In the December 19, 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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 Despite Budget Woes, Virginia Governor Proposes Major Investments in University R&D
Facing a projected budget deficit of more than $600 million, Gov. Tim Kaine told lawmakers the state must invest more money in research and commercialization efforts to accelerate Virginia’s progress in key areas.
 
Anticipating the state’s investments in R&D will pay off in the future, Gov. Kaine unveiled a $1.65 billion bond package for higher education needs that includes support for researchers and research facilities aimed at R&D and commercialization. The governor’s fiscal year 2009-10 budget includes an additional $44.3 million for colleges and universities and continued funding for research across the state’s higher education institutes.

The bond package targets 75 projects for new construction and renovation focusing on developing a 21st century workforce in emerging fields such as science, engineering, education and health care. Upgrades are needed to provide researchers with the equipment to develop cutting-edge technologies, Gov. Kaine said in a press release. The proposed General Obligation Bond, which would be provided through the Virginia College Building Authority, must receive support from the General Assembly and voter approval.
 
Providing continued support for the Education Research Initiative, which was unveiled in the FY 2006-08 budget proposal, Gov. Kaine recommends $4.5 million in FY09 and $16.8 million in FY10. The initiative provides funds to leverage additional federal and private funding for commercialization efforts at the state’s public research universities (see the Dec. 19, 2005 issue of the Digest).
 
As part of a comprehensive general research fund package intended to support leading research programs while encouraging self-sustaining enterprises, Gov. Kaine recommends $29 million in FY09 to the state’s institutions of higher education. The governor also proposes an additional $40.5 million over the biennium for a competitive research program to examine the link between higher education institutions and economic development.
 
The Commonwealth Technology Research Fund is slated to receive $10.5 million over the biennium. This fund provides competitive grants for economic development efforts through institutions of higher education.

Additionally, the governor’s budget authorizes $15 million each year in Higher Education Trust bonds for research equipment – also distributed on a competitive basis. Funding for specific research projects include:

The budget request for the Innovative Technology Authority – the governing body of the Center for Innovative Technology (CIT) – is $5.8 million each fiscal year. This request is slightly less than the previous biennial appropriation of $6.1 million in FY07 and $5.9 million in FY08, which reflects a $312,000 reduction as part of the 2008 budget reduction plan. CIT focuses on accelerating new technologies, entrepreneurs and technology companies.
 
The Virginia Economic Development Partnership would receive $17.4 million each year under the governor’s proposal, which includes a reduction of $920,000 each year as part of the budget reduction plan. An additional $1 million over the biennium is included for rural broadband under the Department of Housing and Community Development. The department must use up to $200,000 in the first year for a feasibility study and planning for a business incubator and higher education center on Wallops Island.
 
A total of $68 million is requested for economic development projects under the Governor’s Development Opportunity Fund – the same level funded in the 2006-08 biennium. Gov. Kaine also is requesting funding for the state’s final payments ($5 million in FY09 and $2 million in FY10) to SRI International to establish a Center for Advanced Drug Research in the Rockingham Center for Research and Technology. The General Assembly established a grant program in 2007 with the independent nonprofit research institute to promote research, development and commercialization.
 
Gov. Kaine’s FY 2009-10 biennial budget is available at: http://www.dpb.state.va.us/budget/buddoc08/index.cfm

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Hawaii Supplemental Budget Request Expands Funding for Innovation Initiatives
Building on a successful legislative session in 2007, Gov. Lingle is requesting additional funds to supplement various ongoing TBED programs.
 
Seeking to continue a pilot program approved by lawmakers last year, Gov. Lingle is requesting  $2 million for a second year for the Hawaii Excellence through Science and Technology Academy Program and Robotics Programs within the Department of Business, Economic Development and Tourism (see the May 14, 2007 issue of the Digest).
 
Under the Strategic Industries Division (SID), Gov. Lingle is requesting one-time funding of $700,000 to establish a Bioenergy Program. The funding would be used to complete the statewide master plan for the program. Annual recurring funding would be necessary to continue operations, the budget documents note. To conduct the expanded responsibilities of the science and technology branch related to the Science, Technology, Engineering and Mathematics education priorities of the Governor’s Innovation Initiative, an additional $50,000 is requested within SID. The renamed Office of Aerospace Development would receive $235,000 to support a comprehensive assessment of the state’s aerospace potential and opportunities for expanding or diversifying aerospace initiatives.

Hawaii's High Tech Development Corporation (HTDC) would receive $200,000 under the governor's recommendation to expand the Hawaii Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) assistance programs. The increase would provide additional state funds to match the increasing number and larger amounts of federal SBIR awards and would allow HTDC to develop and fund the STTR program. An additional $100,000 is requested to provide Hawaii firms with training workshops and one-on-one grant proposal writing assistance under the Governor's Innovation Initiative.

To implement the Hawaii Renewable Hydrogen Program – a key component of the Governor’s Energy for Tomorrow Package – the governor is requesting $5.9 million from the Hydrogen Investment Capital Special Fund.
 
Gov. Lingle’s Executive Supplemental Budget for FY 2007-09 is available at: http://www.hawaii.gov/budget/memos/supplementalbudget/

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Montana Fund-of-Fund Launches after Two-year Delay
A long-delayed equity capital program in Montana is on its way to becoming a reality. Montana, which received no venture capital investment in 2006 according to the PricewaterhouseCoopers Moneytree survey, has struggled to attract the interest of venture capital firms. The Montana Equity Capital Investment Act, sponsored by State Sen. Jeff Mangan and signed by Gov. Brian Schweitzer in 2005, was intended to make the state more attractive to outside investors, but never seemed to get off the ground.
 
As reported in the April 18, 2005 issue of the SSTI Weekly Digest, Senate Bill 133 called for the creation of a $60 million Montana Equity Fund to attract out-of-state investment and increase in-state venture activity. A governor-appointed board was to contract with an outside investor group to capitalize and manage the Equity Fund and a subfund targeted toward investments in strategic industries. The $60 million would be issued in tax credits to investors to offset any shortfalls in scheduled returns on their investments.
 
The Fund, however, was not created right away. In the subsequent two years, concerns about the law's constitutionality and the availability of funding continually delayed its implementation.
 
Gov. Schweitzer finally announced the appointment of five Montana Capital Equity Investment Board members in October to move forward with the fund. When the Board met earlier this month, members decided to move forward with the program and dismissed the idea of filing a "test case" to verify the constitutionality of the law. Instead, the Attorney General, Mangan and other state officials gave testimony relating to the program.
 
Board members are now ready to move forward with the program and are currently investigating fund-of-fund programs in other states to find a suitable model.
 
The text of the Montana Equity Capital Investment Act is available at: http://data.opi.state.mt.us/bills/2005/billhtml/SB0133.htm

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New TBED Ideas Surfacing: Will They Endure?
Policymakers and practitioners continually seek new ideas to integrate into their overall TBED strategies in order to capitalize on innovative approaches and remain a competitive force in the global marketplace. Over the last few months, two new concepts in TBED aimed at supporting higher education have surfaced in New York and Wisconsin with two distinct goals: achieving the status of a world-renowned research capital and increasing college graduates to raise per capita income.
 
NY Considers $3B for Research, Star Faculty, Education Zones
In New York, Gov. Eliot Spitzer will consider a multi-billion investment in the State University of New York (SUNY) and the City University of New York (CUNY) intended to boost the state’s higher education system and enhance university research centers.
 
The New York State Commission on Higher Education – created by the governor earlier this year – released this week a preliminary report that calls for establishing a $3 billion research fund and hiring additional full-time faculty and eminent scholars. Additionally, the report endorses a compact for public higher education to address revenue constraints and the creation of “education partnership zones.”
 
Operating on the notion that outstanding research universities are crucial to New York’s future, the report urges significant investments in SUNY and CUNY to raise their status as world-class institutions. To that end, the commission recommends creating an Empire State Innovation Fund, providing $3 billion over 10 years to support research in physical sciences, biosciences, engineering and medicine. To lead the research efforts, commissioners call for the recruitment of 250 eminent scholars.
 
Because SUNY and CUNY have endured several years of under-funding, they have fallen far behind peer institutions in the amount of operating revenue per student, resulting in hiring less expensive adjunct and part-time faculty, the report states. Over the next five years, the commission recommends hiring 2,000 additional full-time faculty members.
 
In terms of financing higher education, the commission supports a Compact for Public Higher Education that would set differential tuition pricing. Under the compact, the state would commit to provide tax-levy funding that covers 100 percent of the systems’ mandatory costs and at least 20 percent of the costs associated with the master plan investment program. Other funding sources would come from private funds, restructuring existing base budgets, enrollment growth and “modest” tuition increases.
 
The education partnership zones proposal would target high-need districts to increase the number of college graduates and focus on math and science preparation through partnerships between higher education and middle and high schools.
 
While the total cost of implementing the plan has yet to be released, the price tag is likely to pose a problem for the state financially. The New York State Budget Office recently released a report projecting a $4.3 billion budget gap in fiscal year 2008-09 and a $6.2 billion deficit in FY 2009-10 (see the Dec. 5, 2007 issue of the Digest). Gov. Spitzer is expected to unveil his budget recommendations to the legislature in January.
 
TIFS for Human Capital Proposed in Wisconsin
Last month, Competitive Wisconsin (CWI), a non-partisan consortium of agricultural, business, education and labor leaders that promotes public policy in the state, released a strategic plan that calls for the creation of a funding mechanism to increase the number of college graduates. The “human TIF” method is similar to the concept of real estate tax incremental financing and would link higher education investment to income growth benefiting individuals and Wisconsin, according to CWI.
 
In the human TIF model, described by CWI Vice President John Torinus, the state would issue bonds for grants and student loans, which would be paid off by collecting sales and income tax when the graduate enters the workforce. The graduate would benefit in a reduction of student loans with every Wisconsin income tax return filed, providing further incentive to remain in the state after graduation, according to Torinus.
 
The report, A Competitive Mandate for Wisconsin, proposes growing the economy through strategic investment budgeting with a greater focus on recruiting high-wage earners to the state and increasing the number of college graduates, effectively moving away from traditional economic development strategies. Specifically, the mandate calls for an additional 170,000 college graduates by 2012.
 
Torinus endorses the human TIF model to help the state meet this goal and calls on lawmakers to draft legislation supporting the funding plan. In an editorial for the Milwaukee Sentinel Journal, Torinus said the human TIF plan could also propel Gov. Jim Doyle’s Wisconsin Covenant into action. The covenant provides loans and subsidies for high school graduates who have maintained a B grade average. However, the plan has met resistance in the legislature because financing for the plan is unclear, Torinus said.
 
The human TIF model could also target disciplines most needed in the state’s economy, such as engineering, science, math and entrepreneurship studies, Torinus added. He proposes that students within these majors be given priority through larger grants or accelerated grant reduction.

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FCC, Congress Debate New Approaches to Expanding Broadband Access
Earlier this year, the Organization for Economic Co-operation and Development (OECD) reported that the U.S. had fallen from fourth to 15th in broadband penetration among OECD countries (see the June 13, 2007 issue). This report came as little surprise to states that have been struggling to extend and improve high-speed Internet service, particularly in rural areas. Recognizing the need to accelerate the expansion of broadband networks, both the Federal Communications Commission and the U.S. Senate are now considering actions that would help assess broadband deficiencies and build these networks with the assistance of the states.
 
Earlier this month, the Federal-State Board on Universal Service proposed changes to the FCC's Universal Service program that would expand its focus to include broadband access. Currently, the program collects fees from telecommunications providers to fund the availability and affordability of advanced telecommunications services in low income, rural, insular and high-cost areas. The Federal-State Board, which meets regularly to assess the program, now recommends that it be split into three separate funds: one tasked with expanding broadband access, one with disseminating wireless voice services, and another with providing service backups through Providers of Last Resort. The Broadband Fund would work with states to issue grants to build new facilities in underserved and high-cost areas to ensure that access is available.
 
States would be responsible for identifying these underserved areas and for holding a competitive bidding process for the grants. The Board recommends that states be required to provide matching grants for federal dollars, which may also be used to pursue economic development opportunities through broadband and wireless technology enhancements.
 
Read the Federal-State Board on Universal Service's Recommended Decision at: http://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-07J-4A1.pdf
 
This new partnership would place even greater pressure on states to produce accurate data about the availability of high-speed Internet services. That data, however, is difficult to collect. First, no standard definition of "high-speed" exists to broadband from non-broadband data services. A white paper by Daniel Correa of the Information Technology and Innovation Foundation earlier this year recommended the FCC switch to a two-tiered definition of high-speed access, which would include the current 200 kilobits per second standard as well as a more robust 3 mbps standard. This would help ensure that all areas have access to high-speed networks that can provide more advance services like videoconferencing.
 
Second, the current reporting requirements of the FCC only track whether or not broadband providers have subscribers in a given zip code, according to a Government Accounting Office report last year. The FCC does not ask providers if they have actually deployed broadband services in the area, meaning that a zip code is listed as being served even if that service is only provided to a few businesses.
 
To address this problem, Congress is considering a Broadband Mapping bill that would provide more accurate, more granular and more detailed information about broadband availability. Last month, the House passed its version of the bill, which would fund the creation of a searchable national broadband map. Local planning grants would be offered to communities to help spur deployment in their area. The Senate version, which is still pending, authorizes a five-year, $40 million-per-year program to provide matching grants to state public-private partnerships. These grants would support efforts to identify barriers to broadband adoption.
 
Read S.1492 at: http://www.govtrack.us/congress/bill.xpd?bill=s110-1492

This legislation would provide federal funding to expand upon the work being done in many states to bring high-speed access to rural areas. Kentucky, in partnership with national nonprofit Connected Nation, has increased the percentage of homes with broadband access from 60 percent to more than 90 percent since the launch of the ConnectKentucky program in 2004. Similar mapping and broadband research programs are being considered in Ohio and New York, also in partnership with Connected Nation. Both of these programs would fund statewide maps of broadband availability and grants for research on how to overcome the rural digital divide.

Find out more about the Connected Nation model at: http://www.connectednation.com/

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Ontario’s RIN Dares Venture Where More TBED Must
By creating Ontario’s Regional Innovation Networks (ORIN) three years ago, the provincial government experimented with how to establish customized systems-specific, but network-integrated approaches to strengthening and supporting regional innovation. The early successes of the 12 Regional Innovation Networks (RIN) scattered across the vast province are described in a November report, The Critical Role of Regional Innovation Networks in Ontario’s Economy, and the result of the $13 million initiative of the Ontario Minstry of Economic Development is a potential model for other states and provinces to consider.

A longer explanation is required, however, to substantiate that conclusion.
 
First is to identify the problem of plenty. One now can walk into nearly every major city in the U.S. or Canada and find a vast collection of organizations, programs and tools designed to support employment growth and business competitiveness.
 
While most may be serving particular audiences well, there is ample opportunity for duplication of services, rivalry and competition for limited financial support from sponsors or public agencies. Additionally, potential clients can become confused or discouraged navigating the alphabet soup of TBED and economic development agencies.
 
The problems can become exacerbated by competition among neighboring cities, suburbs vs. central cities, rural areas vs. metro areas, and state vs. state. As each reader knows, these artificial political boundaries have little to do with how we live our lives. We easily drive across these barriers to partnership for economic growth to go to work, do our shopping and enjoy recreational opportunities.
 
Second is the need to redefine and focus on collaborating regions. Knowledge and innovation are even more immune to the petty designs of our antiquated political system of townships, counties and even cities. Research has shown that the economic benefits of a particular business or university, as well as the knowledge generated within these institutions, spills over into the surrounding region. While the World Wide Web may eventually minimize the localized effect of spillovers, the ORIN project demonstrates regions – specifically learning regions that display some competence or record at innovation – should be the unit of study and strategy for state and provincial TBED efforts.
 
The Critical Role of RINs points out regionalism, alone, is not a panacea. The ORIN project grew out of the findings from a series of regional cluster studies conducted across Ontario in 2003-2004. The paper points out the studies found “extreme program, policy, and communication silos among regional institutions and government offices of economic development and business attraction. The result was a disconnected and in some cases competitive business support infrastructure incapable of growing the provincial economy or promoting innovation.”
 
The challenge for the Ontario Ministry of Economic Development was to break through the silos and improve province-wide accessibility to the resources already in place to support commercialization and innovation.
 
Third is to establish a systems approach to TBED. The solution is a systems approach toward a specific goal – in Ontario’s case, commercialization and innovation support – that can be adapted to the unique qualities of each particular region’s opportunities and weakness, yet integrated to draw on the strength of the larger network.  
 
The concept of a regional innovation system is based on the idea that the innovation capacity of people within a specific geographic area is dependent on the presence and health of all of the elements necessary to foster, nurture and sustain:

For Ontario, based on the case studies from the first two years of operation that are presented in the report, the 12 RINs seem to be working. Initially overly focused on life sciences, the RINs have adapted to the abilities and strengths of each region of Ontario. Collaboration among the RINs and the partners within each RIN appears to be a significant component of their early successes. The network includes 18 universities, 11 colleges, 13 hospitals, 6 research institutes, all of the commercialization branches of regional, provincial and federal governments, hundreds of business support organizations, and thousands of innovation-based companies.
 
From the larger policy perspective, a critical ingredient for the ORIN success may be the substantial carrot the Ministry dangled before the regions to encourage collaboration. The initial investment of $13 million helped draw experienced leadership for each of the RINs – a second critical ingredient for success. A third ingredient was the flexibility in approaches each RIN has been enabled to take along the theme of developing an integrated province-wide commercialization support system. The sectors served vary from alternative energy, nanotechnology and life sciences, to information systems, forestry and mining technologies.
 
The common elements of the RIN agenda, the report highlights, include consistent client focus by:

ORIN began as a pilot project slated to end in 2008. Like most other geographically based TBED efforts that are achieving societal goals, the RINs model does lend itself well to a market-based revenue stream. As a result, continued financial support from the Ontario Ministry of Economic Development is required to sustain and expand the promise shown already from the early results of the ORIN.
 
The Critical Role of Regional Innovation Networks in Ontario’s Economy is available at: http://www.utoronto.ca/onris/research_review/Related/DOCS/RIN2007_ReportMRI.pdf
 
More information on ORIN is available at: http://www.mri.gov.on.ca/english/programs/RIN-Program.asp

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Recent Research
How Do New University Departments Affect the Knowledge Production in a Region?
In the quest for a region to become more innovative or attain higher levels of degree attainment, expanding the size of existing education institutions or increasing the number of community colleges and universities seems to be a somewhat practical strategy. But how long after these institutions are created or expanded do they produce a measurable impact on a region’s innovation environment?
 
Some recent research by Robin Cowan and Natalia Zinovyeva attempts to chip away at this question, analyzing the effects of new science, engineering and medical departments at Italian universities created between 1985-2000. In Short Term Effects of New Universities on Regional Innovation, Cowan and Zinovyeva track the number, as well as the quality of patents and publications produced within a region in the years following the establishment of a department. They find the number of patent applications in a region from faculty generally increases (although not significant statistically) two years after a department is created. Two years later, or 3-4 years after a department is established, the number of patent applications from industry significantly increases. On average, the authors assert, one new department leads to a 10 percent boost in industrial patent activity within a region.
 
Using another metric to measure knowledge production, their research found that the number of academic publications in international journals rose 3-4 years after the founding of a department. Cowan and Zinovyeya speculate that, since it takes a year or two between a paper’s submission and publication, the positive effect on the amount of scientific research within a region is already occurring after one or two years of a department’s creation.
 
They also look at the quality of both academic and industrial patents – as gauged by the total number of received citations per patent – and conclude the establishment of departments does not effect the quality of patents in the short run, which is a four-year period.
 
Another effect of a new department that can have an economic impact is the creation of new graduates in a certain field, but these gains would only be attained 4-5 years after the department’s establishment. Cowan and Zinovyeya’s research shows that some noticeable effects from expanding a university may be realized within a smaller timeframe of 4-5 years.
 
Short Term Effects of New Universities on Regional Innovation can be downloaded at:
http://www.merit.unu.edu/publications/wppdf/2007/wp2007-037.pdf

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Useful Stats
2006 USPTO Patents per 100,000 Employees by State
Patent activity is a commonly used indicator of a state or region’s innovation capacity. SSTI has prepared a table illustrating the number of patents issued from the U.S. Patent and Trademark Office (USPTO) per 100,000 employees for every state and the District of Columbia for each of the five years from 2002 to 2006. Additionally, the percent change in patents per employee over the five-year period was calculated. For the U.S. as a whole, including Puerto Rico and Guam, the per-employee number of patents rose 0.89 percent, from 75.7 patents per 100,000 workers in 2002 to 76.4 patents per worker in 2006.

The location of origin for each patent was determined by identifying the residence of the first-named inventor on the patent. In 2006, Idaho led the nation with 266.8 patents per 100,000 workers employed in the state. This was followed by California (161.5), Vermont (160.3), Oregon (149.2), and Massachusetts (136.7). The District of Columbia had the lowest number (10.3 patents), along with Mississippi, Alaska, West Virginia and Arkansas.

The state experiencing the largest increase of patents per employee was Washington, with a 46 percent increase from 2006 to 2002. This was followed by Oregon (36.8 percent), Massachusetts (14.1 percent), Kansas (13.4 percent) and California (12.9 percent). Idaho led the nation in patents per employee every year since 2002, but was among the states that had the largest decrease over five-year period.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/121907t.htm

Patent Counts by Country/State and Year was produced by the U.S. Patent and Trademark Office and is available at: http://www.uspto.gov/web/offices/ac/ido/oeip/taf/cst_all.pdf

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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 U.S. Civilian Research & Development Foundation, a nonprofit organization that promotes international scientific and technical collaboration, is seeking a program manager for its Partner Development Program. The ideal candidate for this position is a highly motivated individual with a background in business development, marketing or international business who can network with U.S. industry and pursue new U.S. and Russian partner development opportunities. A bachelor's degree or equivalent work experience is required; a master's degree is preferred. Candidates also must have 2-4 years of prior work experience managing projects, with specific expertise in one or more of three fields: business development, marketing or international business.

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People & TBED Organizations

Jeffrey Boyce was named the assistant vice president of the Research Foundation of the State University of New York. Boyce had been the deputy commissioner for manufacturing services at Empire State Development.

Steve Crawford has joined the Brookings Institution; he was with the National Governors Association most recently.

The Southeastern Universities Research Association (SURA) selected Marc Oettinger as its new technology commercialization manager.

RiverVest Venture Partners, a life science venture capital firm headquartered in St. Louis, announced it will be opening an office at the BioEnterprise facility in Cleveland. The office will be managed by Karen Spilizewski, who is joining RiverVest on a part-time basis as a vice president on Jan. 1.

Steven Zylstra is the new president and CEO of the Arizona Technology Council.

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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. 7, 2008. Publication of the Funding Supplement also will resume in January.

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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