Mellon University’s Center for Economic Development, the report examines the economic role that the technology industry clusters play in southwestern Pennsylvania. These clusters include information technology, advanced materials, biomedical and biotechnology, advanced manufacturing and environmental technology. In addition, the report reveals progress on other key indicators of economic health, such as venture capital investment and research and development (R&D).

The number of technology and technology-related businesses rose 8.9 percent to 10,200 over the previous year, and they now represent 14 percent of all business establishments in the region, according to the data. Employment at core and supporting technology firms increased 2.4 percent over the prior year to 260,000, the report adds. Also, the region’s technology payroll rose 5.3 percent between 2000 and 2001 to $11.7 billion.

In terms of university R&D, State of the Industry Report shows R&D spending at southwestern Pennsylvania's universities and at the Software Engineering Institute (SEI) was $492 million, an increase of 36 percent compared to five years ago. In 2000, the University of Pittsburgh was ranked 30th on a list of 589 North American universities in terms of R&D spending. Carnegie Mellon University was ranked 79th on the same list.

Challenges and opportunities facing the southwestern Pennsylvania region include attracting and retaining talented technology workers, ensuring entrepreneurial vitality, increasing available risk capital, improving the regional and state business climate, and developing real estate appropriate for technology firms. The Pittsburgh Technology Council, which promotes many of these initiatives for the region, states that it is addressing workforce concerns through its Workforce Development activities. In other areas, such as capital availability, the council says it is pursuing state legislation to help small businesses sell unused R&D tax credits.

For the purposes of the report, Standard Industrial Classifications (SIC) are used to identify technology industries, which are defined by three criteria — the percentage of sales invested in R&D, the percentage of scientists and engineers employed, and the number of specialty technology workers. Southwestern Pennsylvania is comprised of Allegheny, Armstrong, Beaver, Bedford, Butler, Cambria, Fayette, Greene, Indiana, Lawrence, Somerset, Westmoreland and Washington Counties. The State of the Industry Report is available at: http://www.pghtech.org/pittsburgh/report.html

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Missouri Blueprint Offers Model for Tech-based Economic Growth
A Blueprint for Prosperity and Jobs, a comprehensive strategic plan to foster and sustain job growth, business success and community vitality in Missouri, has been released by the Missouri Department of Economic Development. The product of two years of research, the plan addresses Missouri's need to focus its resources on building a knowledge-based economy, with emphasis on businesses that generate key technologies and have tremendous growth potential.

The Missouri blueprint began with Governor Bob Holden's Economic Prosperity Summit in April 2001. Since that time, the department gathered input and recommendations from business and community leaders, educators and citizens from across Missouri. A series of roundtable discussions were held with leaders from three industries that hold promise for long-term growth – life sciences, advanced manufacturing and information technology – and additional insight was contributed through six regional dialogues.

Missouri needs to strengthen “traditional” business mainstays while keeping companies in-state, the blueprint suggests. The state's mainstay industries are said to include manufacturing, agriculture, financial services and tourism. Missouri also must further develop strategies to support businesses’ efforts to expand into new global markets, the plan states.

Other highlights include an increased emphasis on education as it relates to economic development, improving the skills of the state's workforce, encouraging balanced growth and investment in communities, and strong support for small business development. Additionally, more than 25 policy recommendations or areas for improvement are provided.

The Missouri Department of Economic Development is the state's lead economic development agency. A Blueprint for Prosperity and Jobs is available at http://www.ded.state.mo.us/.

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Report Finds: Retraining in S&T Yields Higher Wages for Laid off Mature Workers
Layoffs are an expected, yet difficult, aspect of the U.S. economy as companies shift employment needs to reflect changes in demand, technology, competition and trade. During a down economy, the number of workers facing layoffs can be particularly difficult for a region to reabsorb. Research has shown that experienced workers with long tenures in a particular job or sector endure substantial long-term earning losses once they find new work. In other words, the jobs older, more experienced workers take after being laid off typically pay substantially less than their original positions.

Returning to school for even a one-year equivalent at a community college can positively change that, however, if the older worker pursues courses in science, technical and math, according to a recent working paper of the Federal Reserve Bank of Chicago. Louis Jacobson, Robert LaLonde and Daniel Sullivan, the authors of Estimating the Results of Community College Schooling for Displaced Workers, find "courses teaching quantitative or more technically oriented vocational subject matter generate earnings gains that average 14 percent for men and 29 percent for women. By contrast courses teaching non-quantitative or non-technical vocational skills are associated with small or possibly zero earnings gains."

"About one-third of the increase in earnings associated with more technically oriented vocational and academic math and science courses is estimated to be due to increases in wage rates, with the remainder attributable to increased hours of work," the paper states.

The authors caution there are challenges to their model and that further research is needed on the topic. However, the policy and programmatic implications of the findings could be significant, particularly as more of the U.S. workforce ages, as the manufacturing sectors continue to transition jobs to low-wage countries, and as public funds to support training programs become more scarce. For example, the findings suggest job training and retraining programs targeted toward schooling mid- and late-career workers in specific courses in the sciences, math or technical fields would have greater social and economic benefits than subsidizing regular community college or undergraduate course work of laid off workers.

Estimating the Results of Community College Schooling for Displace Workers is available at: http://netec.mcc.ac.uk/WoPEc/data/Papers/fipfedhwpwp-02-31.html

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Useful Stats: 2001 State Rankings of Academic R&D Expenditures
Academic R&D expenditures grew 8.9 percent in 2001, according to the National Science Foundation's FY 2001 survey of research and development expenditures at universities and colleges. Reported in Academic Research and Development Expenditures: Fiscal Year 2001, the survey finds 609 institutions of higher education in the U.S. collectively spent $32.732 billion in FY 2001. The figure for FY 2000 was $30.042 billion.

Federal sources of R&D funds accounted for a significant majority of the growth, climbing to $19.191 billion in FY 2001 — 9.6 percent higher than the $17.508 billion reported for the previous year. State and industry sources of R&D expenditures at academic institutions grew 5.4 and 3.8 percent, respectively, over the year and together account for just over $4.5 billion. Of the sources, institutional funds experienced the greatest percentage growth, rising nearly 10.5 percent to $6.553 billion in FY 2001. All other sources, such as foundations or individuals, provided $2.430 billion in FY 2001.

With 74 detailed statistical tables, Academic Research and Development Expenditures presents the findings by source of funds, field and selected subfields of science or engineering, by academic institution, and by geographic distribution. SSTI has prepared a table standardizing academic R&D expenditures on a per capita basis by state.

The SSTI table shows the national average academic R&D expenditures per capita in FY 2001 was $112.90. The figure was $105.17 for FY 2000. The District of Columbia reported the highest academic R&D expenditures per capita for FY 2001 at $389.12, significantly lower than the nation-leading results of $421.88 posted one year earlier. Maryland, Massachusetts, Alaska, New Hampshire, Iowa, New Mexico, Utah, Connecticut and Nebraska round out the top 10 on a per capita basis.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/041803t.htm

Academic Research and Development Expenditures: Fiscal Year 2001 is available at: http://www.nsf.gov/pubsys/ods/getpub.cfm?nsf03316

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NorTech Seeks Associate Director
NorTech is interested in hiring an Associate Director who will be responsible for all activities associated with one or more initiatives and ongoing high level support for the initiatives. The mission of NorTech is to ensure economic growth and leadership in Northeast Ohio by promoting entrepreneurially based globally competitive technology development and commercialization. For each assignment, the Associate Director would be responsible for planning; convening and coalescing support from CEOs; advocacy at the local and state levels; launching the initiatives; and maintaining an active governance or advisory role post launch. NorTech seeks highly qualified individuals who have demonstrated success as entrepreneurs, senior business development assignments in growth organizations, or leadership experience in public-private initiatives. More information is available at http://www.ssti.org/posting.htm.

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