In the July 26, 2004 Issue:

Copyright State Science & Technology Institute 2004. 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.

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NASA, NSF Take Hits in House Budget
It seems discussion on Capital Hill of the burgeoning federal deficit is loudest when the House, Senate or Administration considers the VA, HUD and Independent Agencies appropriations bill. Perhaps the bill always serves as the fall guy because alphabetically it is the last of the 13 appropriations bills Congress considers, then ignores and then hurriedly mushes together with the other unpassed funding bills several months into the new fiscal year.

The long stumbling title alone is only a small clue to the hodgepodge of agencies, priorities and orphans huddled together to form the third-largest appropriations bill considered each year behind Defense and Labor/HHS/Education.

Under the Independent Agencies portion of the title are two federal offices of considerable interest to most state and local tech-based economic development efforts: the National Science Foundation and NASA. These agencies would see cuts of $111 million and $229 million, respectively, if the version of the bill passed by the full House Appropriations Committee were to become law.

NASA
The NASA appropriation is $1.1 billion below the President's request and 1.5 percent below current appropriations. Press materials from the House Appropriations Committee website explain, "The bulk of these savings come from the elimination of funding for new initiatives. The reductions include $30 million for technology maturation efforts; $230 million from Project Prometheus related to Jupiter Icy Moon Orbital; $438 million resulting from delaying the Crew Exploration Vehicle; and $100 million from Space Launch Initiatives by accelerating the termination of activities."

The bill, on the other hand, fully funds the Mars program announced by the President earlier this year, and according to the American Institute of Physics (AIP), increases funding above the requested level for NASA Education Programs, providing the "National Space Grant College and Fellowship program $28.2 million (compared to an FY 2004 appropriation of $25.3 million)." AIP reports the NASA EPSCoR program would receive $12 million, compared to an FY 2004 appropriation of $10 million.

National Science Foundation (NSF)
The NSF FY 2005 budget level approved by the House Appropriations Committee is 5 percent less than the president's request and two percent less than current year appropriations. AIP reports, "Neither the draft version of the committee's report or the press release issued yesterday explains why this reduction was made."

The rhetoric to increase funding for science has been significant, with Congress passing an act in 2002 doubling the NSF authorization levels between FY 2002 and FY 2008. To meet that goal, the FY 2005 authorization level is $7.378 billion -- 35 percent higher than the $5.467 billion in appropriations approved by the committee last week.

AIP reports, "The committee report explains that 'Given the overall funding constraints, no funds are provided for the proposed [$20 million] Workforce for the 21st Century program, the proposed new class of Science and Technology Centers [$30 million], or the proposed [$10 million] Innovation Fund.'" The EPSCoR program would receive level funding from the current fiscal year appropriation of $94.4 million.

The Committee report on the VA, HUD and Independent Agencies appropriation will be posted at: http://thomas.loc.gov/home/approp/app05.html

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Flat CDFI Funding Rare "Highlight" in House VA, HUD, Independent Agencies Bill
In an appropriations bill where cuts are viewed as good news -- compared to the President's request for program termination, that is -- the small Community Development Financial Institutions (CDFI) Fund could consider itself very lucky after Friday's full House Appropriations Committee mark-up of the VA-HUD and Independent Agencies bill.

CDFI would receive $60.4 million in fiscal year 2005. The funding level is equal to the FY 2004 appropriation, but $12 million over what the Administration had requested for next year. Authorized in 1994, CDFI's goal is  to expand the availability of credit, investment capital, and financial services in distressed urban and rural communities. Funding activities leverage private-sector investments from banks, foundations, and other funding sources. Programs administered by the CDFI include the New Market Tax Credits.

Appropriations for CDFI have decreased steadily since FY 2001, when it received $118 million.

Local economic development strategies dependent on some of the other elements of the bill may breathe a small sigh of relief knowing the House Appropriations Committee voted to restore several programs proposed for termination in the President's request. Those programs face a 4 percent cut over FY 2004 levels, however, leaving $24 million for Rural Housing and Economic Development, $14 million for Round II Empowerment Zones/Enterprise Communities, and $24 million for Brownfields Redevelopment.

Full House consideration of the bill is not expected before the summer recess.

More information on the CDFI Fund is available from the U.S. Department of Treasury at http://www.cdfifund.gov/.

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Governor's $30.5M New Economy Initiative Funded in Delaware
July has been a tech-friendly month for Delaware Gov. Ruth Ann Minner. On July 14, the Biotechnology Industry Organization (BIO) named her "BIO Governor of the Year," recognizing her contributions toward growing the state's biotechnology industry, one of the strongest concentrations in the country. Further attesting to her grasp of biotech issues, Gov. Minner also serves as a co-chair of the National Governors Association Biotechnology Partnership.

More importantly though, the state legislature passed a capital budget in the early morning hours of July 1 that included all of the key components of the governor's New Economy Initiative. Gov. Minner signed the legislation later that same day.

First outlined by the governor in February (see the Feb. 27 issue of the SSTI Weekly Digest), the $30.5 million initiative consists of several different elements to complement and expand the state's existing tech-based economic development portfolio. New appropriations and programs administered through the Delaware Economic Development Office and the Delaware Economic Development Authority include:

The budget also includes $10 million to recapitalize the state's strategic fund, which is used by the Delaware Economic Development Authority for business recruitment, retention and expansion activities.

The bond bill can be viewed in its entirety through the Delaware State Legislature at: http://www.legis.state.de.us/Legislature.nsf/?Opendatabase

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House Passes Committee Legislation to Reauthorize MEP
Earlier this month, a Science Committee bill that would reauthorize the Manufacturing Extension Partnership (MEP) program and create a more robust manufacturing sector cleared the U.S. House of Representatives.

House Resolution 3598, the Manufacturing Technology Competitiveness Act of 2004, was passed by a voice vote after the House accepted one amendment and rejected three others. H.R. 3598 would help improve the competitiveness of U.S. manufacturers by providing grants to help develop new manufacturing technologies, establishing a fellowship program for manufacturing sciences postdoctoral and senior research fellows, and reauthorizing and strengthening the MEP program.

H.R. 3598 was brought to the floor under a modified rule, and the four amendments were offered. The House agreed to an amendment by Representative John Peterson (R-PA) that would require a public audit of all MEP centers but defeated:

By a vote of 171 to 193, the House also defeated a motion by Mr. Costello (D-IL) to recommit the bill to the Science Committee to be re-reported with language establishing a study on outsourcing. The House already approved such a study – and appropriated $2 million for the effort – as part of the Commerce-Justice-State appropriation bill that passed on July 8.

Environment, Technology, and Standards Subcommittee Chairman Vernon Ehlers (R-MI), primary sponsor of the bill, introduced H.R. 3598 on Nov. 21, 2003, and the bill passed the Science Committee on June 16, 2004. The legislation heads to the U.S. Senate for consideration.

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South Dakota Dedicates $2.8M to University Research Centers
Gov. Mike Rounds announced last week the creation of four new specialized research centers at the state's public universities. The $2.8 million in awards mark South Dakota's first foray into using university-based research investments as a tool to grow the state's economy, the governor said.

The four 2010 Research Centers are:

Seven new senior scientists, eight postdoctoral students, seven Ph.D. students, eight graduate associates, and 11 technicians will be brought into the state university system in the first two years of the initiative. Another 24 university scientists, whose salary is supported by their respective institutions, will also be associated with the projects.

Funding for the centers stems from broader economic development legislation in South Dakota that was passed earlier this year (see the March 12, 2004, issue of the Digest). A research and commercialization council selected the four research centers after reviewing 11 proposals submitted by faculty at South Dakota public universities. A press announcement of the centers is available through Gov. Rounds' website: http://www.state.sd.us/governor/

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Larta Institute to Manage $2.5M NIH Commercialization Efforts
The National Institutes of Health (NIH), the largest federal funding source for life sciences research conducted by small tech firms, has selected the Larta Institute to manage its nationwide Commercialization Assistance Program. The multi-year $2.5 million award will target Phase II recipients of the NIH Small Business Innovation Research and Small Business Technology Transfer Programs (SBIR/STTR).

"NIH is interested in seeing products derived from SBIR funding make their way into the marketplace for the benefit of the American people," said Jo Anne Goodnight, NIH SBIR/STTR Program Coordinator. "We are committed not only to supporting high quality research through NIH SBIR awards, but to investing in the long-term success of our SBIR-winners."

Los Angeles-based Larta, will provide assistance in all aspects of commercialization, including: business development, funding and capital acquisition, government regulatory processes, intellectual property protection, licensing strategies, and merger and acquisition opportunities.

The new program will involve a combination of training workshops, individual mentoring and consulting sessions, and public events in which companies present their technologies to the biomedical and biotechnology investment communities.

Larta Institute also will select a team of advisors from its professional network to work with companies participating in the program. Advisors will draw upon their ongoing relationships and contacts with private equity investors, industry partners and other resources necessary for successful commercialization.

More information is available through Larta at http://www.larta.org. More information on the NIH SBIR/STTR program, which has an Aug. 1 deadline approaching for Phase I research proposals, is available at: http://grants.nih.gov/grants/funding/sbir.htm

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U.S. Entrepreneurial Activity Increased in 2003, But Job Growth Lags, Study Finds
Encouraging entrepreneurship has been a predominant focus since the recession and jobless recover, but a recent report from one of the country's leading colleges for entrepreneurial education cautions the current wave of new business starts will not cure many job woes.

Less than one out of every five businesses started in the U.S. has the innovative spark that could lead to strong job generation capabilities over the next five years, according to the 2003 Global Entrepreneurship Monitor (GEM), a study conducted by Babson College.

The GEM research shows a rise in new business start-up activity last year after two years of decline, yet most of these new companies are self-employed start-ups that replicate existing goods or service businesses and project less than five employees over the next five years. While the U.S. maintains a leadership position in encouraging new business formation, more is needed to spur innovation, the report advises.

After two years of decline, entrepreneurial activity in the U.S. is bouncing back, increasing from 10.5 percent in 2002 to 11.9 percent in 2003, according to GEM. But many of these business start-ups merely replicate existing goods and services businesses. In fact, six out of every 10 business owners say that their products or services are not new to any customer.

Further, many of these businesses do not seek to hire. Forty percent of current new business owners are self-employed and do not offer jobs to other people. Of the remaining 60 percent, nearly two-thirds employ less than 20 people.

"The good news is the increase in overall entrepreneurial activity," said William D. Bygrave, the Frederic C. Hamilton Chair for Free Enterprise Studies at Babson College. "The bad news is a disappointing drop in the level of classic venture capital funding."

Bygrave reports that the study found an 80 percent decline in VC funding in the U.S. since 2000. This is the greatest percentage drop in all the G7 nations plus Israel.

According to Bygrave, "The GEM report shows an indisputable need to invest in seed funding, start-ups, and early-stage companies."

Funded by the Ewing Marion Kauffman Foundation, the 2003 GEM report highlights several steps governments can take to help improve both the level of start-ups and entrepreneurial activity among existing firms:

The 2003 U.S. GEM report is available at http://www.gemconsortium.org and http://www.kauffman.org.

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