In the January 16, 2004 Issue:

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Editor's Note
2004 Opens with TBED Top Priority for States
If the first full week of the 2004 state legislative season is any indicator of the year's tone and tempo for tech-based economic development initiatives (TBED), then we're in for quite a ride.

Of the 18 governors presenting their State of the State or Budget Addresses between Jan. 6-14, all but four – Alaska, California, Vermont and Virginia – used the speech to highlight the importance of making future investments in science and technology to encourage economic growth. The supportive tone covered the political spectrum, with both conservative and progressive leaders touching on issues important to the TBED community. SSTI has highlighted excerpts from selected states in our first 2004 installment in the annual series, Tech Talkin' Govs.

The saying goes that talk is cheap. Even in a tight fiscal environment, however, many governors outlined a slew of requests for new initiatives or increased funding for programs fostering research, innovation and entrepreneurship. In this issue, Idaho, New York, and North Dakota are highlighted in more depth, as is the creation of a major new program in Michigan and progress in South Dakota.

Couple the 18 governors' speeches with the release of reports in Oklahoma, Maryland and Minnesota recommending their states make strong additional commitments to TBED activities, and the reader may get a sense of the frenetic pace at which tech-based economic development has moved to the lead of the agendas for state government. Each of these states will be covered next week.

Additionally, governors of Kansas and Washington hinted at big things to come in their budget requests. Not to be outdone or forgotten, news reports suggest more is in store for the research and tech commercialization efforts in Florida and South Carolina.

On top of what is already being investing in TBED, the year could see an additional multibillion commitment by the states to improving their competitive positions in the global knowledge economy.

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Michigan Creates $150M VC Fund and Broadens Mfg Tax Credits
Last Thursday, Gov. Jennifer Granholm signed bills to aid Michigan’s tool and die industry and to promote new venture capital investment in the state’s high-tech industries.

One of Granholm’s key themes in last year’s State of the State address was the importance of leveraging Michigan’s financial power to bring investment capital to the state. The venture capital bills signed today – Senate Bill 834, Senate Bill 835 and House Bill 5322 – create the Michigan Early Stage Venture Capital Investment Fund and provide tax credits for investors in the fund. Money in the fund could be invested in venture capital companies to promote investment in qualified businesses.

The $150 million Michigan Early Stage Venture Capital Investment Corporation (MVIC) will be directed by a seven-member board which will include the state treasurer, the chief executive officer of the Michigan Economic Development Corporation, two governor appointees, and one appointee each from the Michigan Senate, House, and the the Michigan Venture Capital Association.

MVIC will provide money to venture capital firms in Michigan that invest in Michigan companies in selected industry sectors, including information technology, life sciences, advanced manufacturing and alternative energy.

The governor also signed Senate Bill 811 to amend the General Property Tax Act by expanding the definition of ‘special tools’ for the purpose of a personal property tax exemption.

"The tool and die industry in Michigan has been hit particularly hard by the downturn in the national economy," said Granholm. "Providing a tax exemption for special tools was something suggested at our manufacturing summit last month to help this industry remain competitive and keep their shops open. Tool and die businesses are the backbone of manufacturing in our state. They not only create jobs in their own businesses, but they also create opportunities throughout the manufacturing sector."

Copies of each bill are available at: http://www.michiganlegislature.org/

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Centers of Excellence, Tax Credits Key to ND Future, Gov Holds
North Dakota Governor John Hoeven dedicated the lion's share of his State of the State Address to promoting a vision of economic growth for the state based entirely on technology-based economic development. The proposals centered on more than a dozen new university-based Centers of Excellence and new tax credits.

"I challenge all of us today to share a vision; a vision of what North Dakota can be. And I challenge all of us to work together to make that vision a reality. The future I speak of has Centers of Excellence multiplying across all of our state's college campuses, creating new enterprises, opportunity, and good paying jobs. It is a vision where a technology corridor drives growth in the east, where an energy corridor drives growth in the west and where value-added agriculture, advanced manufacturing and tourism enterprises flourish throughout our state."

To back that up, Gov. Hoeven's budget request includes $50 million to support the creation of new Centers of Excellence on each of the state college campuses to accelerate the growth of targeted industries in all regions of North Dakota. The centers would use the funds to leverage federal dollars, private sector support and philanthropy to generate another $100 million.

In his speech, Gov. Hoeven provided examples of potential projects for the 11 campuses, including expansion of technology parks and existing centers and the creation of new centers in numerous areas: biometrics and the life sciences; rural technology, distance learning and computer networking; oil and gas training and technology; renewable energy; bio-security; advanced manufacturing; audiology; rural law enforcement; and tourism.

The $50 million Centers of Excellence Fund would be derived from current revenues and new financing. The governor explained, "Any future debt service would likely be about $5 million per biennium, an amount easily affordable within our current level of expenditures for economic development. Further, the revenues generated from these job-creating enterprises will repay our investment many times over, and in many ways."

Gov. Hoeven also encouraged the state legislature to explore the creation and enhancement of tax credits to encourage the attraction and expansion of technology firms in North Dakota:

"My goal is to create the very best business climate possible for technology firms so that we can develop and attract to North Dakota the good paying jobs they provide. To do so, we must evaluate how we tax new high tech companies and provide tax credits for investment in technology. These tax credits combined with our highly educated workforce and healthy business climate will make our state a major new player in the high-tech world."

Gov. Hoeven's State of the State Address is available at: http://governor.state.nd.us/media/speeches/040114.html

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Empire Zones Reform, High Tech Items Take Center Stage in New York
New York Governor George Pataki, in his 10th State of the State Address last week, outlined a variety of initiatives designed to further promote tech-based economic development (TBED) in the state. From refining the state's Empire Zones program and strengthening the manufacturing sector to making New York a leader in renewable energy and academic research, the governor's agenda is not short on TBED items.

To strengthen the state's Empire Zones, a target of much criticism lately, Gov. Pataki proposes revising it in such a way that reduces the potential for abuse. A comprehensive interagency reporting system, new methods to advance significant economic development projects with "substantial job-creating potential" and accountability measures would be undertaken. Economically challenged communities targeted for redevelopment also would benefit under the governor's plan, which would extend the tax credit program by five years to July 31, 2009.

Gov. Pataki also reaffirmed his commitment to enhancing high tech in New York, announcing a series of initiatives collectively known as the second phase of the state’s high-tech strategy, the first phase being the $250 million Centers of Excellence program launched two years ago [see the May 24, 2002 SSTI Weekly Digest]. The new initiatives include:

To promote research and development in renewable and clean energy sources, Gov. Pataki announced New York would expand its core mission at the Center of Excellence in Environmental Systems in Syracuse. The governor said he is directing the New York State Energy Research and Development Authority to create a partnership among the Syracuse Center, state government and the private sector to strengthen the state’s biofuels industry, as well.

"The worldwide market for clean energy technologies is expected to grow to nearly $100 billion a year over the next 10 years," said Gov. Pataki. "I want New York companies to be the major beneficiaries of this emerging market."

Additionally, the governor said he would submit legislation introducing a five-point plan to boost manufacturing-based businesses in New York. In brief, the five-point plan includes creating job-training assistance programs and a new Manufacturing Assistance Program, reforming tax law to give an advantage to in-state manufacturers, improving the state's Power for Jobs program, and reforming its workers' compensation system. The Power for Jobs program is aimed at providing low-cost power to New York manufacturers.

Gov. Pataki's comments did not outline how his requests would be funded, given the state's continuing fiscal challenges. The governor's State of the State Address is available in its entirety at http://www.state.ny.us/governor/.

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Lean Budget Doesn't Stop Idaho's TBED Agenda
Idaho Governor Dirk Kempthorne dedicated a portion of Monday's State of the State and Budget Address to describing how tight the 2005 fiscal environment would be for his state. The temporary sales tax will lapse, costing the state $170 million in foregone revenue. The one-time $83 million in federal bailout funds are depleted. State employees will get a 27th biweekly paycheck this calendar year, resulting in an additional budgetary burden of approximately $20 million.

That $273 million could represent 13 percent of the state's $2.083 billion budget. Add an $11 million expected increase in health insurance for state workers and the ever-escalating cost of Medicare, and the forecast is less than rosy.

As a result, the opportunity to let a couple of small tax credits expire quietly – tax credits affecting only a small portion of the governor's constituency and costing more than $2.5 million – might be appealing.

Instead, the governor singled out the Broadband Tax Credit and Research & Development Tax Credit in his speech to remind state legislators of the role the credits are playing to transform the state's economy:

"Our innovative Broadband tax credit for high-speed communications is a conduit allowing prosperity to flow to rural Idaho and Idaho products to flow to the world. We knew the potential, but we couldn’t quantify the outcome. Now we can. More than half the state has high-speed connections; but the job’s not finished and that tax credit is set to expire.

"It’s the same with our Research and Development Tax Credit. Has it been successful? Just ask Micron Technology, which brought manufacturing jobs and some of the latest technology home from overseas, including an incredible medical breakthrough — the 'camera-in-a-pill.' Ask AMI Semiconductor in Pocatello, a world leader in custom integrated circuits for everything from pacemakers to automotive brakes and security systems. Both companies have opened new multi-million dollar R&D facilities. But now that tax credit, too, is set to expire.

"So my recommendation tonight is to continue these incentives so that we can connect all of Idaho with the latest in high-speed communications and continue to promote research and development. I’m asking you to make these tax incentives permanent."

Both credits were among several recommendations from the Idaho Science and Technology Advisory Council [see the Jan 19, 2001, issue of the SSTI Weekly Digest]. Led by Dr. Billy Shipp, the Council was created in 1999 and is working to shape the policy and programs to build Idaho’s science and technology industries.

To emphasize the increased importance Gov. Kempthorne is placing on tech-based economic development during a time of tight fiscal constraints, he also used the State of the State Address to announce the creation of the Office of Science and Technology:

"You’ve seen the importance of science and technology to Idaho’s economy. I believe it now deserves full-time attention... Using existing resources and a new investment of $100,000, we will begin pushing an aggressive agenda to expand science and technology throughout the state.

"I’ve asked Karl Tueller, a veteran of the Department of Commerce, to head this new office. Karl is a strong leader and he has the experience and the passion to make this a successful endeavor..."

An additional measure to increase the effectiveness of Idaho's economic development efforts will be the merger of the state's Departments of Commerce and Labor. Gov. Kempthorne said in his speech, "Many times I’ve been in meetings with companies considering moving to Idaho. Even as the meetings ran into late nights and early mornings, the Directors of Commerce and Labor have been by my side. I believe that by merging these departments we can maximize our resources, eliminate redundant functions, while continuing to recruit and retain businesses and create jobs for hard working Idahoans."

The merger will require legislation to take full effect.

Gov. Dirk Kempthorne's State of the State and Budget Address is available at: http://www2.state.id.us/dfm/2004Idaho/Speech/2004SoS.htm

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Former South Dakota Gold Mine Still Worth Millions
"If our children are to have the kind of jobs we want them to, this type of facility is one of the finest advantages we can give them for many generations," said South Dakota Governor Mike Rounds in his 2004 State of the State Address on Tuesday.

The governor is urging legislators to approve plans to help transform an exhausted 8,000-foot-deep gold mine into a one-of-a-kind national laboratory to study subatomic particles.

Since May 2003, the National Science Foundation (NSF) has considered the Homestake Mine to be the preferred location nationally for the Deep Underground Science and Engineering Laboratory, according to the governor's office. The deal is not closed, however, because of several outstanding issues, including ownership, indemnity, structural integrity and financing. NSF could still decide not to establish the lab at all.

Progress toward creating the underground lab in South Dakota moved a step forward this week when Gov. Rounds signed an agreement in principle with the mine's parent company. The agreement outlines the conditions and timeline for the transfer of the former Homestake gold mine in Lead, S.D., to an authority created by the state. Homestake, which had been in operation for 125 years before closing in 2001, may now be within 18 months of reopening.

Under Gov. Rounds' proposal to the Homestake Mining Company, the to-be-created South Dakota Science and Technology Authority (SDSTA) would acquire, develop and maintain facilities needed for scientific experimentation and technological development. It takes an act of the state legislature to establish the Authority, but once done, SDSTA also would be able to take the steps needed to indemnify Homestake from future potential liabilities caused by the operation of the underground laboratory. The agreement signed with Homestake calls for a combination of commercially-available insurance and the establishment of a long-term escrow account to secure indemnification.

At least $10 million, provided via a federal grant, already is in line for the proposed $146.4 million project, the Associated Press reports. Gov. Rounds has asked the legislature to approve another $10 million. The $20 million will be used to drain the mine and refurbish electrical and air systems, according to the Aberdeen American News. In all, the state would contribute $34.1 million under Gov. Rounds' plan, including $11.4 million for administration, insurance and initial operating expenses during the first three years, the AP reports.

An additional $115-120 million would be required to transform the mine into a world-class lab. New reports suggest the SDSTA would be able to issue bonds for the work. The bonds "would be paid off by NSF as part of the cost of conducting experiments," according to an AP story.

“This cooperative effort sends two clear messages to the National Science Foundation and the scientific community," said Gov. Rounds in a press statement. "First, that the best location in the United States for an underground science lab is available for development, and second, that South Dakota will do what it takes to make the lab a reality.”

The state legislature is to consider the legislation necessary to implement the transfer on Jan. 20. Survey results released earlier this week by the AP show nearly three-quarter's of South Dakota's responding legislators support Gov. Rounds' plan. More information about the Homestake Laboratory Conversion Project is available at http://www.state.sd.us/homestake/.

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Tech Talkin' Govs: The Inaugural, Budget and State-of-the-State Addresses

Arizona
Gov. Janet Napolitano, State of the State Address, Jan. 12, 2004
"The Governor's Council on Innovation and Technology recently released a blueprint for developing Arizona's tech industries, so that we can become pace setters in an increasingly competitive arena. [Note: See the Jan. 9 issue of the SSTI Weekly Digest for details.]

"I plan to implement this strategy, which includes a package of legislation to establish early stage and venture capital investments in Arizona's growing innovative industry sectors. We must invest in these high-tech sectors and in our rural economies, to ensure growth in the number of high-paying jobs in Arizona. My legislation will help us to do just that, and it will not require money from the General Fund in 2005.

"More than 20 states have made similar investments, and we must do the same if we are to compete for the future."

Colorado
Gov. Bill Owens, State of the State Address, Jan. 8, 2004
"Contrast the solid return on our tourism investment with the unacceptable record of the CAPCO program. By any measure the CAPCO program has failed. The state auditor's recent report on the program is very compelling:

"Friends, all of us here are for economic development. But what separates us from the CAPCO advocates is that we want economic development for Colorado. We want new jobs and new companies on the West Slope, not the west side of Manhattan. We want innovation in the Tech Center, not Rockefeller Center.

"We can't mend this program. We must end this program."

Georgia
Gov. Sonny Perdue, State of the State Address, Jan. 14, 2004
"Computers and information technology reshaped the 20th century economy. In the 21st century, the most dramatic changes will be in the life sciences and nanotechnology. And I want Georgia to be in the driver's seat. That means building the laboratories that will attract top researchers. Their breakthroughs will lead to new products, new companies, and high-paying new jobs.

"The Georgia Works bond package includes $10 million for a state-of-the-art biological research building at the University of Georgia. It provides $5 million for the Medical College of Georgia Research Initiative that will launch new medical research projects and attract more federal research dollars. And we're putting $2 million toward a $45 million state commitment to construct a world class Nanotechnology Research Center at Georgia Tech.

"Nanotechnology – the engineering and building of products at the atomic level – is projected to be a $1 trillion industry within twelve years. I want Georgia to be a world leader in creating this new industry."

Indiana
Gov. Joseph Kernan, State of the State Address, Jan. 13, 2003
"Indiana manufacturing is a strength, not a weakness, as some have suggested. We must seize the opportunity to make Indiana even more competitive, with support for initiatives such as Purdue's Advanced Manufacturing Institute. As we strive to create more jobs in the future, we will not abandon one of the best workforces in the world...

"We will assist women and minority owned businesses to get certified and gain access to capital.

"And fundamental to our success is the continued collaboration between industry and our world-class colleges and universities to transform ideas and technologies into new products, new services, and new jobs."

Iowa
Gov. Tom Vilsack, Condition of the State Address, Jan. 13, 2004
"The vital work of the Grow Iowa Values Fund must continue, but under its current structure, assurances for funding remains guaranteed for only two of the seven years of the fund... The timid and the hesitant never lead a transformation. The better future belongs to those with faith in the future. Members of the General Assembly, finish the good work you started last year by eliminating any conditions on future funding for the Values Fund. Guarantee these funds for the full seven years of the program – and watch Iowa grow."

Kansas
Gov. Kathleen Sebelius, State of the State Address, Jan. 12, 2004
"...over the course of the summer and fall, led by Lieutenant Governor John Moore, we convened prosperity summits across the state. Nearly 2,000 business professionals, community leaders, and educators shared their ideas for building and sustaining a 21st Century economy in Kansas.

"Those ideas became the framework of a regional economic strategy that you will have an opportunity to endorse this session. Our Economic Revitalization Plan focuses new resources on six goals: creating and retaining jobs, expanding the biosciences industry, providing start-up capital for new businesses, encouraging entrepreneurship in rural areas, linking our workforce development programs to the needs of business and industry, and enhancing the state's image.

"Our plan includes a proposal to modernize our tax incentive programs to make them work better for the businesses they are designed to serve. With these changes, Kansas will compete more effectively for jobs and attract companies that offer the best-paying jobs. Under our plan, high potential start-up companies can sell their tax credits to already established businesses. It's a classic win-win situation: start-up businesses receive needed infusions of cash and already profitable Kansas companies save money.

"The Kansas Technology Enterprise Corporation, key legislators, and the Department of Commerce are working on an aggressive initiative to make Kansas a world leader in biosciences. We must build on the unique assets in the Kansas City metropolitan area and work already underway at our research universities. For the sake of both our economy and the people whose lives will be saved by the research, we must seize this opportunity."

Kentucky
Gov. Ernie Fletcher, State of the State Address, Jan. 13, 2004
"I believe we should select priorities that move us toward a goal we all agree on: creating new economic opportunity... Kentucky's economy will always include agriculture, mining and manufacturing, but high-tech is where the next generation of jobs lies, including advanced agriculture, manufacturing, clean coal technology, biotech and other knowledge-based industries. That's why I've embraced the forward-looking work of the Office of the New Economy and connectkentucky to expand Internet access, because if we want to compete in the new economy, we have to be a wired state...

"And, as I have pledged, we are going to bring a federal research lab to Kentucky."

New Jersey
Gov. James McGreevey, State of the State Address, Jan. 13, 2004
"We have to make sure our high schools, our system of higher education, the private sector and government all work together to create a better trained workforce... Today I have presented a plan to the Legislature to restructure workforce development in New Jersey through a single department — the new Department of Labor and Workforce Development. This new department will have a single task. Whether someone is unemployed or underemployed, a high school graduate or a Ph.D., we are going to provide the skills they need and our economy demands.

"...to move to the next level, to compete with Massachusetts and California, the research in our public universities must become a catalyst for the private sector. I have asked each of the public research universities to...present a plan that eliminates the institutional barriers that prevent the enhanced research and teaching opportunities that our state desperately needs.

"Today, I am proposing the creation of three Innovation Zones that will build industry clusters around our public research universities. These initiatives will use tax credits and financial incentives to facilitate collaboration and the transfer of innovative discoveries from the laboratory to the marketplace.

"...And to keep small manufacturers competitive, we are going to provide additional incentives to modernize their plants and equipment."

Washington
Gov. Gary Locke, State of the State Address, Jan. 13, 2004
"This session, I am proposing to extend our gains in key areas: 1) Creating jobs through tax incentives for R&D and jobs in rural areas, and tools for all communities to accelerate economic growth....

"Our colleges and universities are powerful engines of economic development. They have spawned industries of the future in advanced computing, biotechnology, advanced materials, and environmental technology. Industries that have created thousands of jobs already. And will provide thousands more in the future. The investments we make in these technology areas through targeted tax incentives will fuel this growth.

"We must play to our strengths in these areas with initiatives like Bio 21. Bio 21 is a public-private, non-profit partnership that will further fund our state’s outstanding research capacity in biotechnology and information technology. This initiative merges and builds on these two great strengths to cure diseases and promote medical breakthroughs. It establishes Washington as a global leader in computer and biological sciences. Bio 21 has enormous potential to create new industries and thousands of good-paying jobs for our state."

West Virginia
Gov. Bob Wise, State of the State Address, Jan. 14, 2004
"We must continue the progress we've made with the Vision Shared initiatives — a massive undertaking bringing together business, labor and government to find real solutions to our economic problems. There are three Vision Shared proposals this year — an improved research and development tax credit; better access to borrowing for companies with innovative ideas; and elimination of the Civil War-era paperwork requirements on corporations.

"We must create a landmark research program to allow West Virginia to compete for jobs in industries in the future. Our universities need a steady dependable revenue stream of research funds, and it needs to be more than one year. We have to show we are serious about research. Tonight, I am urging you to establish such a fund. We will start with an additional $10 million; expand the Research Challenge Grant Program; hire top-quality faculty and researchers; purchase cutting-edge equipment; and create research opportunities for students.

"We will support research that is directly tied to West Virginia's economic development. At least 25 percent of it will be earmarked for energy research.

"I also am proposing legislation to create a Distinguished Graduate Student Fellowship Program to keep more of our outstanding undergraduates in state and attract more graduate students from other states."

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Bush Admin Plan for Mfg to be Released Today
Commerce Secretary Don Evans is expected to release today the Bush Administration's plan for economic growth in the manufacturing sector. According to today's Washington Post, the report will "throw President Bush's support to the Manufacturing Extension Partnership... Evans said he will support the program but will demand that the centers coordinate with other programs so they are more efficient."

As the Digest goes to press, it is unclear whether the Administration's support of MEP will translate to restoring its budget to the $106.5 million it received in FY 2003. The Administration's FY 2004 budget proposed cutting the program to $12.9 million.

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People

Kristin Jones recently was hired as senior manager for life sciences under the Indy Partnership, an economic development organization for the Indianapolis region.

Kentucky Governor Ernie Fletcher has named Derrick Ramsey as deputy secretary of the Commerce Cabinet.

Dr. Catherine Renault is the new program manager for the Center for Technology Applications at RTI International, Inc.

Leland Speed has been named the new executive director of the Mississippi Development Authority.

Janice St. Onge has resigned from the Vermont Department of Economic Development to pursue career opportunities at the University of Vermont. St. Onge, whose resignation is effective Jan. 30, served for four years as the state's technology business development director.

Ann Quinn was recently named managing director of the Maryland Department of Business and Economic Development Venture Capital Fund.

Andy Taggart has been appointed president and chief executive officer of the Mississippi Technology Alliance.

Diane Wirth is new executive director of the Valley Economic Development Corp., a public-private organization for the San Jacinto Valley.

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