In the November 7, 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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2007 Election Results: New Governors Promote TBED Strategies; Ballot Items Reveal Mixed Results
The 2007 state elections resulted in two newly elected governors, both promoting TBED strategies as a means to grow the states’ economies. In both cases, the new governorships reflect a change in party affiliation. A third gubernatorial race resulted in the re-election of Gov. Haley Barbour to a second term in Mississippi.
 
Kentucky
Democratic candidate Steve Beshear defeated Republican incumbent Ernie Fletcher by a 59-41 percent margin. The former lieutenant governor, attorney general and state representative unveiled an economic development platform during his campaign that consists of three major components -- the Kentucky Jobs First Plan, Fueling Kentucky First and Putting Opportunity First.
 
Under the Kentucky Jobs First Plan, the state will focus on high-wage job growth through business attraction and retention. The plan will redirect some of the funds now spent on recruiting out-of-state businesses to helping existing businesses grow and expand. Other components of the plan include creating an R&D tax credit to cover a portion of Kentucky businesses’ research expenses and increasing the current venture capital tax credit from 40 percent to 50 percent of the investment.
 
Fueling Kentucky First, an energy independence plan, promotes the state's energy sector through investments in R&D and deployment of clean coal, alternative fuel and clean technology businesses in Kentucky. Gov.-elect Beshear proposes the creation of a $60 million Kentucky Energy Fund to help jumpstart these industries and $15 million in incentives, grants and research funding each year. The plan also calls for establishing a Secretary of Energy Independence position and creating a public-private partnership to focus on production of corn ethanol, bio-diesel and cellulosic ethanol.
 
The Putting Opportunity First Plan will establish more early-college high schools, fully fund colleges and universities, and increase advanced training opportunities. More information is available at www.stevebeshear.com/.
 
Louisiana
Republican Congressman Bobby Jindal was elected Louisiana’s 61st governor on Oct. 20, succeeding outgoing Democratic Gov. Kathleen Blanco, who did not run for a second term. The Governor-elect released an action plan for economic reform that includes investing in higher education, supporting university R&D and developing a quality workforce. Specifically, the plan proposes: More information is available at: http://www.bobbyjindal.com/docs/issues/Economic-Reform.html
 
Results of the 2007 Ballot Issues
The voters have spoken. Tuesday’s election results have been tallied, and the outcomes of ballot items in four states signify mixed results for TBED-related measures across the nation. While voters in Texas approved a $3 billion commitment to cancer research, New Jersey voters rejected a $450 million proposal to fund stem cell research. More detailed information on the ballot measures is provided in last week’s issue of the Digest, which is available at: http://www.ssti.org/Digest/latesttext.htm#Election
Maine
Voters approved 51 percent to 49 percent a $55 million bond proposal aimed at stimulating economic development and job creation for targeted technology sectors, according to unofficial results reported by the Bangor Daily News.
New Jersey
The New Jersey Stem Cell Bond Act was rejected by voters by a 53-47 percent margin. The measure would have authorized the state to issue bonds totaling $450 million over 10 years for stem cell research grants.
Texas
Garnering more than 60 percent of the votes, Proposition 15 was approved, authorizing the state to issue $3 billion over 10 years for grants to fund cancer research. Proposition 2 also was approved by 66 percent to 34 percent, allowing the Texas Higher Education Board to issue $500 million in general obligation bonds to finance student loans. 

Washington
Initiative 960, a measure that requires legislative approval or voter approval for tax increases, was approved by voters 52 percent to 47 percent.

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Michigan Lawmakers Approve Budget: 21st Century Jobs Fund Spared, Three Universities Receive Special Status
For the better part of the year, lawmakers in Michigan have faced the daunting task of balancing both a budget shortfall for fiscal year 2007 and a nearly $1.6 billion deficit for FY 2008. An agreement between Gov. Jennifer Granholm and lawmakers was reached in the early morning hours of Oct. 31, following a one-month extension of the deadline and a brief government shutdown.
 
The agreement allocates $75 million in remaining tobacco settlement revenue to continue 21st Century Jobs Fund programs, which invest in four competitive-edge technologies to grow and diversify the state’s high-tech economy. The Michigan Small Business and Technology Centers will receive $1.4 million from the funds appropriated to be used for the SBIR and STTR matching grants program. Earlier this year, lawmakers considered a proposal to cut a significant amount of funding from the 21st Century Jobs Fund to deal with the state's impeding deficit.
 
To help businesses obtain certification in aerospace manufacturing, the budget allots $500,000 for Aerospace Certification Grants. Half of the funds are dedicated to the Michigan Aerospace Manufacturers Association for organizational assistance and to promote the aerospace manufacturing community.
 
To preserve programs to provide the opportunity for future funding, the budget allots placeholders for initiatives aimed at building entrepreneurial capacity and supporting bioscience research. The agreement adds a $100 placeholder to fund a business incubator program that provides grants and loans to competitive-edge technology businesses located in economically depressed areas. If funds become available at a later date, the program will receive a $4 million boost. Additionally, the budget includes a $100 placeholder for a bioscience research center at Michigan State University.
 
Lawmakers did not include $40 million in state funds for Gov. Granholm’s new No Worker Left Behind initiative. The program, which helps displaced workers receive training in high demand areas, was initially funded by redirecting $37 million in 2007 federal grants. The FY08 budget includes a provision that requires a report on the program’s results to the legislature by July 1, 2008. Gov. Granholm unveiled the workforce initiative during her State-of-the-State Address earlier this year (see the Feb. 19, 2007 issue of the Digest).
 
No funding was included for the Entrepreneurial Training and Mentoring program to assist students enrolled in secondary and postsecondary education programs. Lawmakers also did not include funding for the governor’s Alternative Energy Initiative, a $7 million competitive grant program for gas stations to add ethanol pumps. However, two $100 placeholders are included for projects involving ethanol plants in two localities.
 
Three of Michigan’s universities receive special status under HB 4350, creating a new research university definition under the 2005 Carnegie Classifications. The University of Michigan, Michigan State University and Wayne State University will be classified as major research institutions, allowing them to receive more money in the future as the state develops collaborative partnerships. 
 
While the budget includes an average increase of approximately 1 percent in per-pupil funding for K-12 schools, it also cuts $20 million from middle school math and science programs.
 
In May, Gov. Granholm and lawmakers reached an agreement to balance the $800 million shortfall within the FY07 budget. The plan included siphoning up to $400 million from the state’s tobacco settlement funds, cutting $26 million from universities and delaying $83 million in payments to colleges and universities.

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Brookings Launches Blueprint for Prosperity – One Year before ‘08 Presidential Election
On Tuesday, exactly one year before the U.S. goes to the polls to choose its next president, the Brookings Institution launched a national competitiveness initiative titled Blueprint for American Prosperity: Unleashing the Potential of a Metropolitan Nation. The central premise of the Blueprint is that the “health, vitality, and prosperity” of the major cities and metropolitan areas in the U.S. will be the drivers of the country’s ability to compete globally and meet future economic, social, and environmental challenges. During the next 12 months, Brookings will release a series of reports geared towards the next presidential administration and Congress to address various competitive and economic issues.
 
At the official rollout, vice president and director of Brookings’ Metropolitan Policy Program Bruce Katz made the case as to why the nation’s metro areas are critically important to the nation’s well-being. During his presentation, Katz noted that although the top 100 metropolitan areas (gauged by number of people employed) comprise 12 percent of the country’s land mass and 65 percent of the U.S. population, these top metro areas also are responsible for:

And while the metropolitan areas in the country are such an engine of economic growth, educational attainment, and cultural creativity, Katz contended that the U.S. federal government is out of step with the rapid changes affecting the new spatial geography of the changing economy. The leadership in other countries – such as China, Germany and Spain – is utilizing their federal governments to make critical investments, strengthen connectivity and infrastructure, and promote emerging technologies, compared to a U.S. federal government often seen as “strangely adrift,” Katz argued.
 
To improve the partnership between the nation’s metropolitan areas and government, it is argued the U.S. federal government needs to lead where it can and must – in areas of national visioning and policies that, being aligned with the necessary scalable investments, can produce a tremendous impact. Priority issues for reform that will be addressed by the Blueprint in subsequent reports include boosting innovation and productivity, enacting urban school reform, attaining higher levels of educational attainment, improving transportation linkages between and within metro areas, increasing the supply of workforce housing, and improving the energy efficiency of the nation’s housing.
 
The website for Blueprint for American Prosperity, which includes videos of Tuesday’s release and the report Metro Nation: How U.S. Metropolitan Areas Fuel American Prosperity, can be accessed at: http://www.brookings.edu/projects/blueprint.aspx

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Useful Stats
2005 Federal R&D Obligations to Universities and Colleges by State
The federal government made obligations of $25 billion in R&D to colleges and universities in fiscal year 2005 ­- a 4.8 percent increase from the FY 2004 total of $23.8 billion, according to new National Science Foundation (NSF) data. In its report, Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions: Fiscal Year 2005, NSF details all categories of direct federal science and engineering support to institutions of higher education in the U.S.
 
Delving deeper into the data, SSTI has prepared a table showing the state rankings for total federal academic R&D obligations and percent change over the five-year period from 2001-2005. During this time, federal R&D obligations grew by 29 percent but some states experienced much larger changes. North Dakota showed the largest increase in federal R&D obligations at 106.7 percent, followed by Nevada (91.6 percent), Idaho (81.4 percent), Hawaii (68.6 percent) and Louisiana (61.4 percent).

For fiscal year 2005, California led the nation with $3.56 billion in federal R&D obligations. This is followed by New York, which broke the $2 billion mark in 2005 for the first time. Pennsylvania, Maryland, Texas and Massachusetts all received more than $1 billion, and North Carolina reached $1 billion for the first time.

“Obligations are the amounts for orders placed, contracts awarded, services received, and similar transactions during a given period, regardless of when the funds were appropriated and when future payment of money is required,” according to the report. “Obligations differ from expenditures in that funds allocated by federal agencies during one fiscal year may be spent by the recipient institution either partially or entirely during one or more subsequent years.”

SSTI's table is available at: http://www.ssti.org/Digest/Tables/110707t.htm
 
Federal Science and Engineering Support to Universities, Colleges, and Nonprofit Institutions: Fiscal Year 2005 is available at: http://www.nsf.gov/statistics/nsf07333/

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Arizona Governor Unveils New Economic Development Structure
In an effort to streamline economic development strategies and market the state as a globally competitive place to pursue new business ventures, Arizona Gov. Janet Napolitano recently announced the creation of a new model for economic development last month.
 
A year-long study on the overall economic health of the state resulted in the creation of the Arizona Economic Resource Organization (AERO) and a newly expanded Arizona Global Network (AGN). AERO will serve as an umbrella organization for all economic development activity in the state to coordinate and leverage assets, set workforce strategies, and provide policy leadership and branding. 
 
The partnership will operate as a nonprofit board, combining the efforts of government agencies, private businesses and universities. Gov. Napolitano will serve as AERO chair, which includes the integration of the following entities: Commerce and Economic Development Commission, Greater Arizona Development Authority, the Arizona Department of Commerce, Science Foundation Arizona, and a formalized Arizona Global Network. Directors and board members were announced last week.
 
The newly expanded AGN is charged with recruiting new companies to the state and promoting the state globally. In a video released in conjunction with her announcement, Gov. Napolitano said Arizona needs to diversify its economic base and raise per capita income. Over the past decade, the state has been overdependent on the residential housing market, which is facing a downfall, Napolitano said.

A recent analysis of key indicators in metropolitan Phoenix conducted by Arizona State University and The Arizona Republic echoes Gov. Napolitano's sentiment. The analysis, called Arizona Indicators, found that Phoenix is losing ground to peer cities in the global economy and experiencing a deteriorating quality of life. Similar cities have reinvented their economies around research and technology, and in order to compete, Phoenix needs to attract more engineers and scientists, retain an educated workforce, and create a sense of urgency among policymakers and business leaders, the analysis states.
 
More information about AERO is available from the governor’s office at www.governor.state.az.us/. For additional information regarding Arizona Indicators, please visit www.asu.edu/indicators/about.htm.

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Recent Research
Can Incentives Really Create Manufacturing Jobs?
States frequently employ incentives like tax exemptions and loan guarantees to lure manufacturing plants from other states. This phenomenon - commonly known as smokestack chasing - is a mainstay of conventional economic development, but new evidence suggests that these programs do not effectively leverage the public funding to create new jobs.
 
A recent article by Yoonsoo Lee of the Federal Reserve Bank of Cleveland suggests that public incentives to attract and retain industrial plants have only a marginal impact on the decisions made by manufacturing firms to relocate or shut down particular plants. Additionally, plant relocation itself has a small role to play in overall shifts in national manufacturing employment. Lee tracks the creation, closing and relocation of U.S. manufacturing firms between 1972 and 1992 and finds that most new manufacturing jobs result from non-relocated (de novo) new plant openings and the expansion of jobs at existing plants. Plant relocation plays a fairly minor role. Also, overall patterns in the geographic redistribution of U.S. manufacturing jobs seem to favor states with an already growing manufacturing base.
 
Though favorable incentives have been used to attract out-of-state plants, interstate relocation plays a relatively minor role in the redistribution of manufacturing jobs, according to Lee. Plant relocation to other states accounts for about 10 percent of all plant turnover, but its impact on employment is lower. Across the country, about 93 percent of net manufacturing employment changes are attributable to new plant openings, growth of existing plants, permanent plant closings and relocation within the state. Only about 7 percent of these changes are due to relocation from one state to another.

Lee also finds that states with momentum in growing their manufacturing sectors benefit disproportionately from the geographic redistribution of manufacturing. States with growing manufacturing employment tend to experience greater gains from plant turnover. When a plant opens in a state in which manufacturing employment is growing, it will create four more jobs than it would in a state with declining employment. Though plant relocation plays a smaller role in overall employment changes than de novo plant openings, the disparity between growing and declining states is even greater. A plant that relocates to a state that is experiencing a decline in manufacturing employment will add an average of 16 jobs to the economy. In a growing state, an average relocated plant will add 23 jobs.

Since reallocation between plants plays a much greater role in job growth and losses than the relocation of firms between states, Lee argues that smokestack chasing has a marginal role to play in the creation of manufacturing jobs. He also argues that the incentives themselves do little to attract or create new jobs.

The paper identifies nine types of incentives used by states to lure manufacturers, including corporate and personal income tax exemptions, R&D tax exemptions, state bond financing, and loans and loan guarantees. Lee collected data on which states offer each variety of incentive to evaluate their effectiveness as a tool for economic development. By comparing this data to the figures on plant closings and relocations, he finds that these incentives have only a marginal effect on corporate decision-making. Personal income tax exemptions are particularly ineffective and tended to slightly increase the likelihood of closings and relocations, Lee notes. None of the nine incentives appeared to increase the rate of plant openings, closings or relocations.

Lee concludes that smokestack chasing and manufacturing incentives appear to be an ineffective use of public funds. By focusing on luring manufacturers from other states, the programs already limit their effectiveness by concentrating on a minor segment of shifting manufacturing jobs. Also, these incentives appear to have little influence on plant relocations or de novo plant openings.

Download "Geographic Redistribution of the U.S. Manufacturing and the Role of State Development Policy" at: http://www.ces.census.gov/index.php/ces/cespapers?down_key=101779

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SSTI Job Corner
A complete description of this opportunity and others is available at http://www.ssti.org/posting.htm.

The Maine Technology Institute (MTI) is seeking someone to serve as manager of cluster and commercialization support programs. This position is primarily responsible for managing MTI's programs supporting the development of vibrant technology-intensive clusters and its activities supporting awardee commercialization and capital access.

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People

Sally Bilancia was selected to replace Sally Bates as the development director in the City of Bangor, Maine.

Jeff Coney was named Northwestern University's first director of economic development.

Dr. Paul Kedrosky has joined the Ewing Marion Kauffman Foundation as a senior fellow.

Peter Longo was appointed president and executive director of Connecticut Innovations. Longo previously served as the organization's deputy director and acting executive director.

Hamid Ghandehari and Marc Porter, two prominent scientists in the field of nanotechnology, recently were hired by the University of Utah as part of the state's new Utah Science Technology and Research initiative. Ghandehari comes from the University of Maryland, while Porter comes from Arizona State University.

Carlos Romero, a University of New Mexico employee who previously oversaw the university's governmental affairs office, is now its associate vice president for research administration.

Frank Sabatine has been appointed to the newly created position of associate vice president of economic development and community engagement at Ball State University.

John Wilkinson was promoted to minister of research and innovation in the Ontario cabinet.

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Correction
In last week's issue of the Digest, "New Report Offers Advice for Emerging Tech Transfer Universities" contained hyperlinks that were either wrong or not entirely helpful in accessing the report, which was the focus of the story. Subscribers may use www.InnovationAssoc.com or www.InnovationAssociates.us to access the report's executive summary free of charge, to purchase the report, or simply to learn more about Innovation Associates -- the company responsible for the report.

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