In the December 18, 2006 Issue:

Copyright State Science & Technology Institute 2006. 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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 Commission Says U.S. K-12 Education Needs Sweeping Changes to Maintain National Competitiveness
The New Commission on the Skills of the American Workforce, a bipartisan group of academic, industry and government leaders, is calling for a massive overhaul of the U.S. education system. In its new report, Tough Choices, Tough Times, the panel of business leaders, scholars, education officials, and former governors and cabinet secretaries argue that the country’s current system of K-12 education is outdated and must be restructured to enable American students to thrive in the global economy.
 
While most students once required only a rudimentary education to participate in the workforce, technological changes and globalization now demand skilled workers who have been trained in high-quality schools. The commission maintains that the current U.S. system is ill-suited to meeting these needs at any level of funding. Instead, it proposes a new structure that would begin educating children earlier and increase the number of students that enter the workforce with the necessary skills.
 
The primary component of the commission’s plan is a restructuring of the transition from high school to college. At the age of 16, students would be required to take a state board exam that would evaluate whether or not they are prepared for university-level academics. The commission predicts that if its recommendations are instituted, 95 percent of students would be able to pass the qualifying exam. Those who pass would be eligible to transition directly into a regional vocation school or community college. Students with higher scores would be eligible for an upper secondary academic program similar to current advance placement or international baccalaureate programs. After two years, both upper secondary and community college students could take a second set of exams to qualify for a four-year university.
 
The report also calls for a change in the governance of local school districts. Current districts would be replaced by independent contractors, mostly limited liability corporations owned and run by teachers. The role of school central offices would be to write performance contracts with the operators of each school and to collect and report data  to inform school funding. The contracted schools would be public and funded directly by the state based on a new formula that would provide additional funding for high-need communities. Schools serving low-income families and other disadvantaged students would receive substantially more state funding.
 
States would be encouraged to create regional competitiveness authorities, involving key local leaders to design educational initiatives tailored to the economic development needs of the community. These authorities would identify the skills needed by local employers and ensure such skills are taught in regional schools.
 
Other recommendations include:

Commission members include former U.S. senator and Reagan Labor secretary William Brock; former Michigan governor and National Association of Manufacturers President John Engler; New York City Public Schools Chancellor Joel Klein; National Urban League President and CEO Mac Morial; and former George W. Bush Education Secretary Roderick Paige.

Tough Choices, Tough Times is available for purchase at http://www.skillscommission.org/.

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Indiana Governor Proposes Higher Ed Initiatives to Stem 'Brain Drain'
State lottery would be leased to private company to finance fund, scholarships
Two initiatives recently proposed by Gov. Mitch Daniels would keep graduating college students in-state and lure world-class researchers to Indiana's public universities. However, a lottery lease plan that would, in part, finance the initiatives may be more the center of attention with Indiana legislators.

The initiatives: (1) a forgivable loan of up to $20,000 for students who attend four-year colleges or universities in Indiana and stay in the state for three years, else repay the loans, and (2) a fund that would create endowments to cover salary and start-up costs to draw the aforementioned researchers and scholars from outside of Indiana.

The financing: Lease the Hoosier Lottery for a fixed term to a contractor that would operate the lottery and continue an annual payment of $200 million to the state. The state would then license and regulate the operator, which would provide an up-front payment to support the education initiatives, and possibly receive an ongoing percentage of the operator's revenue that is above a certain amount.

If the state achieved up-front proceeds of $1 billion, for example, 60 percent or $600 million would be directed to the Hoosier Hope Scholarships. That amount would enable some 1,700 Indiana high school graduates to receive financial assistance each year. The other 40 percent, or $400 million, would be used for the World Class Scholars Fund. Each year, $50 million would be available and leveraged to at least double that amount through required university matching funds and federal grants. Each awarded grant, which universities would place into an permanent endowment, could range from $500,000 to $3 million.

The annual payment amount of $200 million is just above the average of the last four years of lottery returns. It would continue to fund police, fire and teachers pensions; local motor vehicle excise tax replacement; and state and local capital projects, as it does in Indiana's current lottery earnings stream.

Students attending two-year colleges and universities such as Ivy Tech Community College also would be eligible under Gov. Daniels' plan, but for a lesser amount -- $5,000 total, with the opportunity to receive an additional two years of funding at a four-year institution.

"This proposal is vital as we focus on the workforce needs of Indiana," said Gerald Lamkin, president of Ivy Tech, which has 23 campuses throughout the state. "Specifically, this franchise concept will allow us to address the immediate life science and bio science workforce needs in Bloomington and central Indiana, where we need more than 2,000 trained workers in the next five years."

Forty-five percent of all Indiana public postsecondary graduates leave Indiana after graduating, according to the governor's press statement. Indiana also is said to rank 44th among states for its share of population over the age of 25 with a bachelor's degree, behind such states as South Carolina, Georgia, Tennessee and New Mexico.

The goal of the higher education initiatives, as touted by the governor's office, is to transform higher education in Indiana and to enhance the state's key knowledge-based industries, yet Indiana lawmakers are skeptical. A Dec. 14 Associated Press article cites the concerns of those who feel Gov. Daniels' proposal "pushes" privatization and allows the private company running the lottery "to expand gambling to make a bigger profit."

The State Student Assistance Commission of Indiana would administer the Hoosier Hope Scholarships, which would be based on merit. Scores on the SAT or ACT exam, cumulative grade point average (GPA) and class rank would be key award criteria. Once awarded, students would be required to maintain a 3.0 GPA and complete studies in the time specified by their degree program, to continue to receive awards each year.

The number of scholarships awarded annually would be based on the endowment's annual earnings, but a specified number would be reserved for those who enroll in a two-year degree program.

Though the faculty grants could be accessed only by public colleges and universities, Indiana's private colleges could participate through collaborative proposals. The World Class Scholars Fund would be amortized over 10 years, and all grants would require matching contributions from the institutions that receive them.

The state's Public Finance Office soon will issue a request for qualifications to begin to identify interest in the transaction. Gov. Daniels also will seek legislation to franchise the lottery operation and to specify the uses of the two trust funds.

The governor's press release is available at: http://www.in.gov/apps/utils/calendar/presscal?PF=gov2&Clist=1_3_4_6_11_16_61&Elist=87845

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Oregon Sets Sights on Innovation Plan
The Oregon Innovation Council (Oregon InC), which spent a year reviewing how best to expand the state’s economy by leveraging industry-supported initiatives with public investments, may get to see the toils of its labor come to fruition. Gov. Ted Kulongoski released earlier this month his 2007-09 budget, with full support for the innovation plan put out by Oregon InC.

Oregon InC, a private-public statewide advisory council created by the 2005 legislature, had proposed $38.2 million for investment in industry and research initiatives to increase productivity and generate innovative technologies (see the Oct. 2, 2006 issue of the Digest). The governor's budget includes full funding for the council's proposals, including:

Another chunk of the recommended funding, $10 million, would support two new signature research centers. The Oregon Translational Research and Drug Discovery Institute, a partnership of four state universities, would develop and commercialize new drugs to fight infectious diseases. The Bio-Economy and Sustainable Technologies Center would focus on R&D in clean energy, bio-based products and green building materials.

In addition, $5 million is proposed for a Cluster Accelerator Fund, offered in partnership with the Oregon Economic and Community Development Department to strengthen the state's innovation pipeline in selected technology areas.

During its first year, the 42 executives, university provosts, venture capitalists and legislators comprising Oregon InC volunteered more than 1,000 hours to develop the plan. The group sought to create a strategy that would raise wages, result in new high-paying jobs and strengthen research efforts. While not listed with a specific funding recommendation, one of Oregon InC's other objectives - increasing venture, seed and private capital available to entrepreneurs - also receives some attention in the plan. In all, the group reviewed 25 innovation proposals, highlighting those deemed closest to implementation.

Oregon InC's 2007 Innovation Plan is available at http://www.oregoninc.org/plan.htm.

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Hawaii Commission Recommends Greater Accountability for High-Tech Investment Tax Credit Program
A recent report from Hawaii’s Tax Review Commission recommends the state eliminate or drastically overhaul its five-year old tax credit for high-tech investors. According to the report, the current credit provides no clear advantage to the state and appears open to taxpayer abuse. The commission was particularly troubled by the lack of data provided by taxpayers who were approved for the credit and by the lack of transparency concerning the credit within the state’s Department of Taxation.
 
A review undertaken on behalf of the commission was unable to determine the effectiveness of the credit, due to insufficient data on its cost to the state and its impact on state high-tech industries. This lack of transparency led the commission to suggest the Hawaii credit may be a ‘black hole’ for tax revenues, and propose legislative changes that would restructure the credit as a program of grants administered by a state agency.
 
The Tax Review Commission concluded that the state’s high-tech industries would be better served by a program of grants administered by a state agency, which could better oversee the state’s technology efforts. Barring such a change, the report recommends the tax credit:

The commission also recommended the state minimize its use of any tax exemptions or credits for any purpose and include sunset dates for the review of any such tax break to ensure their accountability and effectiveness. Tax credits and exemptions shrink the tax base and can result in higher taxes for private citizens and other businesses. According to the Tax Foundation, Hawaii was the fifth-highest taxed state in 2005 and 2006. The commission warns that although these tax breaks are intended to attract new firms, acquiring a reputation for excessive taxation discourages businesses and hampers economic development.
 
Read the Hawaii Tax Review Commission report at: http://www.hawaii.gov/tax/a9_2trc_doc.htm

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Want Some Advice on Your TBED Efforts?
SSTI's most recent publication, A Resource Guide for Technology-based Economic Development, provides valuable insights into three of the most important elements of transforming regional economies:

While distinct, these three elements comprise the heart of most state TBED strategies and are closely interrelated. Readers of the guide will benefit from the wisdom and experiences of 58 experienced practitioners who have worked on these issues. Each section of the book provides insight into the characteristics and qualities shared among the best TBED policies and practices. Examples of key strategies from across the country are included, as well as special considerations, cautions or tips for each approach.

A Resource Guide for Technology-based Economic Development, produced with support from the U.S. Department of Commerce's Economic Development Administration, is available as a free, downloadable PDF at http://www.ssti.org/Publications/Onlinepubs/resource_guide.pdf or as an inexpensive 90-page bound book (a format still more likely to be perused by most legislators or gubernatorial staff than a pile of printouts). Single print copies are $15 plus shipping and handling. SSTI members receive a 10 percent discount on each order. The guide can be ordered by calling SSTI at 614.901.1690 or ordering it online at SSTI's bookstore: http://www.ssti.org/Bookstore/merchant.mvc

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Filling in the Pieces to Build the High-Tech Economy in Kansas City
The Kansas City region is obtaining funding for high-tech research in the life sciences, but entrepreneurship is stifled because of fragmented efforts to improve the innovation environment and the region’s lack of an overall strategy for its various stakeholders. This finding and others were identified in Completing the Puzzle: Creating a High-Tech and Life Sciences Economy in Kansas City, a recent report prepared for the Brookings Institution Metropolitan Policy Program. The report offers suggestions on how a “second-tier” region like Kansas City can build upon its existing industrial capacity to emerge as a viable location for knowledge-based industries.
 
While labeled as a relatively diverse and stable economy, the report cites the underperformance of the Kansas City region compared to other metropolitan areas using several innovation metrics: a patent registration rate below the national average; lower rankings in the amount of funds received for R&D; a relatively smaller number of advanced degrees awarded in the region; and the inability for local entrepreneurs to obtain SBIR and STTR grants and venture capital. For example, where the total amount of research expenditures doubled at Kansas City life science institutions from $122 million in 2000 to $243 million in 2004, the amount of venture capital investments in the region fell from $55 million to $6.5 million in the same period.
 
The report explores the perceived necessity of metropolitan areas to contain a top-tier research university. In this case, the Kansas City region does not contain a traditional top-tier research university, so other institutions in the region, such as private R&D intuitions like Marion Laboratories, Cerner Corporation and Sprint, have created the effects of a research university over the years, the report contends. These institutions – labeled “surrogate universities” – produce a substitution effect by their ability to attract and retain a skilled labor pool, produce innovative products and develop spin-off companies.
 
The report offers suggestions on how to improve the commercialization and networking functions in the Kansas City region. They include:

The report can be found at the Brookings Institution’s website: http://www.brookings.edu/metro/pubs/20061101_kansasmayer.pdf

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Enrollment of New International Students Up 8% from 2005
In what is often seen as a leading indicator of future total international student enrollment numbers, the percentage of newly enrolled foreign students has increased 8.3 percent between the 2004-05 and 2005-06 school years. This trend and others were highlighted in the annual Open Doors Report published by the Institute of International Education. The attractiveness of the U.S. as a place to attain an education is of great concern to many higher education institutions and public officials because of the contributions international students make to the innovative capacity and economic future of the U.S.
 
Looking back over the past few years, total enrollment of international students in the U.S. was at its highest number during the 2002-03 school year – 586,323 students. Enrollment then declined the following two years by 2.4 percent and 1.3 percent, creating concern over the country’s ability to attract international students to its shores, especially after the response to the terrorist attacks in 2001 and the competitiveness of other higher education institutions outside of the U.S. However, new data in this report shows this decline slowing to a crawl, with only a 0.05 percent decrease from 2004-05 to 2005/06. Furthermore, a recent survey conducted by the institute shows 52 percent of U.S. campuses report increases in new enrollment for fall 2006, with 20 percent reporting declines.
 
In addition to these statistics, the newest version of Open Doors provides information about the fields of study for international students, the level of degrees they are pursuing, their country of origin, their source of funding, and the enrollment change within each state. For example, India has the largest number of students in the U.S., but that number has decreased by 5 percent between 2004-05 and 2005-06.
 
Although the Institute of International Education’s Open Doors 2006 will not be available for shipping until February 2007, an assortment of data used to create the report can be found at:
http://opendoors.iienetwork.org/?p=89189

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Job Corner
University of Arizona Seeks Regional Economist
The University of Arizona's Office of Economic and Policy Analysis seeks a highly qualified and motivated individual to conduct and advance a nationally recognized applied research program in regional economics. Focus areas include regional economic integration, cross border trade and linkages, economic impact analyses, and evaluation of economic development policies. A full description of this opportunity and others is available through the SSTI Job Corner at http://www.ssti.org/posting.htm.

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People

The Hershey Center for Applied Research announced that Laura Butcher will serve as its first executive director, effective Jan. 3.

Gov. Tim Pawlenty shifted Ward Einess from his position as acting director of the Minnesota Department of Employment and Economic Development to commissioner of the state Department of Revenue. No replacement has been named for Einess.

Al Frink resigned as the U.S. Department of Commerce's assistant secretary for manufacturing and services. Frink will serve through January 2007.

Bruce Johnson, formerly Ohio's lieutenant governor and development director, was named president and CEO of the Inter-University Council of Ohio.

Tiffany McVeety stepped down from her post as director of the Northwest Women's Business Center to become a business banker for Shoreline Bank. Rebecca Villareal replaces McVeety.

Mark Rudin, the interim vice president for research and graduate dean at the University of Nevada, Las Vegas, will become the vice president for research at Boise State University, effective Jan. 1.

Peggy Schaffer left Maine's Office of Innovation to become chief of staff of the Maine Senate Majority Office.

Marvin Strong, Jr. announced he will resign as secretary of the Kentucky Cabinet for Economic Development, effective Jan. 31.

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Digest, Funding Supplement Publication Schedule
Due to the Christmas and New Year's Day holidays, the next issue of the SSTI Weekly Digest will be published during the week of Jan. 8, 2007. Publication of the Funding Supplement also will resume in January, following this week's issue (Dec. 18, due out by Thursday).

Just a reminder, the Supplement is reserved for SSTI sponsors, affiliates and supporters. If you are not in one of these SSTI member groupings, but would like to be, sign up your organization today to begin your subscription to the Supplement. More information, including benefits and a link to a secure registration form, is available at http://www.ssti.org/benefits.htm.

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