In the June 19, 2006 Issue:

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 Legislative Actions & Tech Talkin' Govs 2006, Part V
The fifth installment to Walkin' the Tech Talkin' Gov Walk (see the April 17, May 8, June 5 and June 12 issues of the Digest) covers the outcome of the 2006 Massachusetts legislative sessions. Following is a synopsis of bills passed and budget appropriations relevant to tech-based economic development and the priorities outlined in respective gubernatorial addresses at the beginning of 2006.

Massachusetts
The legislature last week enacted Gov. Mitt Romney's economic stimulus bill. During his State-of-the-Commonwealth Address, Gov. Romney asked for legislative support for the bill he proposed a year ago (see the Jan. 23 issue of the Digest). The bill includes $80 million to spur activity in the life sciences and technology sectors, creates a $13 million cultural facilities fund, and invests $23 million in workforce development and training. It also establishes a new office to bring wireless or broadband Internet access to the entire state and provides scholarships for students who pursue math and science careers.

A main focus of the economic stimulus legislation is to support and grow the life sciences industry in the state. The bill creates a new state entity designed to foster R&D and help raise private funding for projects, the Boston Globe reports. Additionally, the bill includes funds for a new nano-biomanufacturing center at the University of Massachusetts at Lowell.

According to the Boston Globe, the economic stimulus legislation is paired with the FY 2007 supplemental budget bill and, combined, the bills draw $120 million from the state's rainy day fund and use another $440 million in leftover surplus funds from the last fiscal year. The supplemental budget bill includes $2.5 million to support research and innovations at the University of Massachusetts biomedical institute for discovery at the Worcester campus.

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Flush with Cash, States Spend and Cut
Four short years ago, 37 states were in fiscal crisis, many making several rounds of deep spending cuts to cope with the most dramatic reduction in revenues in 20 years. In all, more than $15 billion were shaved from state budgets. Twenty-one states experienced negative revenue growth in FY 2003, forcing even deeper cuts. The fiscal winter of '02-'03 slowed many states' strategies for supporting growth in their knowledge-based economies.

In contrast, the latest June 2006 Fiscal Survey of the States, prepared by the National Association of State Budget Officers and the National Governors Association, reveals only four states were forced to reduce enacted budgets during FY 2006 because of revenues falling short of projections when budgets were enacted. The four were Indiana, Louisiana (post-Katrina), New Jersey and Rhode Island.

In fact, total state general fund spending was 7.6 percent higher in 2006 compared with 2005 - 18.75 percent higher than the 29-year historical average annual growth rate of 6.4 percent. State contributions to Medicare account for most of the growth, however. Federal contributions for Medicare are not keeping pace with the growth in costs, forcing the states to assume a larger share of the federal program's costs.

With revenues exceeding expectations and enacted budgets, more states are returning money to taxpayers than saving for the next inevitable downturn in revenues. State officials in 20 states are proposing tax cuts. In aggregate, the survey finds state governors proposed a $1.4 billion net cut in personal income taxes in 2006.

At the same time, year-end balances collectively comprised $47.3 billion or 7.9 percent of revenues in FY 2006, down from $48 billion or 8.7 percent of revenues in FY 2005. Storm clouds appear to be brewing based on the survey's findings for FY 2007, during which year-end balances are projected to fall to only $32.5 billion or 5.2 percent of revenues.

The June 2006 Fiscal Survey of the States is available at: http://www.nasbo.org/Publications/PDFs/FiscalSurveyJune06.pdf

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EDA Seeds $3M Growth Fund in Washington
A $1.46 million grant from the Economic Development Administration to the Sirti Foundation is making possible a $3 million loan fund to technology companies within a 10-county region of Eastern Washington. The program provides another example of the non-traditional use of EDA funds to support tech-based economic development strategies. In addition, the deal structure may serve as a model to help other public agencies encourage TBED activities typically outside the scope or possibility of many public entities.

The Sirti Technology Growth Fund is designed to accelerate technology companies in a number of market sectors, including bio-products/health sciences, energy and the environment, value-added agriculture, and defense/homeland security that do not qualify for conventional bank financing. Sirti, an economic development agency of Washington State, identified a gap in funding sources for start-up, emerging and expanding technology-based companies in the Inland Northwest. Such companies typically have a marketable product but require financial and other resources to successfully "go the distance." Help with launching the company, products or services into new markets or to acquire the inventory necessary to fulfill an order can make the difference for long-term success.

The Sirti Foundation, a separate tax-exempt entity from Sirti, received the EDA grant in 2004. The EDA grant required dollar-for-dollar match funding which the Sirti Foundation secured by teaming with the Business Development Corporation of Eastern Washington (BDC), an investment consortium of community and regional banks and businesses. Member bank investors include AmericanWest Bank, Banner Bank, Bank of Fairfield, F&M Bank, FirstBank Northwest, 1 Inland Northwest Bank, The State National Bank of Garfield, Washington Trust Bank, Wheatland Bank and the Bank of Whitman. Development of the administrative plan for the Sirti Technology Growth Fund was made possible by a grant from Spokane Teachers Credit Union. Administrative services for the Sirti Technology Growth Fund will be provided by the BDC.

The Sirti Foundation is funded privately through grants and contributions to help support Sirti. In particular, the foundation pursues funding for special projects that help deliver results under Sirti's mission. The Sirti Foundation has six outside board members representing executive leadership from various industries and three board members from the Sirti Board.

The Sirti Foundation Board has contracted with the Business Development Corporation of Eastern Washington, an industrial development corporation, to officially administer the loan fund with ongoing support from the Sirti Foundation Board and Sirti staff members. The loans granted to qualified applicants will be co-owned by the Sirti Foundation and the BDC. Typical loan amounts are expected to range from $50,000 to $350,000 and have terms tailored to the unique business and industry environment.

More information is available at http://www.sirti.org.

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Offshore Outsourcing Hurts IT Labor Markets
Despite industry claims to the contrary, the recovery of the U.S. information technology (IT) sector has not created enough new jobs for IT workers, according to a new report from the Washington Alliance of Technology Workers. Information Technology Labor Markets: Rebounding, but Slowly reveals that the recent increase in IT spending has not led to a full recovery in the labor market.

The Alliance worked with the University of Illinois at Chicago's Center for Urban Economic Development (CUED) to prepare the report. CUED finds that only 76,300 IT jobs have been created in the U.S. since April 2003. This represents less than a quarter of the 383,100 jobs lost during the 2001-2003 recession. IT employment growth remains sluggish and well below pre-recession levels.

The report cites the rise in global IT outsourcing as a factor in the protracted recovery. A growing number of processes and services associated with the industry "have been outsourced to providers in low-wage countries," leaving U.S. IT workers un- or under-employed. Offshore outsourcing is expected to increase over the next few years and, according to the CUED study, will continue to stifle domestic IT job growth.

Several metropolitan areas have enjoyed a more substantial recovery. Seattle and Washington, D.C., have surpassed 2001 employment levels, driven largely by in-house IT spending. Many large-scale IT projects were delayed during the recession, but are now being conducted within the internal IT divisions of firms. As a result, many displaced workers have found IT employment within non-IT companies.

The Information Technology Association of America and other industry groups have been more optimistic about IT employment trends and the overall effect of outsourcing on the U.S. economy. The CUED study suggests that policymakers might want to take steps to curtail the migration of IT jobs and develop workforce education efforts that combine IT training with targeted business skills.

Read the report at: http://www.washtech.org/reports/ITLaborMarketsStudyL.pdf

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Useful Stats
2003 Federal S&E Obligations to Universities and Colleges by State
The federal government distributed $26.7 billion to universities in the U.S. in fiscal year 2003 - a 9.4 percent increase from the FY 2002 total of $24.4 billion, a recently released National Science Foundation report reveals. Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions: Fiscal Year 2003 details federal science & engineering (S&E) activities to the nation's institutions of higher education.

The NSF report divides federal S&E obligations to universities into six categories: R&D; R&D plant; facilities and equipment for S&E instruction; fellowships, traineeships and training grants; general support for S&E; and other S&E activities.

Using NSF data, SSTI has prepared a table showing the state rankings for the percent change from 1999-2003 for total federal academic S&E obligations. Nationally, federal S&E obligations grew by 47.61 percent over the five years. South Dakota saw the largest increase with 112.25 percent, followed by Hawaii (89.24 percent), Kentucky (84.72 percent), Idaho (82.05 percent) and Vermont (80.39 percent).

On the other end of the spectrum, the District of Columbia showed an increase of 10.46 percent - the lowest in the nation - and New Mexico (24.41 percent), Arizona (29.79 percent), Arkansas (29.99 percent) and Colorado (31.06 percent) rounded off the bottom five.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/061906t.htm

Also available is a table presenting federal S&E obligations to universities from 1998-2002: http://www.ssti.org/Digest/Tables/032105t.htm

Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions: Fiscal Year 2003 is available at: http://www.nsf.gov/publications/pub_summ.jsp?ods_key=nsf06309

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Participate in Southern Growth's Manufacturer Information Technology Survey
Southern Growth Policies Board, in partnership with the National Institute of Standards and Technology (NIST), has designed a survey to identify the needs of small and medium-sized manufacturers in the area of information technology. The 20-question survey takes only a few minutes to complete and the results will be used to develop new programs to help small and medium-sized manufacturers. To participate, visit http://www.surveymonkey.com/s.asp?u=358482117916. For more information, contact Charity Pennock at cpennock@southern.org.

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People

Phil Bond will become president and CEO of the Information Technology Association of America in August. Bond formerly was undersecretary for technology in the U.S. Department of Commerce.

Joni Cobb is the first president of KTEC Pipeline, Kansas's new technology entrepreneurship fellowship program.

John Hanson has joined the staff of the University of Connecticut Office of Technology Commercialization to serve as director for the new Tech-Knowledge Portal.

Rob Jaffe, director of federal funding programs with Innovation Philadelphia, is resigning to become a senior underwriter for Institutional Lending at Commerce Bank.

Brian Thompson, formerly a managing director of Wisconsin's TechStar, is now senior advisor for research and strategic initiatives at the University of Wisconsin - Milwaukee Foundation.

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