In the November 14, 2005 Issue:

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Editor's Note
2005 Elections Review; 2006 Preview
As off-year elections go, the Nov. 8, 2005, election was pretty quiet across the country if you weren't running for mayor in one of 300-plus municipalities up for grabs or governor of New Jersey or Virginia. Issues of importance for the technology-based economic development (TBED) community, however, were on the agenda of the nation's only two gubernatorial elections, several of the few bond issues up, and a dozen or so referenda or constitutional amendments on the ballot. This week's Digest is dedicated to looking at the implications for local and statewide TBED efforts in those states that had significant issues before the electorate.

We also want to focus some attention toward November 2006, which promises to be a much more hectic election cycle at the national and state levels of government. In addition to next year's biennial election of the entire U.S. House of Representatives, the seats of 33 senators will be contested, providing the potential for one or both chambers of Congress to shift political majorities.

Leadership of 36 of the 50 states also be decided next fall. At least eight states - Arkansas, Colorado, Florida, Idaho, Iowa, Nevada, New York and Ohio - are guaranteed new governors because of term limits or decisions not to run for reelection.

Whether or not TBED plays a significant role in your state's election next year will depend greatly on the leadership, input and direction the candidates receive from their business, academic and TBED constituencies, beginning today.

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New Jersey, Virginia Promote Political Veterans to Governorships
New Jersey and Virginia were the only two states to choose governors in November 2005, with both states having open races. Below is a description of each governor-elect's position on TBED.

New Jersey
New Jersey Gov.-elect Jon Corzine handily defeated Republican businessman Doug Forrester by winning more than 1.15 million votes (53 percent) to 956,795 votes (44 percent) in unofficial results. The governor-elect, who is currently a U.S. senator, will replace Democratic Acting Gov. Richard Codey, who will return to the state Senate as president of that chamber when Gov.-elect Corzine takes his oath of office. As the former chairman and CEO of Goldman Sachs, Senator Corzine put economic development at the top of his agenda during his campaign and said that he will streamline the state’s economic development apparatus and bring the New Jersey Economic Growth & Tourism Commission into the governor’s office.

The cornerstone of Senator Corzine’s economic development strategy is his proposal for the Edison Innovation Fund, which would build on the research and technology history of the state by continuing to support technology transfer, job creation and business opportunities through university partnerships with state government and the private sector. The proposal anticipates that results of the fund would be to improve competitiveness of existing companies; the attraction of new firms; the formation of new enterprises; and the generation of millions of dollars in state and local revenues. Corzine's proposal calls for the fund to be created initially through proceeds from a voter-approved bond initiative and the reallocation of economic development programs scattered throughout 16 state agencies. The fund also would leverage additional private sector investment and research funds from federal agencies that support R&D. Targets for investment of the fund would be:

The governor-elect's economic development position includes strengthening opportunities in higher education that include providing more grants for low and moderate income students; creating a new "Serve New Jersey" program that would forgive $1,000 in student loans or provide tax credits for graduates who work in high-need sectors in the state; creating a similar tax credit for high school graduates who attend college in other states but return to New Jersey and work in high-need sectors; reducing the brain drain by creating 1,000 scholarships for outstanding high school graduates who attend the state's public colleges and universities; and continuing to support the NJ STARS program that offers free county college tuition to all high school students in the top 20 percent of their graduating class.

More information on Gov.-elect Corzine's economic development positions is available at http://www.corzineforgovernor.com/plans/smarter/

Gov.-elect Corzine's campaign website: http://www.corzineforgovernor.com/plans/

Virginia
Virginia Lieutenant Gov. Tim Kaine defeated his main opponent, former Republican Attorney General Jerry Kilgore, with one million votes (52 percent) to 909,258 votes (46 percent) in unofficial results. The lieutenant governor will replace Democratic Gov. Mark Warner who was prevented by the state constitution from seeking a second term. During the campaign, the lieutenant governor said he would focus on keeping a stable financial environment, helping small business succeed and fostering competitive regional economies.

As part of the governor-elect's proposal on building competitive regional economies, he would restore the Regional Competitiveness Program. Prior to its termination, the program provided about $50 million to leverage $700 million from other sources in funding for such programs as workforce development, technology councils, regional transportation and infrastructure projects, regional marketing programs and industrial parks. The lieutenant governor also has proposed providing incentives in state funding formulas for local governments to collaborate on providing regional services. The proposal also touts the importance of the military presence to the state's economy and the role the state will play to mitigate the impact of base-closing decisions by helping in redevelopment efforts.

The proposal emphasizes the importance of small business as the economic engine of the state and the lieutenant governor said he would focus his efforts on helping existing businesses grow by:

The governor-elect's proposal highlights the need for targeting distressed areas by providing high-speed Internet access to small communities; supporting the creation of a four-year state college in Southside that is currently under discussion among legislators, local chambers of commerce and the State Council of Higher Education; the continued support of the use of Enterprise Zones in urban areas; and making permanent the Economic Strike Force that was previously created by executive order. The lieutenant governor will form a group of Governor's Economic Ambassadors made up of business leaders from every region of the state to leverage the private sector for business recruitment efforts. Additionally, the proposal indicates continued support of investments in workforce training through the Community College System.

More information on Gov.-elect Kaine's economic development positions is available at http://www.kaine2005.org/issues/economy.php

Gov.-elect Kaine's campaign website: http://www.kaine2005.org/issues/

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TBED Ballot Issues and Bond Proposals Fare Well in '05 Election
Last Tuesday's election included a major bond package in Maine, a constitutional amendment in Ohio to complete the Third Frontier initiative, budget reform in New York, and additional TBED items in Iowa and Texas. Following are the results from some of the major ballot and bond issues within the states.

Iowa
Voters were divided on the issue of whether or not to form municipal communications utilities in their communities. According to the Des Moines Register, 17 communities passed the measure and 15 counties defeated it. The proposal, strongly supported by OpportunityIowa, does not commit the city to building or financing communications utilities, the article states. Instead, cities where the vote passed can now appoint boards to further evaluate the possibility of a utility.

OpportunityIowa and other proponents of the measure say that cities should have the right to offer utilities services, especially to keep up with the latest technology in broadband. Opponents argue these types of projects would waste municipal resources.

Maine
Voters passed four of the five ballot proposals within Gov. John Baldacci's $83 million Bond Package, including $20 million for jobs and economic growth. However, the $9 million bond proposal to raise money for upgrades and renovations at the state's community colleges and public universities failed by a mere 2,356 votes, according to an unofficial count tabulated by the Bangor Daily News.

Components of the $20 million economic stimulus bond include:

The defeat of the Higher Education Bond was close enough to trigger a recount should supporters request one, according to the Bangor Daily News. The ballot proposal included $5 million for Maine's community colleges, $2 million for a Lifelong Learning Institute at the University of Southern Maine, and $2 million to upgrade laboratory space and enhance science laboratories and classrooms at five of Maine's public universities.

New York
A constitutional amendment that would change the state budget process, which was heavily criticized by Gov. George Pataki, was defeated 64 percent to 36 percent, the Times Union reports. The proposition would have changed the process by which the state budget is adopted, in particular, by providing for a contingency budget to take effect if a budget was not adopted before the beginning of a new fiscal year. Gov. Pataki said in a press release that the amendment would lead to higher taxes and irresponsible spending, while threatening New York's fiscal stability. The measure also would have encouraged late budgets, the governor added.

In addition to providing for a contingency budget, the measure sought to place limits on the amount of spending during each contingency period, eliminate the requirement that the legislature act on the governor's proposed appropriation bills and authorize the legislature to end the contingency period by adopting a multiple appropriation bill, and set forth requirements for the operation of a fiscal stabilization reserve fund from which money could be dispersed in a subsequent year.

According to an article in the Times Union, the proposal came to the ballot as a result of frustration among lawmakers unhappy with 20 late budgets in the last 21 years and dissatisfaction with a Court of Appeals ruling that sided with the governor's domination of the state budget.

Ohio
The final component of Gov. Bob Taft's Third Frontier Initiative passed 54 percent to 45 percent, according to unofficial results from the Secretary of State. Issue One is a constitutional amendment declaring that local government infrastructure, financial assistance for R&D, and development of sites for industry, commerce and distribution are public purposes. In addition, it authorizes state institutions of higher education to issue bonds in support of R&D.

The $2 billion bond package, portions of which were rejected by voters two years ago, includes $500 million over the next seven years for research, development, and commercialization projects competitively selected by the Third Frontier Commission (see the May 2 issue of the Digest).

Texas
Voters approved a proposal that clarifies local economic development programs, loans or grants do not constitute or create debt. The measure, HJR 80, states that the legislature may provide for the creation of programs and make loans and grants of public money for the public purposes of development and diversification of the economy of the state, elimination of unemployment or underemployment, stimulation of agricultural innovation, or the development or expansion of transportation and commerce in the state.

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TABOR-Like Spending Limits Considered by States
As states have wrestled with budget constraints in recent years, many have adopted or are contemplating spending-limit measures, such as Colorado's Taypayer's Bill of Rights (TABOR), or similar fiscal limitations that restrain growth of government spending. In the recent November elections, California voters rejected a spending-limit proposal and Colorado voters suspended their state's restrictive TABOR amendment, allowing the state to keep funds for the next five years.

A number of states during the last decade have adopted tax or expenditure limitations (TELs) that are designed to restrain the growth of state and/or local governments on either the tax side, spending side or both. The National Conference of State Legislatures (NCSL) says that as these approaches to fiscal restraint become more popular, policy issues associated with fiscal limits are under review and will have an impact on how those states considering such restraints or amending existing restraints move forward. According to a NCSL September 2005 report, State Tax and Expenditure Limits-2005, “23 states have spending limits, four have tax limits and three have both. About half are constitutional provisions and the other half are statutory. Many of the TEL were enacted in the late 1970s and early 1990s, coinciding with economic fluctuation in the U.S.”

According to the Center on Budget and Policy Priorities and various newspaper reports, as many as 23 states had proposals under consideration during the 2005 legislative session, and other states currently have new tax- and spending-limit proposals under discussion, including: Alaska, Arizona, California, Idaho, Kansas, Maine, Maryland, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas, Virginia and Wisconsin.

The states are taking different approaches to these spending limitation proposals, with some proposals more restrictive than others, such as the 1992 voter-approved TABOR constitutional amendment in Colorado, which limits revenue growth for state and local governments, requires rebates of the surplus revenues, and requires that any tax increase in any state or local government be approved by the voters of the affected government, pursuant to the state constitution. According to NCSL’s Talking Points on Colorado’s TABOR, “Colorado’s early experience with TABOR was successful because of the rapid population and economic growth of the state in the 1990s.” In 2000 and 2001, the state’s economy along with the rest of the country’s declined and so did tax collections. The TABOR cap on revenue growth and a 2000 voter-approved constitutional amendment mandate for education expenditure limits that led to education spending growth at a faster pace than the TABOR expenditure limit ensured that the state would be unlikely to grow out of its problems, according to the NCSL.

Coloradans on Nov. 1 amended their constitution to allow the state to keep and spend $3.7 billion for the next five years instead of refunding it to taxpayers. Additionally, Colorado voters in at least three local governments, Boulder County, Castle Rock and Nederland, opted out of the taxing and spending limits established by TABOR, according to a Nov. 2 article in the Rocky Mountain News. These entities are among many Colorado counties and cities that have passed overrides since 1992 allowing local governments to keep the extra funds, according to a Nov. 2 article in the Boulder Daily Times-Call. In Boulder County, voters agreed with proponents that a projected $2.5 million property-tax surplus would be better spent to improve government services rather than return an average of $11 to each taxpayer. The NCSL indicates that several votes have passed in school districts and some small cities exempting their governments from TABOR limits.

Proponents and opponents of spending limits on government were watching the Colorado vote closely. “As state’s move forward to design fiscal restraint mechanisms, the level of flexibility in the TEL’s structure to respond to sweeping changes or volatile fiscal environments will help to shape the types of responses legislatures will consider,” according to the NCSL report. The following states have recently rejected or are currently considering spending limit proposals.

In addition to the above states, the Center on Budget and Policy Priorities listed the following states that considered in their 2005 legislative session TABOR proposals as constitutional amendments that limit annual growth in state and/or local spending or revenue to the rate of growth of population plus inflation. The proposals died in committee, unless otherwise noted: Alaska, Arizona, Idaho, Kansas (not taken up in 2005; same proposal can be considered in 2006), Maryland, Michigan (in committee), Minnesota, Missouri (voted out of House rules committee, but never made it to House floor vote), Nevada, New Hampshire, New Mexico, North Carolina, South Carolina, Tennessee, Texas and Virginia.

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Southern Growth Seeks Nominations for Innovative Programs in South
Southern Growth Policies Board, a regional public policy think tank, is accepting nominations for its Innovator Awards. These awards are presented annually to recognize innovative southern initiatives that improve the quality of life in the organization's 13-state region - Alabama, Arkansas, Georgia, Kentucky, Louisiana, Mississippi, Missouri, North Carolina, Oklahoma, South Carolina, Tennessee, Virginia and West Virginia - and the Commonwealth of Puerto Rico. The 2006 Innovator Awards will be chosen in the context of the Southern Innovation Initiative, a year-long series of events that focuses on the importance of innovation to the South’s economy. Each nominated initiative must use technology as an integral component to accomplish goals; be truly unique; be something more than a new product, process or service; and provide a track record or other measures of success. Nominations are due Nov. 23, 2005. Award winners from each state will be recognized at the Southern Innovation Summit on June 4-6, 2006, in New Orleans. For a complete list of award criteria and to nominate a program online, visit http://www.southern.org/main/innovators/innovators.shtml.

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