In the April 25, 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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NCSL: States Haven't Won FY03 Budget Battle
With only two months left in most fiscal years, states must still close a $21.5 billion budget gap in order to comply with their balanced budget requirements, according to a report issued today by the National Conference of State Legislatures.

Entering their third straight year of budget shortfalls, state lawmakers have had to close a cumulative $200 billion budget gap. NCSL President and Oklahoma Senator Angela Monson says state policymakers are dealing with complicating factors on both sides of the budget.

"Already plagued by anemic revenue performance, lawmakers have been besieged by spending overruns - from Medicaid to homeland security to emergency snow removal," she said. "The problems have been relentless as most states have run out of the simple, painless options."

During FY 2003, which began on July 1 for most states, 37 states saw revenues failing to meet projections, while only three reported revenues exceeding budget levels. Forty-five states subsequently revised their forecasts, in nearly every instance downward.

The situation is not much brighter for FY 2004. As states craft their budgets for the next fiscal year, estimates show 41 states facing a cumulative budget gap of $78.4 billion. Thirty-seven of those states reported a gap in excess of 5 percent of their general fund, while 19 of these exceed 10 percent.

Copies of State Budget Update: April 2003 are available for purchase by contacting NCSL's publications department at 303-364-7700 or by e-mail at books@ncsl.org.

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Congress Supports Full Funding for MEP
The Senate and Congressional Manufacturing Task Forces garnered support from a majority of senators and representatives for continued funding of the Manufacturing Extension Partnership (MEP). Senators Olympia Snowe (R-ME) and Joe Lieberman (D-CT), co-chairs of the Senate Task Force, drew support from 58 Senators with both parties joining forces to support MEP. Representatives Jack Quinn (R-NY) and Marty Meehan (D-MA), co-chairs of the Congressional Task Force, spearheaded the House effort and won support from 203 colleagues. The California House delegation and Congressional Hispanic Caucus sent letters of their own bringing the total House support to 246 Representatives. The letters support $110 million for MEP in the FY 2004 appropriations bills

As in FY 2003, the Administration's FY 2004 budget request recommended phasing out federal funding for MEP to less than $13 million. In FY 2003, Congress provided $106.6 million for the program.

The MEP network of 60 centers with 400 locations across the country and in Puerto Rico help manufacturers to adopt and use the latest and most efficient technologies, processes and business practices.

Senators and Representative signing the manufacturing task force letters noted, “As the U.S. economy struggles with recovery, MEP clients are increasing sales, hiring workers, and investing in plant modernization . . . MEP services help our small manufacturers maintain good jobs and advanced production capacity in our country.”

In addition to the House and Senate letters, Congress demonstrated further support for the MEP program in the recently passed FY 2004 Budget Resolution. The accompanying joint conference report notes, “The President's proposal to discontinue the Manufacturing Extension Program, however, is not assumed by the Senate amendment.”

More information on the Manufacturing Extension Partnership is available at: http://www.mep.nist.gov

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EDA Names Winners of Excellence in Economic Development Awards
The Economic Development Administration (EDA) recently announced the recipients of its 2003 Excellence in Economic Development Awards. A total of eight award-winners were named across seven broad award categories. Those pocketing awards in Innovation and Technology-led Economic Development, respectively, are described below.

Innovation

Technology-led (tie)

The awards will be presented May 7-9 at EDA's National Conference Engines of Economic Growth for the 21st Century in Washington, D.C. A full listing of the award-winners and complete conference information are available through http://www.osec.doc.gov/eda/.

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Washington State Extends More Tax Breaks for R&D Firms
Washington Governor Gary Locke signed legislation last week that will give a tax break for research and development (R&D) firms. HB 1462 – passing unanimously, 96-0, in the State House and by a majority, 41-4, in the State Senate – prohibits Washington's local governments from taxing the intellectual property of these companies.

The new law provides that "a city may not impose a gross receipts tax on intellectual property creating activities." Such activities are said to include R&D that leads to the creation of patents, trademarks or other intellectual property. However, municipalities may continue to tax research firms that occupy a certain amount of square footage or have a certain number of workers.

HB 1462 is expected to cost the city of Seattle $1.5 million annually, according to the Seattle Times. More information on the bill is available at: http://www.leg.wa.gov/wsladm/billinfo/dspBillSummary.cfm?billnumber=1462

In related news, tax exemptions benefiting high-tech and biotech companies in Washington were approved last week for another 10 years by the State Senate, the Seattle Times reported. The article states the following:

"Under the tax incentives, companies can apply for:

Since 1995, when the incentive programs were instituted, the high-tech and biotech industries have saved $508 million, the Times story adds. The full article, "High-tech tax breaks spark political fight," is available in the April 23 edition of the Times at: http://seattletimes.nwsource.com/html/home/

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New Jersey Creates Commission on Jobs, Growth and Economic Development
To help make his state a leader in research, development and innovation, New Jersey Governor James McGreevey recently signed an executive order establishing the Commission on Jobs, Growth and Economic Development. Highlighting the state's strengths but calling for it to move forward, even with a $5 billion budget shortfall looming, the governor said the commission is needed to put New Jersey in position to be more competitive.

The commission is being charged with five primary functions, including:

New Jersey's strengths are largely found in its research universities, the governor noted. To improve upon this area, however, Governor McGreevey said the state is working to restructure the present system in favor of an "innovation triangle of partnerships" involving the State of New Jersey, the research university community and the private sector. He added that the commission would exhaustively examine the educational system and recommend strategies "to ensure that teachers, students and facilities are prepared for the innovation economy."

Earlier this year, Governor McGreevey recommended elimination of the state's lead tech-based economic development, the New Jersey Commission on Science and Technology, which has provided funding for university-industry partnerships. The governor will co-chair the new commission with Dr. P. Roy Vagelos, Merck and Company's former CEO, and Shirley Tilghman, president of Princeton University, a press report held. The governor's speech announcing the creation of the panel is available at: http://www.state.nj.us/governor/speeches/030415_jobs.html

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ISU's Research Park Provides Economic Boon to Iowa
A recent study by Iowa State University researcher David Swenson suggests the ISU Research Park's substantial and diverse economic activity bolsters Iowa's economy. Focusing on current tenants, Swenson's research shows that the park links directly to almost $88 million in total industrial output. Businesses that provide goods and services to park customers and employees are said to generate an additional $46.3 million in economic activity.

Park administrators commissioned the Iowa State Department of Economics to complete the analysis to measure current economic value created by the park's companies and centers. The park has tracked growth by employment and new business starts for more than 10 years; however, it has never studied its overall economic impact.

Wages paid by park companies exceeds $36 million annually, according to the data. An additional $16.9 million in wages are generated by businesses providing goods and services to park firms. Park tenants employ more than 900 Iowans. Another 639 central Iowa jobs are generated by businesses providing goods and support services to the firms. Research Park tenants generate an estimated $3.7 million in state taxes, primarily through income and sales tax.

Established in 1987, the nonprofit ISU Research Park acts as an incubator for entrepreneurs and firms and operates under a Board of Directors. It currently is home to 43 private and public firms engaging in research, product development and testing of goods, technologies and services, with more than 270,000 sq. ft. of building space.

The ISU Research Park and its affiliated centers, the Pappajohn Center for Entrepreneurship and the Small Business Development Center, are a part of Iowa State's economic development system. The ISU study does not include affiliate companies that utilize services at the park but are not physically located there. It also does not include companies that have left the park and relocated in Iowa.

Many of the research park's companies are young in their evolution, said Steve Carter, director of the park. It will take several years and substantial investment for the companies to contribute their full potential to the Iowa economy, he said.

To obtain a copy of the ISU Research Park impact study, contact Judi Eyles at eyles@iastate.edu.

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Incubators in the News

Florida Incubators Form Alliance to Expand Services
The Seminole Technology Business Incubation Center (STBIC) and the University of Central Florida Technology Incubator have partnered, and the benefits are expected to be widespread, the Orlando Sentinel recently reported. STBIC – a joint venture of Seminole County, Seminole County Port Authority and Seminole Community College – is supported by grants from NASA and the Technological Research and Development Authority, which sponsors Florida programs that enhance education and economic development. Eight companies already are housed by SBTIC, but up to 15 more are expected to join in the next year.

The UCF incubator, since opening in 1999, has grown from 12 to more than 30 companies, which have generated more than 400 new jobs and more than $100 million in revenues from sales and research and development grants. The incubator consists of more than 70,000 sq. ft., with locations in the Central Florida Research Park, adjacent to the UCF campus in East Orlando, and in Downtown Orlando.

Both incubators assist technology-based companies in the early stages of development. Their agreement is expected to result in greater shared access to resources, with UCF opening offices in STBIC.

Fourth, Fifth Enterprise Centers Slated for St. Louis Counties
With three centers already providing business incubation services, the St. Louis County Economic Council has announced two more St. Louis Enterprise Centers are in the works, according to the St. Louis Post-Dispatch. One of them is slated to open in October 2003 in Wellston, MO. The second, or fifth overall, would be built in mid-St. Louis County with $2 million in funding from the Small Business Administration, the article states. Officials are hopeful this incubator will open in 2004. Three existing centers in Chesterfield, Lemay and midtown St. Louis collectively offer 98,000 sq. ft. in office, retail and warehouse/production space for up to 110 companies.

Incubator in Arlington, TX Secures $1.4M in Federal Funding
Little more than 12 months after its opening the Arlington Technology Incubator has secured a $1.4 million grant to help purchase a 22,000-square-foot building, the Fort Worth Star Telegram reported earlier this month. A joint venture between the Arlington Chamber of Commerce and the University of Texas at Arlington, the incubator won the grant from the U.S. Department of Commerce to help pay for the 3-story building known as the Border Center. UT Arlington, which is under contract to buy the building in June, will fund 20 percent of the cost, the article observes. The incubator serves to link the research capability of the university with the business community in order to develop commercial opportunity.

Maryland Incubator Will Focus on Homeland Security Technology
Anne Arundel County in Maryland will have its first business incubator when the Chesapeake Innovation Center (CIC) opens in June. With the Anne Arundel Economic Development Corporation (AAEDC) as the lead agency, the CIC will have as one of its primary focuses the development of firms specializing in homeland security technology. The center is in the process of developing partnerships with federal agencies, universities and key corporations as it seeks to develop new companies in the communications and information technology sectors. CIC is projected to open in a 24,000 square-foot facility in Annapolis at a cost of more than $1 million over the next three years to Anne Arundel County. Fifteen start-up companies are expected to take up residence in the first year. AAEDC is a nonprofit corporation that provides economic development services for Anne Arundel County.

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Useful Stats: 2002 Educational Attainment State Rankings
Comparing the recent release to the same report issued two years ago surfaces an unavoidable danger of relying on trends identified 13 years ago in the 1990 decennial census. The 2002 educational attainment figures released by the U.S. Census Bureau in March reports 26.7 percent of the U.S. population 25 years or older holds at least a Bachelor's degree, about one percentage point higher than the previous year. The range across the states shows the District of Columbia at 44.4 percent with the highest and West Virginia with the lowest at 15.9 percent.

Washington, D.C. held first place in the Census' 2000 estimate for the same statistic, but the percentage was only 38.3 percent. This reflects an apparent 15.9 percent increase in the number of District residents with a Bachelor in just two years. More dramatically, when comparing the 2000 and 2002 reports, South Carolina, Delaware and Indiana respectively posted 22.6 percent, 22.9 percent, and a whopping 38.6 percent jump in college graduates in 24 short months.

Did it really happen that fast? Not likely. One would expect a corresponding surge in average wages and competition for higher-skill jobs.

The problem lies in that the 2000 report relied on trends identified in 1990, the most recent decennial census available at the time. The 2002 statistics are based on trends identified in the 2000 census and were collected in the Annual Demographic Supplement to the March 2002 Current Population Survey (CPS).

SSTI has prepared a table presenting the 2000 and 2002 educational attainment percentages and rankings for all 50 states and the District of Columbia. The table is available at: http://www.ssti.org/Digest/Tables/042503t.htm

The Census survey data are available at: http://www.census.gov/population/www/socdemo/educ-attn.html

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SSTI Eyes More Digest Survey Responses
SSTI extends its thanks to those of you who have participated in the 2003 SSTI Weekly Digest survey. As mentioned in a separate e-mail earlier this week, the survey results help us determine the editorial direction and content of future issues of the Digest and Funding Supplement. We're also open to suggestions for our website, publication catalog, investment portfolios and hairstyles, so the survey offers a great chance to express yourself.

Hundreds of you responded in the first few minutes, potentially causing a traffic strain on our little server. Four Digest recipients were nice enough to alert us to a technical glitch that involved a sordid browser-firewall relationship that we think we've resolved. If you encountered any problems, we hope you will try again.

Completing the online survey form should take only a few minutes. Most are multiple choice for further simplification, although your personal comments are very helpful and most valuable.

Every SSTI staff member involved in preparing the SSTI Weekly Digest and Funding Supplements will read every comment or suggestion, and a summary of the results will be submitted to the Economic Development Administration, the funding source that allows the Digest to be a free publication.

The survey is available at http://www.ssti.org/digestsurvey03.htm [expired].

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