In the March 29, 2004 Issue:

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Oklahoma Gov. Urges $44M Higher Education Bond Issue
Oklahoma's Higher Education Day, when students and faculty are given the chance to discuss their concerns with the state legislature, recently provided a golden opportunity of sorts for Gov. Brad Henry. Held March 9 at the State House, the event enabled the governor to advocate support for a bond issue that would fund endowed chairs at Oklahoma's colleges and universities.

According to Gov. Henry's budget figures, $44 million in private donations are waiting for matching state funds for the endowed chair program. The governor is proposing a bond issue to match those donations. Funding endowed chairs, which enables a college or program to recruit and retain faculty whose reputations elevate its prominence, is a key component of the governor's $1 billion Economic Development Generating Excellence (EDGE) initiative (see the Jan. 23, 2004, issue of the Digest).

The EDGE task force, created last August as part of the initiative, consists of private and public sector volunteers that review the state’s economic development efforts and recommend improvements. Eliminating the present backlog in unfunded endowed chairs is a priority for the task force, according to the governor's press office.

For every $1 invested, the state can generate another $5 dollars in federal and private research funds, Gov. Henry said in a press statement. This makes it “inexcusable” for the state not to step up its endowed chair funding, he said. Passage of the bond issue, he added, is necessary in order to allow the state to lead in biomedical, energy and agricultural research and development.

In using bonds, a mixture of taxable and tax-exempt debt could be included while also easing the stress on Oklahoma's general fund. For example, faculty salaries would be taxable and money for research facilities would qualify for tax exemption.

More information on the EDGE initiative is available at: http://www.okhighered.org/eco-devo/

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Maine Fund Will Help Companies Bridge Financing Gap
A new fund developed by the Maine Technology Institute (MTI) is expected to lead to greater commercialization of technologies in the northeast state. Created through a reserved proportion of MTI’s annual grantable funds, the Accelerated Commercialization Fund (ACF) will allow previously funded MTI companies the chance to achieve significant growth. To qualify for funding, companies must at a minimum demonstrate significant potential for financial and economic development returns.

The financing gap that exists between some companies' research and development (R&D) and sales is the motivating force behind the Maine fund. MTI plans on the investments piggybacking on other investors' terms, generally in the form of equity, and either converting existing debt or providing additional capital to help advance new products toward the market.

Approximately $1 million will seed the ACF, with two to three investments made each year. MTI will select only those companies with high growth potential and interest in equity investments, with consideration given to a variety of factors — an investment's perceived impact for Maine, its potential for return to MTI, quality and relationship of investment partners, and past performance with MTI-funded projects.

The fund's guidelines include:

Also outlined within the guidelines are the fund's possible uses. ACF funds, while working to advance technology commercialization, can be used for development, marketing, operations, working capital and similar items. Neither the ACF nor matching funds may be used to pay earlier investors or prior debt. Companies receiving funding also must show documented interest from at least one potential or current customer.

For more information on the ACF fund and other MTI award programs, visit: http://www.mainetechnology.org/proposal.asp

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Study Highlights Successful Programs in Rural Governance
Innovations in public and private institutions could be the key to aligning governance with opportunity, according to the Center for the Study of Rural America's latest annual report.

Previous focus for the center has been on how rural regions can build new economic engines, which the report's authors contend is well understood by public and private leaders. What is less understood, they explain, is the need to effectively change how regions reach economic decisions, a process they call rural governance.

New governance, suggests Innovations in Rural Governance, will define how decisions will be made within a region and how key institutions of federal, state and local government, higher education and the private sector will work together.

Solving jurisdictional boundary issues is vital to the process of bringing partnerships together, the authors explain. In many rural regions, institutions that were created for 19th and 20th century economies are no longer compatible with today’s technology, they say. This has resulted in old jurisdictional boundaries impeding on multi-county partnerships that are useful in building new business engines.

What is essential, Innovations in Rural Governance argues, is the need to reinvent how a region is governed. The report calls for creating a process that allows regions to make quick and efficient economic decisions that are in line with new economic opportunities. Instead of offering specific directives to achieve this, the authors highlight four programs showing positive signs of innovation:

The above examples envelop the support of universities, government and the private sector, which collectively bear the representation of an arrowhead, the authors conclude. Of the three, one becomes the tip and acts as the catalyst to new regional governance; without it, governance will not innovate. All three are necessary, however, in order to transform the region’s economy.

The Center for the Study of Rural America was created by the Federal Reserve Bank of Kansas City to focus on the economic and policy issues that are unique to rural America. Innovations in Rural Governance is available at: http://www.kc.frb.org/RuralCenter/mainstreet/MainStMain.htm

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Broadband Trends, Access Vary Across States
Looking to jumpstart the federal policy process regarding broadband Internet access, the Alliance for Public Technology (APT) has released A Nation of Laboratories, Broadband Experiments in The States, a report examining various broadband policies and programs nationwide.

In its report, APT recognizes that some states have productive programs in place, while others have none at all. APT contends that only a national policy can ensure full and equitable access to advanced telecommunications services.

Upon release of the report, Matthew Bennett, APT’s public policy director, said the fact that such programs are limited to single states undermines the goal of universal service envisioned by the 1996 Telecommunications Act, which according to the Federal Communications Commission, is intended to allow anyone to enter the communications business and any communications business to compete in any market against another business.

Chicago-area businesses seem to be feeling the effects of limited access, even though it is the center of more Internet traffic than any city worldwide, according to the Metropolitan Planning Council (MPC). Many Chicago neighborhoods lack access to even basic broadband technology and existing broadband providers have not matched demand in the area, MPC concludes in its new study From Broad Shoulders to Broadband.

One hope on the horizon is CivicNet, a project that would result in broadband access for all Chicago individuals and businesses. CivicNet seeks to create new infrastructure the city needs to compete for jobs, improve education, train the Internet work force and eliminate the Digital Divide. It would leverage the city’s telecommunications purchasing power to save millions of tax dollars and boost economic development across the city.

CivicNet seems to be stalled, however. The City of Chicago has yet to complete the bidding process for the project that was announced in 1999. According to Mayor Richard Daley’s press office, the project is still on hold and has not been cancelled. Through the release of its study, MPC is calling on the city to move forward with the plans. Similar programs are already found in Houston and Pennsylvania.

In Nebraska, broadband Internet access is rapidly spreading throughout the state, including rural areas. A study recently conducted by the Nebraska Information Network found that four out of five rural Nebraskans live in areas where high-speed connections are available. Additionally, 80 percent of people outside of the state's most populated cities had broadband access in 2003, compared to 75 percent the previous year.

Research from Parks Associates indicates that the interest in upgrading to broadband service is diminishing and the surge in demand may be short-lived. Parks Associates, a market research consulting firm, recently released a study showing less than one-third of U.S. households with Internet service are interested in upgrading in the next 12 months, compared to the almost one-half of subscribers who were inclined to upgrade in 2002. As interest levels decrease, broadband service providers may need to offer more incentives to consumers such as lower prices or bundled services, Parks Associates suggests.

Although still in the experimental phase, a new technology being introduced in Australia, iBurst, may fit in well with U.S. businesses. The service allows laptop and PDA users to roam up to nine miles away from the base station and still receive a broadband connection. High-end business users in Australia are already subscribing to the expensive new technology following trial periods. Wired.com reports that Personal Broadband Australia, the company launching the network, plans to cover 75 percent of the Australian population and 95 percent of Australian businesses by 2005.

The U.S. should be leading the world in broadband access instead of trailing behind other nations, the APT report concludes, and in order to do so the federal government must take action and go beyond state experiments to incorporate the knowledge gained into a national plan of action.

The APT report is available at http://www.apt.org/publica/.
The Parks Associates report is available at http://www.parksassociates.com.

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States Take Steps on Outsourcing
One of the hottest political topics this year is the outsourcing of U.S. jobs to other countries. A Google search on "outsourcing" returns about 4.8 million pages. Reports from Gartner, Forrester Research, McKinsey & Company, AeA, and the Institute for International Economics, among others, have looked at the topic and fed the interest.

While the presidential campaigns attempt to deal with the issue, in the last week alone, four governor have taken steps to try and address some aspect of the outsourcing issue. As is typical in technology issues, state action defies party label and geography.

Earlier this week, Utah Gov. Olene Walker signed legislation that will provide financial incentives and assistance to state agencies that outsource work to companies in rural Utah. The program will be administered through the Utah Department of Community and Economic Development's Smart Sites program <http://smartsites.utah.gov/>. The legislation can be found at: http://www.le.state.ut.us/~2004/htmdoc/sbillhtm/SB0199S01.htm

In Michigan, Gov. Jennifer Granholm signed Executive Directive 2004-3, which gives preferences to Michigan-based job providers in the state government contracting process. For the first time, the Department of Management and Budget must consider whether or not a bidder is engaged in exporting jobs or in using an offshore tax shelter when determining if a bidder’s proposal provides the best overall value to the state. Under the directive, the department will now collect from all vendors information related to job outsourcing. The directive is available at: http://www.michigan.gov/gov/0,1607,7-168-29544_29546_29549-88892--,00.html

Meanwhile, Massachusetts Gov. Mitt Romney revealed his plan to slow outsourcing by giving economic incentives to companies willing to stay and expand in the state. The governor's $29 million initiative would: 1) provide more than $8 million in capital loans to companies willing to stay or expand in Massachusetts, 2) offer $10 million in grants to firms that create 250 or more in-state jobs, and 3) distribute $11 million in smaller $2,000 grants to companies that hire workers that have been unemployed for over a year. For more information, visit: http://www.mass.gov/portal/govPR.jsp?gov_pr=gov_pr_040322_sencorp_outsourcing.xml

Earlier this month, Pennsylvania Gov. Ed Rendell endorsed a plan to keep jobs in the U.S based on a point system. The governor's proposal would incentivize contractors who work for the state by giving them credit during bidding if they guarantee the work will remain inside the U.S. The proposal does not specifically prohibit outsourcing. More information is available at: http://www.state.pa.us/papower/cwp/view.asp?A=11&Q=436390

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Useful Stats: Defining High Tech
For years, defining "high technology" and identifying industries that fit within that classification has been a difficult task loaded with political implications. AeA, for example, has used a definition of high tech in its publication Cyberstates that places heavy emphasis on information technology.

In presentations around the country, SSTI has advocated using a definition based on work prepared by the Bureau of Labor Statistics (BLS) that defines high tech by data rather than ideology. Unfortunately, the BLS definition was developed under the Standard Industrial Classification (SIC) system. Attempts to translate those industry sectors into the North American Industry Classification System (NAICS) through correspondence tables and crosswalks results in a list lacking in precision because the individual user must make certain judgments as to whether or not an industry should be included.

A new issue brief, Technology Industries and Occupations for NAICS Industry Data, prepared by the Center for Economic Development (CED) at Carnegie Mellon University and SSTI offers a new approach to identifying technology industries using NAICS.  Industries are identified either as technology employers or technology generators. Technology employers have employment of technology occupations exceeding the national average by at least three times. Technology generators are industries where R&D expenditures per employee and/or the proportion of full-time equivalent R&D scientists and engineers in the workforce exceed the national average.

The issue brief identifying the industries that fall within the technology employers and technology generators definitions can be found at http://www.ssti.org/Publications/online.htm or through CED at http://www.smartpolicy.org/. One of the difficulties discussed in the issue brief is the shortcomings of available data.

One shortcoming is that to protect company confidentiality, employment data is masked for several industries, particularly in smaller population states. SSTI, with CED's assistance, has prepared a table <http://www.ssti.org/Digest/Tables/032904t.htm> showing by state the minimum level of employment in each of the Technology Employer and Technology Generator industries. Because not all employment data is publicly available, the employment levels and percentage of technology employment should be viewed as the minimum occurring in the state. As a result of the data-masking, users are strongly discouraged from ranking the states. State and local policymakers might want to use the list of industries identified to get more precise data from their employment services departments that are responsible for ES202 data.

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