In the October 31, 2007 Issue:

Copyright State Science & Technology Institute 2007. 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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Election Preview: States Consider TBED-Related Ballot Measures
Voters in four states will consider several TBED-related measures at the polls next week, including a $3 billion cancer research proposal, state funding for stem cell research, and an R&D bond proposal to spark job creation in emerging technology sectors.
 
Texas
Texas voters will consider 16 separate ballot items this year, including Proposition 15, a bond proposal to authorize the state to issue $300 million a year in bonds over 10 years for grants to fund scientific research at the newly created Cancer Prevention and Research Institute. Gov. Rick Perry signed HB 14 earlier this year, establishing the institute and dedicating funding of up to $3 billion, pending a voter approved constitutional amendment (see the June 27, 2007 issue of the Digest).
 
Opponents of the proposition argue the proposal is an unfair burden on taxpayers, citing $1.6 billion in interest that could accrue over the 10-year period, according to an article in the Austin American-Statesman.
 
Also appearing on the 2007 ballot is Proposition 2, a measure to allow the Texas Higher Education Coordinating Board to issue $500 million in general obligation bonds to finance low-interest student loans. Since 1965, voters have reauthorized the bonding authority for this program six times, and, without reauthorization, all current bond funds will be exhausted in spring 2009, according to the University of Texas-Pan American.
 
New Jersey
Voters will consider a proposal to provide grants for stem cell research. The New Jersey Stem Cell Research Bond Act authorizes the state to issue bonds totaling $450 million over 10 years to fund stem cell research projects at institutions of higher education and other nonprofit and for-profit entities in the state. Grants would be awarded to researchers by the Commission on Science and Technology.
 
The bond referendum is part of the state’s ongoing effort to position New Jersey as a national leader in stem cell research. Lawmakers approved $270 million last year for construction of five biotechnology research facilities across the state (see the Jan. 8, 2007 issue of the Digest). A groundbreaking ceremony for the first facility to be approved for funding, the Stem Cell Institute of New Jersey, took place last week. In 2005, former Gov. Richard Codey proposed a $380 million stem cell initiative that included $150 million for a world-class stem cell research facility and a $230 million ballot initiative to provide stem cell research grants. However, lawmakers did not vote on the measure in order to move it to the ballot.
 
Maine
A $55 million R&D bond proposal in Maine is aimed at stimulating economic development and job creation for targeted technology sectors through loans and grants administered by the Maine Technology Institute. The bulk of the money - $50 million - will be distributed as grants that must be matched dollar-for-dollar with federal grants or private funding.
 
The R&D bond proposal is a component of the $295 million three-part package that also includes funding for infrastructure improvements within the University of Maine System (see the April 9, 2007 issue of the Digest).  
 
Washington
A ballot measure in Washington would make increasing taxes more difficult. If passed, Initiative 960 will require two-thirds legislative approval or voter approval for tax increases, legislative approval of fee increases, certain published information on tax-increasing bills, and advisory votes on taxes enacted without voter approval.

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Better Late than Never: Wisconsin Budget Supports Energy, TBED and University R&D
Nearly four months into the current fiscal year, Wisconsin Gov. Jim Doyle signed into law the biennial 2007-09 budget last week, investing in renewable energy, university R&D and expanding tax credits to attract angel and venture capital investment.
 
The enacted budget includes $15 million in fiscal year 2008-09 for a renewable energy grant and loan program -- about half of the governor’s recommendation (see the Feb. 19, 2007 issue of the Digest). The program authorizes the Department of Commerce to award a grant or loan to a business or researcher to fund R&D, including demonstration projects into renewable energy technologies, development of renewable energy sources and infrastructure, the commercial application of renewable energy technology sources, and construction of one or more cellulosic ethanol production plants.
 
The Commerce budget also includes $775,000 in FY 2007-08 to increase funding for the Wisconsin Development Fund (WDF), bringing the total funding to $23.1 million for the biennium. It also includes an amendment to the technology commercialization grant and loan program that increases the maximum level of funding for the entrepreneurial and technology transfer center grants to $600,000 -- up from $500,000. 
 
The enacted budget restructures the WDF, the state’s major job creation tool, eliminating current grant and loan programs and establishing more general program criteria and procedures for distributing financial assistance. Under the restructured program, Commerce is authorized to make grants or loans to eligible recipients and the WDF board is expanded to include two legislative members. Commerce also is required to establish criteria for awarding the grants and loans, including the types of projects eligible for funding.
 
Gov. Doyle’s proposal to expand the angel and seed investment tax credits was ultimately approved in the enacted budget after being removed from the Senate version in July. The Assembly added the measure back into the budget, which expands by $5 million tax credits for angel investors and early- and seed-stage venture investors. Under the current law, Act 255, taxpayers can claim a total of $3 million per calendar year for angel investment credits and $3.5 million for early-stage seed investment credits. The new law increases the total tax credits to $5.5 million and $6 million, respectively.
 
Lawmakers approved funding for several initiatives within the University of Wisconsin System’s Growth Agenda, a plan to boost the state’s economic growth, increase college graduates, and grow knowledge-based jobs. The budget includes $8.4 million for UW-Milwaukee initiatives aimed at moving forward plans for a $149 million, 55-acre engineering campus and research park. Funding is allocated to expand an existing research initiative to compete for additional extramural research funds, hire 20 leading faculty in targeted clusters such as biomedical and health technologies, advanced manufacturing and other science and engineering areas, and enhance the level of graduate and undergraduate education and research. The appropriation is slightly less than the $10 million requested by the university.
 
The enacted budget also includes $2.1 million for a partnership between UW-Eau Clarie, UW-Stout and the Chippewa Valley Technical College championed by Gov. Doyle in his State-of-the-State Address earlier this year. The goal of the partnership is to educate more students in advanced science, technology, engineering and mathematics disciplines, including nanotechnology, biotechnology, polymer engineering and computer and electrical engineering. Funding also will be used to improve access to science and engineering facilities and to enhance the training of graduates in these fields to attract and retain high-end employers.
 
One-time funding of $2.5 million in FY08-09 is included for the comprehensive cancer center located in the UW School of Medicine and Public Health for lung cancer research. The funding must be matched by federal grants or private funding. The budget also includes $200,000 to establish a School of Public Health at UW-Milwaukee, pending approval from the Board of Regents.
 
The FY07-09 budget is available at: http://www.legis.state.wi.us/2007/data/acts/07Act20.pdf

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New Income Tax Credit Designed to Fund Oregon Public Universities
Earlier this month, Oregon’s University Venture Development Fund began operations, which will allow the state’s taxpayers to receive a 60 percent income tax credit on contributions that will be applied toward commercialization and entrepreneurial programs at Oregon’s eight public universities. Authorized by the state legislature, the fund will enable $14 million to be provided to the universities in aggregate, with each institution’s allocation formulated by its annual income from research grants and contracts.
 
The program allows individuals or corporate donors to make unrestricted gifts of cash or publicly traded stock to one or more of the selected universities. Upon university receipt of the contribution, the donor will receive a tax credit for Oregon income tax equal to 60 percent of the original donation. The credit that can be claimed by the donor in a year is 20 percent of the original contribution or $50,000 – whichever is less and does not exceed the donor’s tax liability. Any remaining income tax credits will rollover to subsequent years.
 
The full University Venture Development Fund program comes after the passage of Senate Bill 853 in 2005 and SB 582 in 2007. As specified in the legislation, each university may designate the funds for a variety of uses, including capital for entrepreneurial programs, proof-of-concept funding for turning R&D into commercially viable products, and opportunities for students to gain experience in applying research to commercial activities.
 
As currently constructed under this program, Oregon State University will be eligible to receive $5.35 million, Oregon Health and Science University $4 million, the University of Oregon $3.2 million, and Portland State University $880,000. The Oregon Institute of Technology, Eastern Oregon University, Southern Oregon University, and Western Oregon University may share $500,000. The program is designed such that the universities will repay the state for claimed tax credits from royalty incomes and licensing fees. Once repaid, the state will reissue additional tax credits.
 
Additional information about Oregon’s University Venture Development Fund is available at:
http://www.ous.edu/about/campcent/uvdf.php

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NSB Releases Action Plan on STEM Education
Many Digest stories in recent years have described the actions of states and regions to build a stronger educational foundation in the science, technology, engineering, and mathematics (STEM) fields. The National Science Board (NSB), the policy-making body of the National Science Foundation, released its recommendations to improve the ability of all American students to receive the necessary skills and knowledge to successfully participate in the workforce of the future. In A National Plan for Addressing the Critical Needs of the U.S. Science, Technology, Engineering, and Mathematics Education System, NSB describes two central challenges of equal importance that form the core of their actionable steps: (1) Ensure a coherent STEM education system throughout the entire country, and (2) ensure that U.S. students are educated by well qualified and highly effective teachers.
 
The report offers some perspectives on America’s lagging rankings in STEM critical thinking skills compared to other industrialized nations and includes information from the National Center for Education Statistics, which reports 30 percent of first-year college students take remedial math and science courses because of their lack of readiness for college-level courses. Actionable steps are organized into four categories: coordinating and enhancing local, state and federal programs; providing horizontal coordination of STEM education among states; providing vertical coordination of STEM education across grade levels from pre-K to the first years of higher education; and, increasing the number and quality of STEM teachers.

The first recommendation listed in the report - and the one that seems to be generating the most discussion among policymakers - endorses the creation of a new National Council for STEM Education. Designed to be created by congressional legislation and approved by the president, the council would be responsible for coordinating and facilitating STEM education initiatives across the U.S., and informing policymakers and the public on the condition of the country’s STEM education system. Comprised of approximately 25 members, the council’s voting membership would come from local and state governmental agencies and nongovernmental organizations, and non-voting members would include representatives of Congress and the president. Recommendations of who should comprise the council, from governors to community college representatives to practicing STEM classroom teachers, are defined in the report. Arguments against the creation of the Council have included the concern of a top-down approach to organizing federal STEM initiatives.
 
Besides the creation of the National STEM Council, recommendations include:

The report also argues that compensation for STEM teachers should be increased, and the proposed National Council should create strategies to remove the barriers preventing local education agencies from increasing compensation. Besides directly increasing salary levels, other incentives include federal tax credits for STEM teachers, payment for improved student performance, payment for obtaining STEM certifications, and increased compensation by participating in summer professional development programs and research experiences. Developing national STEM teacher certification standards also is listed as an actionable item to improve the quality of teachers.
 
Further elaboration on many of these recommendations, including the additional action steps to improve the horizontal and vertical coordination of STEM education programs, are contained in the report, which can be accessed at: http://www.nsf.gov/nsb/edu_com/report.jsp

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Recent Research
New Report Offers Advice for Emerging Tech Transfer Universities
While discussions of successful university technology transfer programs tend to revolve around a select set of high-achieving institutions, a number of less-recognized institutions are now being proposed as national models for their approaches to entrepreneurial support and regional outreach. A recent report from Innovation Associates highlights 10 colleges, universities and community colleges that are emerging as significant contributors to their regional economy through tech transfer activities. The list includes institutions that are maximizing the impact of their research investment and entrepreneurial programs despite their small size, geographic isolation, or limited R&D budget. Montana State University, Springfield Technical Community College and the University of Central Florida are listed among these emerging tech transfer centers.

Drawing from the 10 case studies, the authors have assembled a set of recommendations for institutions that aspire to have a greater regional impact through tech transfer. The report advises university administrators to create greater connections between their institutions' entrepreneurial services and programs and their tech transfer offices. This will help improve communication, strategy and awareness of the resources available to entrepreneurs. Linking these functions also will help institutions develop stronger partnerships with the private sector, sources of capital and state and local government. University leaders also should appraise their institution's research strengths and build on them to create research centers that can compete on a national and global scale.

The University of Akron is one of the institutions singled out by the report for the expansion of its research programs over the last decade and for building on the core strength of the university and region in polymer science. Between 1996 and 2004, the university nearly doubled its research investment and engaged in a number of industry partnerships that helped the school become one of the nation's leading centers for polymer research. Almost 35 percent of total research expenditures were dedicated to the polymer science program, which ended up attracting a number of private research sponsors. Industry-sponsored partnerships represent about 12.6 percent of total research expenditures at the University of Akron, while the national average is only 4.9 percent. The university also has secured state grants from the Ohio Third Frontier project to further develop its specialization in physical sciences.

The report identifies several outstanding issues at the national, state and institutional level that should be addressed to improve the effectiveness of U.S. tech transfer:

Special mention is made of how the National Science Foundation's Partnerships for Innovation (NSF PFI) program could be expanded and replicated to increase federal support for university tech transfer. Since 2000, PFI grants have been awarded to university projects that encourage meaningful collaboration between institutions of higher education, state and local governments, the private sector and other organizations. The program is an example of what the federal government could do to promote innovative small businesses connected to universities and regional economies, according to the report, but PFI remains small in comparison to the rest of federal investment in R&D. By expanding PRI and similar programs at other agencies, the federal government could significantly enhance the economic impact of its research investment.

Read the full report at: Innovation Associates

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Equity Investment and Fundraising Reach Post-Tech Boom High, though Gaps Persist
The U.S. venture and angel markets appear to have fully recovered from their slump earlier this decade. Pricewaterhouse Coopers' Moneytree Survey reports that as of the third quarter, 2007 is on track to become the most active year for venture investment since 2001. Three years after hitting a tech bust low of just under $20 billion in 2003, venture firms investment surpassed $26 billion last year. Venture fundraising has been even stronger, as funds recovered from a low of less than $5 billion in 2001 to more than $30 billion in 2006. Meanwhile, U.S. angel investment has posted some impressive gains, jumping from an estimated $15.7 billion in 2002 to $25.6 billion last year, according to the University of New Hampshire's Venture Research Center. Angel investment, which had been a distinctly secondary market in past years, has become as active a market as venture investment.

With so much capital available for new and expanding businesses eager to pursue equity capital, why do many state and local leaders still report that capital gaps remain a serious impediment to economic growth? Despite the rapid expansion of investment overall, this new capital has not been evenly distributed. For instance, much of the recent growth in investment has gone to later-stage companies rather than seed- and early-stage firms. Venture investment at the earlier stages remains low, at less than 10 percent of total deals. This share is almost half what it was during the height of the tech boom dedicated to seed- and early-stage companies in the late 1990s.
 
Angel investors, while still the primary source for early capital, also increasingly are turning to later-stage deals to reduce the risk involved in investment. Between 2004 and 2006, the percentage of angel deals dedicated to early-stage companies fell from almost 60 percent to 46 percent. As discussed in the October 10, 2007 issue of the Digest, post-start-up stage deals now represent the majority of angel deals. For entrepreneurs attempting to find equity capital that will help them to survive the early "valley of death" period of firm development, the emphasis on later-stage investment poses a difficult obstacle.

Also, some industries have experienced more growth than others. Software and biotechnology remain the leading sectors for venture investment, though the overall percentage of venture investment flowing into these industries has declined as investment becomes more diverse, at least among the top tier of industry sectors. Together, software and biotechnology still represent about half of all venture investment, but several other sectors have been growing quickly over the past few years.
 
Medical device companies have been on an upward trend for investment since 2003, while the past two years have brought quarter-after-quarter of record investment levels for the Industrial/Energy sector. The Industrial/Energy sector includes clean and renewable energy and environmental technology companies. Though the Media sector has struggled in the past few years, 2006 saw it rebound to 2001 levels. Service-oriented sectors, such as IT and Health Care Services, have experienced a gradual decline in their share of investment.

Finally, regional disparities in capital availability persist even during this period of growth, and have even grown somewhat in intensity. Since 2001, California and Silicon Valley have steadily increased their lead in U.S. venture investment. Last year, Silicon Valley firms received about 36 percent of the country's venture capital, and while the region may have receive more total dollars during the tech boom, its share of national investment has never been higher. The same is true for the entire state of California, where most of this recent growth has come from regions outside of Silicon Valley. Between 2003 and 2006, few other states significantly increased their share of national venture investment; the exceptions include New York and Washington, both with 1.6 percent growth.

These persistent gaps may leave early-stage/Midwest/consumer service companies frustrated with the frequent reports that the venture capital industry has been saturated with cash. For state capital access programs, these trends beg the questions of how to properly target their investments so that they provide assistance to underserved companies and do not simply contribute to the growing tide of investment.
 
An overview of these trends is available in PowerPoint format as presented at this year's SSTI Annual Conference. Download the presentation at: http://www.ssti.org/capitaltrends07.ppt

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Southern Growth Launches Two New Online Tools
Southern Growth Policies Board recently announced the launch of two new, searchable web-based tools and the redesign of its website.

The Southern.org website has been redesigned to provide users with improved navigational tools and greater access to Southern Growth's research, toolkits, best practices and publications. Southern Growth also added a scrolling regional calendar and two new, searchable online tools -- the Southern Compass News Portal and the Southern Growth Idea Bank.

The Southern Compass News Portal at www.southerncompassnews.org includes a searchable archive of Southern Growth's weekly e-mail newsletter, Southern Compass, with additional tools. The portal offers users the opportunity to research articles, publications, press releases, announcements and trends in four broad areas - community & quality of life, globalization, technology & innovation, and workforce development - chronologically for up to a year's worth of Southern Compass issues. Users can search more than 900 articles by keywords, broad categories, chronologically or in combination. The Southern Compass News portal also offers links to a comprehensive list of research tools in economic and community development and links to regional newspapers and recent Southern Growth press announcements. Users can sign up for the Southern Compass via the portal or check the site each week to view the latest edition. 

The Southern Growth Idea Bank at www.southernideabank.org is an online compendium of smart ideas, best practices and innovative programs from across the Southern region. The Southern Growth Idea Bank allows users to search for programs by state, by a specific category or by keywords. The Idea Bank includes more than 175 programs covering a broad range of topics, from leadership to foreign relations to emerging industries to career preparation in K-12 and lifelong learning. The program profiles within the Idea Bank cover ideas from academic institutions, businesses, nonprofits, public-private partnerships and governments at the national, regional, state and community levels. 

For more information and updates about Southern Growth's advisory councils, regional projects, publications and tools, visit http://www.southern.org/.

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SSTI Job Corner
Complete descriptions of these opportunities and others are available at http://www.ssti.org/posting.htm.

The Missouri Small Business Technology Development Center, which focuses on strengthening the technological competitiveness of Missouri's businesses, is seeking someone for the position of technology commercialization specialist/counselor. This person will serve as a statewide specialist to provide leadership, expertise and training to university faculty and staff and private sector clients, as well as guidance for commercialization of products and development of companies. A master's degree in engineering, business, science or a related area with appropriate coursework, along with five or more years of relevant experience, is required.

South Dakota State University (SDSU), the state's land-grant institution with more than 11,000 students, invites applications and nominations for the position of technology transfer coordinator in SDSU's Office of Research and Sponsored Programs. The technology transfer coordinator is responsible for overseeing university activities of faculty, staff and students for technology commercialization. He or she will review policies and procedures insuring all agreements adhere to university, South Dakota Board of Regents, and federal policies and perform other responsibilities. An MS or MA degree in a relevant field of study, plus five five years of experience in research management, intellectual property management, technology transfer, or a related area, is required.

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