January 16, 2008 - SSTI Weekly Digest

In the January 16, 2008 Issue:

Tech TalkinТ Govs, Part II
West Virginia Governor Proposes $80M for University R&D, Workforce Training
Mixed Results for TBED in State Budget Proposals
Recent Research and Useful Stats: NSF Releases Science & Engineering Indicators 2008
Outdated Tax Systems Holding Back State Economies, Report Says
SSTI's 14th Annual Conference will be held in [enter your city or state name here] in 2010!

Copyright State Science & Technology Institute 2008. 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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Tech TalkinТ Govs, Part II
The second installment of the Tech TalkinТ Govs series includes highlights from state-of-the-state, budget and inaugural addresses from Arizona, Colorado, Louisiana, Missouri, Nebraska, South Dakota, Vermont, and West Virginia.

Arizona
Gov. Janet Napolitano, State-of-the-State Address, Jan. 14, 2008
УHigher standards for students mean we must sustain a higher-quality corps of math and science teachers by expanding teacher loan forgiveness, scholarships, and incentives. Last year, you took a big step in this direction by providing initial funding for these incentives, and by funding more math and science teachers; I ask you to do the same this year. Е

УЕ The eighth graders of today are the high school class of 2012 Ц ArizonaТs centennial class. I say, letТs make a contract with these Centennial Scholars, and with all the classes that follow. LetТs agree that any eighth grader who pledges to stay out of trouble and maintains at least a УBФ average in high school will be guaranteed free tuition at any of our community colleges or state universities. Е

УЕ I propose that, beginning next year, all Arizona universities guarantee that when a student begins college, his or her tuition will not be raised for four years Ц period. Times change and tuition will rise, but it shouldnТt go up once youТve started your coursework. Е

УЕ I call on our higher education institutions to work together and double the number of bachelorТs degrees they produce by the year 2020. To do this, our universities have to increase graduation rates, retain more students, create more options for students in rural areas, enroll more first-generation students, and boost the number of students coming from community colleges. This Legislature needs to support them now in these critical tasks.Ф

Colorado
Gov. Bill Ritter, Jr., State-of-the-State Speech, Jan. 10, 2008
УThis year, we will be launching phase two of the New Energy Economy, called СBringing the New Energy Economy Home.Т This will include opportunities for every individual and every business in Colorado to take part. We are developing all of the following.

A Colorado Carbon Fund, a voluntary carbon offset program that will support new, clean-energy and greenhouse-gas-reduction projects to be built right here in Colorado;
A СGo SolarТ incentive program to put clean solar power within reach for all Coloradans;
An СInsulate Colorado ProgramТ to make home heating more affordable and efficient.

УЕ We've created specific strategies to target four of our most-promising economic sectors: aerospace, energy, tourism and the biosciences. 2008 holds just as much promise, and I'm pleased to work with you and the business community on an economic-development package that will Е simplify how businesses calculate taxes -- the single-sales factor approach. It will exempt 30,000 companies from the Business Personal Property Tax over time, and it will increase state investments in bioscience and clean energy projects. Е

УЕ [T]oday I'm pleased to announce the three co-chairs of our new Jobs Cabinet. Е The Jobs Cabinet will work to align Colorado's economic-development strategies, education programs and regional workforce needs to make sure we are producing the highest-quality, 21st century labor force for Colorado businesses.Ф

Iowa
Gov. Chet Culver, Condition of the State Speech, Jan. 15, 2008
УЕ [I]n order to maintain our lead in this new bioeconomy, we must continue to support the Iowa Power Fund. Е You know, we've made real progress on renewable energy, and now it's time to build on it.

УAs I stated previously, funding the Iowa Power Fund and supporting the new Office of Energy Independence and the Power Fund Board should be our top priorities. Е I'd also like to expand the Renewable Fuels Infrastructure Program, to include terminal blending of ethanol and biodiesel. Let's help our farmers, consumers, and ethanol, and biodiesel producers, by developing the infrastructure necessary to increase access and drive greater consumption of Iowa-grown biofuels. Е

Ф... I'm proposing we build a $5 million science, technology, engineering, and math Ц or STEM Ц Center at the University of Northern Iowa. This will help us double the number of math and science teachers in our public schools and make sure every high school graduate is ready for the jobs of the future.

ФIn addition, I am asking you to join me in fully funding our successful community college level workforce training program, known as ACE. And, to meet the needs of the workforce in the future, let's continue to do what we can to make college more affordable. One way to do this is by expanding the All Iowa Opportunity Scholarship.Ф

Louisiana
Gov. Bobby Jindal, Inaugural Address, Jan. 14, 2008
УI will ask our legislature this year to re-orient our workforce training to meet the challenges and skills required by the global economy. And our administration will streamline its demands of job-makers. Е

УЕ That is how we will run our New Louisiana government. Twenty-first century schools and colleges. Curricula linked to our new economy. Quality teachers. Accountability for results. A business climate second to none Е that rewards risk-takers Е welcomes entrepreneurs.Ф

Missouri
Gov. Matt Blunt, State-of-the-State Address, Jan. 15, 2008
УTonight, I recommend increased investment in math and science education. I recommend $750,000 to train nearly 1,000 new Advanced Placement teachers and to help more than 6,000 Missouri students take Advanced Placement tests. I recommend $5 million to create 100 technologically-advanced classrooms and to equip 300 classrooms with advanced math and science curriculum. Е

УЕ To further grow alternative fuel production, I support a B5 standard for biodiesel sold in our state. Е

УЕ This year, I support incentives for the construction of alternative fuel pumps, for the purchase of environmentally-friendly hybrid vehicles, and for the purchase of cleaner burning alternative fuels.Ф

Nebraska
Gov. Dave Heineman, State-of-the-State Address, Jan. 15, 2008
УImagine what it would be like for our children if Nebraska could create a large number of jobs that pay twice the current Nebraska county average salary.

УTo accomplish that goal requires 21st century leadership that is innovative and creative. ThatТs why I am proposing that Nebraska take a quantum leap forward with a new tier of performance based incentives that reward the creation of higher paying jobs and IТm asking you to make this a priority in this legislative session. This new program is called the Nebraska Super Advantage. The Nebraska Super Advantage is about the next decade and the next generation of Nebraskans. This bold, new plan is our opportunity to keep our young people right here in Nebraska.Ф

South Dakota
Gov. Mike Rounds, State-of-the-State Address, Jan. 8, 2008
УTo accelerate the development of more biodiesel, I will be submitting a bill to provide a 2-cent tax reduction for biodiesel-blended fuel. Е

УЕ IТm also asking for $2,954,000 for year 3 of the Classroom Connections Program. ThatТs for classroom laptops for children. That will be 4,600 more laptop computers for high school students and 400 more for their teachers. Е

УЕ With your approval, 14,200 students will have computers next year, and that would raise the percentage to 38 percent of our high school students.Ф

Vermont
Gov. Jim Douglas, State-of-the-State Address, Jan. 10, 2008
УWe must continuously rethink how best to achieve equity in our tax system, because unfair or excessive taxation threatens prosperity and stifles innovation. Е

УЕWe will also lower our top rate Ц which is the highest in the country Ц to increase our competitive advantage when recruiting employers to start or expand businesses here. Е

УЕ To position Vermont for the next wave of environmentally friendly industry, we must continuously reassess and revitalize our economic development efforts. My comprehensive job creation strategy is the sum of many parts: creating a wireless telecommunications infrastructure, a focus on science and technology in the classroom and targeted incentives for small businesses Ц all with convergence toward our green economy. Е

УЕ To further inspire investments in technology, IТm proposing we invest $250,000 in two pilot projects Ц a partnership with Champlain College and the University of VermontТs Center for Emerging Technologies Ц to provide grants to start-up businesses that are developing cutting edge software; and an e-communities grant program to enable more local internet content, discussion forums, wikis and blogs. Е

УЕ For VermontТs economy to produce quality, high-paying jobs in the future, we must be competitive with countries around the globe. Our ability to compete depends on our education system.

УWe must rethink how science, technology, engineering and mathematics are taught in our state. Е That is why I have asked the State Board and Department of Education to help schools implement more innovative science, technology, engineering and mathematics curricula. Е

УTo ensure that prosperity grows with each generation we must make a continued investment in our human capital. To empower the next generation of workers I propose we invest $8 million Ц a 14 percent increase over last yearТs appropriation Ц in college scholarships and workforce training programs. Е

УЕ Now in Vermont, our future is being shaped by innovators producing cutting edge products and ideas Е Last year, we kicked off an effort to make Vermont a global center for environmental engineering. This year, I propose we build on that initiative by modifying the Vermont Employment Growth Incentive program to make environmental service companies eligible for significantly larger incentives to create jobs here.

УIn addition, I ask that the Legislature join me in urging the State retirement boards to designate a percentage of their funds for investment in the creation of green jobs. This could generate up to $10 million in additional capital for investment in entrepreneurship and job creation.Ф

West Virginia Ц see article in this issue of the Digest.

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West Virginia Governor Proposes $80M for University R&D, Workforce Training
Using one-time lottery surplus funds available for fiscal year 2008, Gov. Joe Manchin wants to invest $80 million in world-class research and specialized job training to propel the state toward a knowledge-based economy. The proposal was unveiled to lawmakers during Gov. Manchin’s State-of-the-State Address last week in conjunction with the fiscal year 2009 budget recommendation.

Citing a skilled labor shortage for West Virginia companies, Gov. Manchin said that to improve the workforce, the state must target higher education and workforce development investments. The governor’s plan, dubbed “Bucks for Jobs” is twofold. First, he proposes the state create a $50 million education research trust fund modeled after Kentucky’s successful “Bucks for Brains” initiative. The state’s leading research universities – West Virginia University and Marshall University – are the proposed recipients of the endowment, which will require a dollar-for-dollar match by private donations. Funds will be used to simulate world-class R&D and attract venture capital, which will eventually lead to jobs in emerging, high tech and high-wage industries, Gov. Manchin said during his address.

The second part of the plan invests $30 million in two advanced technical centers that will serve as training centers to meet the specialized needs of businesses. Federal and state workforce training programs will be coordinated into a single and comprehensive “Training Bucks” program under the plan. Additional recommendations for spending surplus lottery funds include $7.1 million to expand Allied Health programs at community and technical colleges and $2 million for the College Foundation of West Virginia to create a single source of information for preparing for and financing a college education.

To retain college graduates at a higher rate, Gov. Manchin is proposing the Promise Board develop a rule requiring recipients of the Promise Scholarship to work in the state following graduation as a condition of not having to pay back the loan. The governor’s FY 09 budget recommendation includes an additional $816,000 to the Promise Scholarship program and $660,000 to the Higher Education Grant Program to meet the statutory requirement of 2 percent growth.

The West Virginia High Tech Consortium Foundation, a technology organization focusing on the statewide, regional and national high-technology business sector, is slated to receive $235,783 under the governor’s general fund budget recommendation.

Gov. Manchin also addressed energy initiatives during his state-of-the-state speech, saying that he is committed to working toward development of clean coal technologies and the construction of clean coal power and fuel liquefaction plants.

The governor’s FY 2009 Budget Recommendation is available from the State Budget Office at: http://www.wvbudget.gov/

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Mixed Results for TBED in State Budget Proposals
Coinciding with a plethora of state-of-the-state addresses delivered over the past week, several governors have released budget recommendations for the upcoming fiscal year. The following statesТ budgets include crucial TBED investments and reductions in programs.

California
Upon declaring a fiscal emergency and calling a special legislative session to address the current-year budget deficit of $3.3 billion, Gov. Arnold Schwarzenegger unveiled his fiscal year 2008-09 budget recommendation to lawmakers alongside the proposed budget stabilization plan aimed at reducing the deficit.

The proposal calls for 10 percent reductions to nearly all general fund departments and programs, boards, commissions and elected officials, with limited exceptions.

Gov. SchwarzeneggerТs fiscal year 2008-09 budget does include funding for the Science and Math Teacher Initiative. Under the governorТs proposal, the workload budget includes an ongoing $2.7 million for California State University and $1.1 million for the University of California to continue its efforts to address the shortage of math and science teachers in public schools. Assuming proportional reductions are made to the programs, $3.4 million would remain available for the effort, according to budget documents.

Idaho
Last week, Gov. Butch Otter announced the GovernorТs Science and Technology Advisory Council would be disbanded after eight years in existence. The group was created by former Gov. Dirk Kempthorne and tasked with developing a strategic S&T plan for the state, which was unveiled in 2001 (see the Jan. 19, 2001 issue of the Digest). The recommendations failed to garner legislative support, and the council identified new areas for state investment in 2006 (see the Oct. 2, 2006 issue of the Digest), which also failed to receive funding. Idaho Commerce Director Jim Ellick said it was possible the council could be replaced with an innovation-focused council or advisory group, according to an article in the Idaho Statesman.

Gov. OtterТs FY09 budget recommendation removes one-time funding of $300,000 Ц the level of funding appropriated the last two fiscal years Ц for the stateТs TechConnect Centers, which assist entrepreneurs and technology businesses. Additionally, there is no funding included for the Entrepreneurial Fund, an initiative to provide high-tech entrepreneurs with training and development assistance.

The budget includes $1 million in one-time general funds to the Business and Jobs Development Fund within the Department of Commerce Ц the same funding level as last year. Gov. Otter also is proposing the creation of the Office of Energy Resources, directing $3.6 million to the effort in FY09. The Broadband Fund is slated to receive $4.3 million and would be moved from the Department of Commerce to the Department of Labor.

Gov. OtterТs capital budget proposal allots $10 million toward a new $35 million research center at Boise State University to support education, research and outreach involving environmental science and economic development. Ongoing funding of $5 million is included for the Community College of Western Idaho, which is expected to open in 2008.

New Mexico
Gov. Bill RichardsonТs FY09 budget recommendation includes only a fraction of the funding for TBED initiatives included in last yearТs budget proposal (see the Nov. 20, 2006 issue of the Digest).

The Technology Commercialization Program under the New Mexico Development Department would receive $263,000 Ц 1.5 percent less than the FY08 appropriation. The governor recommends $2.3 million Ц a $174,000 decrease over last year Ц for the Renewable Energy and Efficiency Program due to anticipated loss of federal funds. The program promotes renewable energy and the use of alternative fuels and transportation.

The Spaceport Authority would receive a substantial boost in FY09. Gov. Richardson recommends $826,000 Ц a 126 percent increase Ц for the development of spaceport facilities to actively promote and assist private and public sector infrastructure development to attract new business industries and create new jobs. Additionally, the governor recommends two performance measures for the Authority in FY09, including annual aerospace jobs created due to Spaceport Authority efforts.

South Carolina
Gov. Mark Sanford proposed increasing the Palmetto Fellow Scholarship by $5 million and the LIFE Scholarship by $14 million in his FY09 budget recommendation. Both scholarships are merit-based, and beginning last fall, students receiving the scholarships were eligible for additional money if they pursued degrees in science, mathematics, computer science, informational technology, engineering, science and math education, and healthcare-related disciplines. The goal is to increase the number of college graduates in math and science to support the knowledge-based economy.

Under the new program, LIFE scholarship recipients who major in math and science are eligible for up to $7,500 per year beginning their sophomore year Ц up from $5,000 per year. Palmetto Fellow Scholarship recipients meeting eligibility requirements can receive up to $10,000 per year Ц up from $7,500.

Gov. SanfordТs FY09 budget proposal includes $3.4 million Ц current level funding Ц for agricultural biotechnology research at Clemson Public Service Activities. Efforts are coordinated with the South Carolina Biotechnology Incubation Facility and the Department of Commerce to recruit companies and assist with new company start-ups.

The governorТs budget also would maintain current level funding of $2.3 million for the Center for Accelerated Technology Training. Recurring funding of $2 million is requested for the International Center for Automotive Research at Clemson University and $367,640 for start-up and ongoing expenses for a statewide Hydrogen Fuel Cell Coalition.

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Recent Research and Useful Stats
NSF Releases Science & Engineering Indicators 2008
On Tuesday, the National Science Foundation (NSF) released Science & Engineering Indicators 2008, its comprehensive biennial analysis of the U.S. and international science and technology landscape. This version provides thorough details about the features of a rapidly-changing global economy, as countries continue to make investments in their knowledge-based capacity and industries.

The report provides some of the most current and succinct illustrations of how, over a relatively short period of time, China and other Asian countries have quickly ascended in economic size and international science and technology prominence. The U.S., due to its large and diversified science and technology infrastructure and industry, is holding its own when compared to the rest of the world. Japan and the E.U., however, are beginning to slip in a variety of comparative metrics. As the entire world is realizing the benefits of knowledge-intensive economies, the bar is continually rising as countries push to improve education, high-tech industrial development, and R&D advancement, the report points out.

An example of this shift can be found in high-technology manufacturing from 1985 to 2005. In this period, the U.S. share of the worldТs total of high-tech manufacturing grew to 35 percent, while the E.U and Japan shares decreased from 25 percent to 18 percent and 16 percent, respectively. China however, experienced a rise from 2 percent to 16 percent over the same period.

For the world as a whole, 12 percent of total manufacturing output in 1985 could be considered high-tech, which grew to 19 percent in 2005. In those 20 years, the portion of high-tech manufacturing in the U.S. increased from about 14 percent to 24 percent of total manufacturing. Experiencing an even larger jump, ChinaТs proportion of high-tech manufacturing swelled from 8 percent of the countryТs total manufacturing to almost 28 percent in the same period.

The U.S. continued to make sustained increases in its per capita GDP and productivity per employee year after year, keeping the U.S. well ahead of many other countries. In fact, most world regions saw the difference in their productivity compared to the U.S. continually widen over the past 20 years.

Intellectual property protection, as measured by patents with the U.S. Patent and Trademark Office (USPTO), also displayed a global shift. The number of USPTO patents from the U.S. had tripled from 1985 to 2005. However, the report reminds readers that the U.S. share has hovered consistently around 53 percent. In that same time frame, the E.U.Тs share decreased from 21 percent to 13 percent of total patents, and AsiaТs share (which includes Japan, Korea, and China, among others) grew from 19 percent to 29 percent.

U.S. R&D expenditures grew to $325 billion in 2005, as JapanТs increased to $131 billion, and China inched even closer, passing the $100 billion mark for the first time in 2005.

The 2008 Indicators report suggests industrial R&D spending as a percentage of U.S. total R&D spending is beginning to rebound from its peak of 70 percent in 2000, as 2004 levels were 64 percent, rising to 66 percent in 2006. Also in 2006, student visas issued were higher than pre-Sept. 11 numbers. Visas dropped 25 percent immediately after the 2001 attacks.

The 558-page volume I of the report is filled with comparative values and charts on a wide range of subjects from international degree attainment to foreign-born science and engineering workforce trends. Of special interest to SSTI state organizations may be the 47 indicators that compare the states in Chapter Eight, in subject areas such as math and science aptitudes at various grade levels; degree attainment per capita; SBIR, R&D and venture capital funding as a share of the stateТs GDP; and, public school expenditures.

Volume II of the report, which contains 576 pages of appendix tables, is also available for download. Both volumes of Science & Engineering Indicators 2008, plus instructions on how to obtain a copy of the report on CD can be found at: http://www.nsf.gov/statistics/seind08/

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Outdated Tax Systems Holding Back State Economies, Report Says
With many states anticipating or already preparing for budget pressures, state leaders are increasingly looking for ways to increase their revenue streams. A new report from the Pew Center for the States finds that in many cases outdated state tax systems are stifling growth and failing to build a stronger tax base. Authors Katherine Barrett and Richard Greene argue that many of these systems have not been overhauled since the rise of service economy. In 2005, service industries accounted for 68 percent of U.S. gross domestic product; however, only a handful of states tax more than 80 of the 143 most common types of services. At the same time, other industries, particularly telecommunications, are subjected to a variety of taxes based on their former monopoly status.

The report focuses on the need to streamline state tax systems, expand taxes on services and limit and monitor the incentives granted to businesses. Barrett and Greene believe that "combined reporting," which forces corporate parents to combine their profits with that of their subsidiaries, could help simplify tax collection while increasing state revenues. Also, by participating in the national Streamlined Sales Tax Project, states can begin to build an effective system for taxing Internet sales as those transactions become more prevalent.

Telecommunications companies have suffered most of all at the hands of outdated state tax systems, according to the report. These companies, which once limited themselves to the installation and administration of phone networks, are now an essential force in economic development. They are responsible for the rollout of high-speed data networks and wireless and Internet services. Telecommunications companies are often forced to file more than 500 returns in a state, a relic of their former status as monopolistic players. Barrett and Green argue that this administrative burden has hampered the growth of telecom companies and state telecommunications networks. Only a few states have undertaken any reform of telecommunications tax systems in the past decade.

The report cites Robert Lynch of the Department of Economics at Washington College who argues that tax incentives for businesses may spur economic growth, but only when they do not involve a corresponding reduction in government services. In reality, however, Lynch observes that lost revenue frequently results in reduction in services. Economic development efforts should instead focus on building a capable workforce, increasing the volume of high-quality research, and maintaining the state’s infrastructure for growth. Incentives can be a useful tool, but only with a strong accountability measure put in place to ensure they are being deployed effectively.

To address this issue, some states are now increasing the accountability requirements for incentive recipients. For example, the Honolulu Advertiser recently reported that the Hawaii Department of Taxation has disallowed 38 percent of claims for the state’s technology tax credit through an audit of past recipients. The claims represent about $22.2 million in potential state revenue. The Act 215 program provides a 100 percent credit for investments in high-tech companies and a 20 percent credit for qualifying R&D investments. The Adviser reports that the rejected credits were disallowed because the company’s activities or costs were not applicable under the program, or the company could not prove that the cost was part of the qualified R&D activity.

The Pew Center finds that more and more states are practicing greater oversight over the incentives they offer. Every state that offers tax incentives now undertakes some form of incentive monitoring, which was not nearly as common 10 years ago, according to the report. Eighty percent impose penalties on recipients that do not meet their obligations. An almost equal number of states have tax expenditure budgets that provide data on tax incentives, including potential revenue lost. Thirty-two states publicly disclose information about recipients and/or the tax revenue lost.

Download "Growth & Taxes" from Governing Magazine at: http://www.governing.com/articles/1taxmain.htm

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SSTI's 14th Annual Conference will be held in [enter your city or state name here] in 2010!
Yes, it could happen. Bid packets are available today. Your organization could host SSTI's 14th annual conference during the fall of 2010. More than 350 of the nation's greatest thinkers and practitioners for building tech-based economies could descend on YOUR city.

Over the past 11 years, SSTI's annual conference has grown to become the nation's largest gathering of the tech-based economic development community. The 14th annual conference brings the opportunity to acknowledge the impact and growth of tech-based economic development. It is our hope that this conference will inspire even more collaboration, creativity and success across the nation.

The conference host is an integral part in the preparation and success of each conference. Because of the hostТs knowledge of local and regional resources, the host is asked for suggestions and advice concerning local suppliers, destinations and potential experts/speakers. Also, the host receives 40 complimentary conference registrations.

Please contact, Noelle Sheets, director of membership services, at sheets @ ssti.org to request a conference bid package today! Letters of intent are due on Feb. 14.

NorTech will host SSTIТs 12th Annual Conference, Transforming Regional Economies. Please, plan to join us at the InterContinental Hotel Cleveland! Pre-conference activities are slated for Tuesday, Oct. 14, 2008, with the main conference continuing through Oct. 15-16, 2008. (Look for an announcement regarding the 2009 conference location soon, too!)

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