In the May 16, 2005 Issue:

Copyright State Science & Technology Institute 2005. 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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Washington Creates $350M Life Science Fund
Washington Gov. Christine Gregoire last week signed a bill creating the Life Sciences Discovery Fund (see the Feb. 7 issue of the Digest). The fund will support life sciences research using $350 million in strategic "bonus" payments Washington will receive beginning in 2008 for its leadership role in the tobacco settlement. The state will receive the funds over a 10-year period. By leveraging funds from private and federal sources, the fund's total impact is expected to exceed $1 billion and is anticipated to drive important health care innovations, new company formation and job creation across the state.

The newly created Life Sciences Discovery Fund Authority, consisting of seven members to be appointed by the Governor and four members of the state legislature, will manage the fund and oversee the grant-making process. Criteria to be used by the authority in evaluating applications include: the potential to positively impact health care outcomes; evidence of public and private collaboration; the potential to leverage additional funding support from other sources; the potential to stimulate employment; and, the geographical diversity of grant recipients.

Passage of Engrossed Second Substitute Senate Bill 5581 was one of Gov. Gregoire's legislative priorities for the year. The bill was backed by a coalition of leaders from business, research institutions and civic organizations from across the state, including the Technology Alliance of Washington, which contributed to this story.

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The Up and Down of CAPCO Programs
One starts up. Another bites the dust. The Certified Capital Company (CAPCO) Program, a complicated and controversial tool used by some states to encourage venture capital investments, finds its beginnings in one region while seeing its demise in yet another.

The D.C. CAPCO program, officially launched today after being enacted in 2004 by the D.C. Council, will afford insurance companies with a tax credit against their premium taxes in exchange for making $50 million in equity investments over 10 years. The program's three fund managers - Wilshire D.C. Partners, Advantage Capital Partners and Enhanced Capital Partners - will look to invest in small and emerging businesses, including manufacturing centers and technology companies, through three initial funds.

The CAPCO model combines private sector expertise in identifying, evaluating and financing businesses with the public sector's interest in encouraging equity investment. Companies are required to have a product or service with good potential, a sound business strategy and capable management. For the D.C. program, they must be headquartered within the District of Columbia, with 75 percent of their employees working in the District and 25 percent residing there.

To qualify for the investments of $100,000 or more, companies also must meet the U.S. Small Business Administration's requirements for loan applicants. More information on the D.C. CAPCO Program is available at: http://brc.dc.gov/incentives/cccprogram.asp

Meanwhile, the CAPCO Program in Florida received a fatal setback after state legislators passed House Bill 1817, which repealed authorization for an additional $75 million injection of credits into the seven-year-old program. The Florida program's first phase, in 1998, provided $150 million in state tax credits over 10 years to insurance companies that committed to invest a similar amount to three venture capital funds, who could keep $75 million to invest and reinvest in small Florida businesses and return the balance to the insurance companies. Two of the three VC funds, Wilshire and Advantage Capital, also manage portions of Florida's CAPCOs and funds in other states.

See the March 12 Digest story, "Colorado CAPCO Demise Leads to Questions for Other States" for more background on CAPCOs: http://www.ssti.org/Digest/2004/031204.htm#CO

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Arizona Angel Capital Tax Credit Passes
Arizona's investment and technology communities are the anticipated winners from the state legislature's recent passage of a tax credit encouraging angel capital investments in start-up Arizona tech firms.

Senate Bill 1335 provides individual investors, limited partnerships or "S" corporations a 10 percent state tax credit per year for three years for investments in qualified technology companies. For investments in qualified biotech firms or for technology businesses located in rural areas, the credit climbs to 12 percent per year for two years and 11 percent the third year. Investments must be a minimum of $25,000 and only the first $250,000 of any investment is eligible for the tax credit.

The Arizona Department of Commerce will administer the angel investment tax program, capped at $20 million over five years, and will qualify eligible companies and investors. Qualifying technology firms must employ at least two individuals and having no more than $2 million in assets.

Gov. Janet Napolitano's signature on the measure is expected, according to a May 10 article in the Arizona Republic.

More information on S.B. 1335 is available at: http://www.azleg.state.az.us/legtext/47leg/1r/bills/sb1335h.htm

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Massachusetts Gov. Returns Stem Cell Bill to Legislature
As expected, Massachusetts Gov. Mitt Romney rejected last week Senate Bill 2039, the bill supporting stem cell research. Exercising a power not enjoyed by all governors, Gov. Romney sent the measure back to the legislature with four amendments for consideration, rather than vetoing the measure.

According to a May 12, 2005 article in the Boston Globe, one amendment would prohibit somatic cell nuclear transfer, or therapeutic cloning, while the other three ask the legislature to reconsider the bill's position on when life begins, to clarify monetary compensation for women who donate eggs for research, and to define the circumstances appropriate for researchers to create human life. Gov. Romney also sent a letter to lawmakers stating the bill would change the definition of an unborn child that dates back to 1974, the article states.

The legislature, however, does not seem likely to adopt the governor's amendments as the bill was passed by a veto-proof margin. In a May 13 Boston Herald article, the chairman of the House Economic Development and Emerging Technologies Committee, Rep. Daniel Bosley, said the governor's proposed changes are political and predicted the bill will be back on the governor's desk quickly.

If lawmakers reject his amendments, Gov. Romney could either issue his threatened veto, which could be overridden by a two-thirds majority vote of the legislature, or he could let the bill become law without his signature.

More information on S.B. 2039 is available at: http://www.mass.gov/legis/bills/senate/st02/st02039.htm

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ConnectKentucky Unveils Maps to Identify Gaps in Broadband Service
Moving forward with the governor's statewide broadband initiative, the ConnectKentucky Steering Committee and Gov. Ernie Fletcher recently unveiled Phase I Maps to illustrate service gaps and to serve as an economic development resource for communities.

The phase is intended to produce maps using Geographic Information System (GIS) technology to provide a comprehensive statewide inventory of existing broadband service and infrastructure. The committee will use the GIS maps and other demand and supply-side incentives toward full broadband deployment by 2007 under the governor's Prescription for Innovation initiative (see the Oct. 25 issue of the Digest). A second phase of the mapping project will identify expansion plans for 2005.

To help communities assess their current rates of technology adoption and usage within nine different sectors, ConnectKentucky also developed a community benchmarking tool. The tool will act as a guide to provide a benchmark for each community's current readiness to participate in the economic, social, governmental, and personal changes that high-speed communications entail, the Steering Committee said. Currently, more than 30 counties and communities use the tool.

More information is available at http://www.connectkentucky.com.

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Rhode Island Going Wireless?
While many states are striving to increase broadband availability (see the Kentucky story above, for example), a Providence-based nonprofit released a study this month promoting the feasibility of making Rhode Island the first entirely networked state for broadband wireless.

The Business Innovation Factory initiated the Rhode Island Wireless Innovation Networks (RI-WINs) to assess the demand for a statewide broadband wireless network and to determine the technological and economic feasibility of the network. The study also proposed an operating model for RI-WINs drawing on a broad public-private partnership.

The study's conclusions were all positive. Rhode Island's concentrated geographic area proves to be a substantial plus for initial network installation, a substantial hurdle for most other states. The report suggests an initial capital outlay of $20.2 million and an annual operating cost of $5.012 million would allow for installation and maintenance of a 100-plus site network based on WiMAX transport core with WiFi technology at the consumer interface.

At this point in time, RI-WINs anticipates charging users $250 annually for the service. The total available market - state employees, education, healthcare and mobile workers - is calculated as 322,000 with potential RI-WINs users estimated to number 25,000.

The Business Innovation Factory's next steps are to design, secure funding and launch a pilot project to test how the statewide network should be built. The RI-WINs study is available at: http://bif.shazamm.net/files/RIWINsReportFinal.pdf

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Task Force Created to Attract VC to Southern Region
The South represents 20 percent of the nation's economic activity but attracts only 9 percent of the total U.S. venture capital invested. In an effort to bring those numbers closer together, the Southern Growth Policies Board recently announced the creation of a multi-state task force dubbed VentureSouth. Virginia Gov. Mark Warner, a former venture capitalist himself, will chair the group as it develops strategies to increase the flow of venture capital in the 14-state region.

Membership in the task force will be capped at 100 firms, with participants primarily coming from the private sector - entrepreneurs and professionals in the venture capital industry. The remaining members will be comprised of policymakers - governors, legislators and state government science and technology directors.  The membership fee to join VentureSouth is $500.

Task force members will meet for the first time in October to begin developing recommendations for the region. Managed by the Southern Technology Council, the network is expected to complete its work in two years.

To view a list of current VentureSouth members, get more information or to join, visit: http://www.southern.org/main/STC/venturesouth/venturesouth.shtml

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Parents' Attitudes Toward Higher Ed May Present Barrier to TBED
Sometimes when people are surrounded by others who share backgrounds, beliefs or opinions, they assume everyone thinks that way -- or should. It is one of the negative side effects or symptoms of the phenomenon known as "group think."

It could be easy, for example, for Digest readers deeply immersed in building tech-based economies - surrounded by college-educated researchers, scientists, MBAs, lawyers and engineers - to believe that obtaining a degree after high school is a fundamental key to future economic prosperity. Studies support the idea that the higher level of education attained, the higher one's income will be. We assume the only hurdles are affordability or access and set goals then to double the number of college graduates.

Gov. Jennifer Granholm announced during her 2005 State-of-the-State Address a plan to create better-paying jobs as the state recovers from a loss of manufacturing jobs and an overall net job loss in 2004. The plan includes raising the state's Merit Award scholarships from $2,500 to $4,000 for students who complete two years of postsecondary education or apprenticeship training (see the Feb. 21 issue of the Digest).

Most readers will be aware of similar efforts in nearly every state across the country. We are in a knowledge-based economy competing with other countries that are rapidly increasing the skills, education and innovation competencies of their citizens, right?

Surely, every American parent wants their child to pursue a two- or four-year education after high school graduation, right?

Wrong. A recent survey of Michigan parents presents eye-opening findings if your worldview has become so insular that it comes with an electronic roledex in which everyone's name is followed by B.A., M.A., MBA, M.D., J.D., Ph.D., etc.

Acting on the recommendations of Lt. Gov. John Cherry's Commission on Higher Education and Economic Growth, Gov. Granholm's proposal to double the number of college graduates may face some hurdles, according to an article in the Detroit News. The article quotes Ed Sarplous, who conducted the survey, as saying any measure the state proposes will not make an impact unless residents change the way they think about higher education.

Preliminary results of the survey indicate only about half of the parents polled believe everyone should obtain a college degree and only about one-fourth say a good education is essential to getting ahead in life. However, evidence that people holding college degrees make more money and are less likely to be unemployed is abundant. U.S. Bureau of Labor statistics indicate that people with a bachelor's degree earned a mean salary of $916 per week and had an unemployment rate of 2.7 percent in 2004. In contrast, high school graduates earned a mean salary of $574 per week and had a 5 percent unemployment rate.

The survey, conducted for a group of education organizations in the state, involved telephone interviews with 1,544 parents and guardians across the state. The questionnaire covered issues such as parents' general attitudes toward education, schools and the relationship between education and the standard of living; aspirations for their children; contributions to their children's education; and core academic subjects.

Minority and ethnic groups, including Arab Americans, Native Americans, Hispanic Americans, Asian Americans and African Americans, are more likely to value education than the majority White population. For example, almost nine out of 10 Arab Americans agree that everyone should have a college education, compared to the base sample, which is just slightly over half. Minority groups also are more likely to trust the judgment of school teachers and professors and believe that people with a college degree are better off. However, the survey also reveals that this group is less likely than the majority population to have done something specific to afford college for their children.

The Michigan Parents Culture of Education Survey is available at: http://www.mea.org/design.cfm?p=5503

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Three for Rural America
Encouraging economic growth in rural America is the topic of a recent report, a new $500 million economic development investment program, and an upcoming conference worth further investigation.

Capitalizing on Rural America
Policy and funding priorities have not kept pace with the economic diversification underway in rural America, according to a study commissioned by the Federal Home Loan Bank of Des Moines. The study, Crafting a Competitive Future, provided the platform for a recent Washington, D.C. forum on rural development issues. It is divided into three major sections: a description of the economic and social drivers and trends affecting rural America; a summary of key federal programs among the 337 identified in the report to provide financial and technical assistance; and a discussion of several strategic options for capitalizing on rural America.

The underlying conclusion of the report and guiding principle for the recommendations advanced in the strategic options section may apply to many urban areas as well "communities and policymakers should shift from the traditional focus on problems to an emphasis on rediscovering the economic value that is offered by rural regions and upon which new, productive activities can be pioneered and grown." (p. 7)

The full report is available at: http://www.fhlbdm.com/Docs/About_Us/PF/SRIReport_FINAL.pdf

$500M Rural Capital Advance Launched
In response to the recommendations heard at its Capitalizing on Rural America symposium (see report above), the Home Loan Bank is putting money where its mouth is.

The bank recently committed $100 million a year for five years to support innovative rural economic development initiatives. A new program, entitled Rural Capital Advance, will support business expansion, start-ups, and small business retention. The goal is to increase flexibility and creativity in how rural areas approach economic growth, encouraging communities to focus on innovation and entrepreneurship rather than chasing one big company or potential employer.

Of the first $100 million to be allocated, $50 million will be reserved until Dec. 31 for five states (Iowa, Minnesota, Missouri, North Dakota, and South Dakota), with each receiving $10 million. Any funds to those five states beyond the $10 million will be distributed on a first-come, first-serve basis.

For the Rural Capital Advance, "rural" is defined as a unit of general local government with a population of 25,000 or less; an unincorporated area outside a Metropolitan Statistical Area (MSA), or an unincorporated area within an MSA that qualifies for housing or economic development assistance by the U.S. Department of Agriculture.

More information is available at: http://www.fhlbdm.com/ci_cia_rca.htm

Rising Together: The Summit on the Rural South
This year's annual conference of the Southern Growth Policies Board will be a three-day summit in Point Clear, Ala., focusing on new strategies and success stories in rural development. Gathering rural experts, government leaders, the private sector, and economic and community development professionals, the June 12-14 conference will share ideas for "creating rural prosperity in a uniquely Southern way - through storytelling." The Southern Growth Policies Board also will release its 2005 Report in the Future of the South to kick off the event. More information is available at: http://www.southern.org/conference/reg.shtml

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Useful Stats
State Population Projections Through 2030
A child born in the U.S. today who obtains a master's degree directly after college and high school will have been in the job market for only 1-2 years in 2030. Many people in the tech-based economic development community want that girl or boy to study math, science or engineering. A more basic question, though, is where will that child live as a young adult? If you guessed in the West or South, you have a good chance of being right, based on the latest population projections from the U.S. Census Bureau.

Thirty percent of the nation's population will live in California, Texas, or Florida if the Bureau's guesses are close. Each of the three states are projected to gain nearly 13 million new residents during the next 25 years. The mix of residents by age is considerably different, as Florida's population aged 65 or over is expected to jump from 17.6 percent, already the nation's highest concentration, to 27.1 percent by 2030.

As the editors of the StatScan, the monthly e-newsletter of EconData.net, point out, the Census bases its projections on demographic trends over the past two decades, such as migration. Many other factors will influence actual state populations by 2030. For instance, carrying capacity and climate change may play larger roles in demographic shifts during the next 25 years than they have previously.

Nevertheless, the projections can provide an impetus for the design of public policy. Take the child born today, our future scientist or engineer, for example. Using the Census projections, SSTI has prepared a table showing the change in population specifically for 25-year-olds between 2005 and 2030. Thirty states and the District of Columbia will see actual declines in the number of 25-year-olds by 2030 if the projections hold. The nation as a whole, however, would see 9.14 percent more members of the age group.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/051605t.htm

The complete Census list of 2030 projection tables is available at: http://www.census.gov/population/www/projections/projectionsagesex.html

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SSTI 2005 Conference Update
The first conference mailer went to the post office yesterday, but we're too excited to delay announcing that the website for SSTI's 9th Annual Conference is now available to accept registrations and provide preliminary information for the tech-based economic development (TBED) community's premier professional development event of the year. The conference will be held on Oct. 19-21, 2005, at the beautiful Intercontinental Buckhead-Atlanta.

SSTI is looking forward to this year's event for two particular reasons: our local co-hosts. The Georgia Research Alliance (GRA) and the Advanced Technology Development Center (ATDC) are two of the most widely respected TBED organizations in the world. That's no exaggeration and worth repeating -- in the world. Both organizations are celebrating anniversaries this year: GRA turns 15 and the venerable ATDC celebrates its 25th.

It is the longevity, success and vitality of these two outstanding organizations that helped SSTI develop the theme for this year's conference, Investing in a Brighter Future: Building Tech-based Economies. Both GRA and ATDC represent long-term investments based on innovative models of public-private partnership. Both have weathered and embraced change in state leadership time and time again. And both have the successful track records with proven impact results to demonstrate the risk of those investments has been worth it - many times over.

The urgent need to focus public investment on the more distant horizon has been the recurring and underlying theme for all of the national discussion on unbalanced federal R&D budget priorities, the need for a national innovation strategy, and the challenge and opportunity presented by a "flat world" (to borrow a phrase from Thomas Friedman).

SSTI's 2005 conference in Atlanta provides a unique and timely forum to advance understanding of the states' and regions' evolving roles as leaders in fostering the continued competitiveness of the U.S. economy. Some folks may continue to discuss the need to encourage innovation, fund science and research, support entrepreneurship and strengthen our workforce, but states, regions, universities, colleges, tech councils and nonprofits are actually doing it.

SSTI's 2005 annual conference, then, is for all of you actually investing in a brighter future. We look forward to joining you in Atlanta this fall. More information is available at: http://www.ssti.org/conference05.htm

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