In the January 7, 2009 Issue:
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Tech Talkin' Govs, Part I
SSTI's ninth annual Tech Talkin' Govs series highlights new and expanded TBED proposals from governors' state of the state, budget and inaugural addresses. The first installment of the series includes excerpts from New York and North Dakota.

New York
Gov. David Paterson, State-of-the-State Address, Jan. 7, 2009
"We should also understand that our current Empire Zone program does not work and we need to reform it. ....  That's why we set an aggressive target to have Empire Zone participants produce 20 dollars of benefits for every dollar of state money. With the savings generated by reforming Empire Zones, we will make strategic investments in the job-creating industries of tomorrow, such as biotechnology and manufacturing, and we will offer R&D tax credits to foster innovation. .

". To maximize the extraordinary academic and scientific resources available in the Western, Central, and Capital Regions, we will create an upstate research consortium on hybrid electric batteries and energy storage technologies. This will help reshape the upstate economy and create a clean corridor that includes cities in the Erie Canal corridor built some two hundred years ago. We will also create a New York Energy Policy Institute to coordinate the necessary knowledge base and expertise of our higher education institutions."

North Dakota
Gov. John Hoeven, State of the State Address, Jan. 6, 2009
"As we help students with financial need, we must also do more with non-needs based assistance, as well, to attract and prepare young people for the new jobs and careers we're creating in North Dakota.

"Under our STEM Grants, a merit-based program, students in the fields of science, technology, engineering, and math will be eligible for up to $2,000 a year for five years - $10,000 in total - to help with their technical training or education. .

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Proposals Aim to Attract Renewable Energy Companies to Virginia
Last month, Gov. Tim Kaine unveiled proposed amendments to the fiscal year 2008-10 biennial budget and announced a new initiative aimed at creating jobs by attracting renewable energy companies to Virginia. The governor will seek legislative support for both proposals in the coming months.

The Renew Virginia Initiative is the governor's plan to boost job creation and position the state as a leader in alternative energy generation and R&D. Gov. Kaine created a new Interagency Task Force for Energy Project Recruitment that consists of state agencies, university research centers and federal labs. The Virginia Economic Development Partnership is charged with assembling a marketing plan for promoting the state.

The FY09 executive budget includes new funding proposals, outlines the October reductions approved by Gov. Kaine, and recommends further reductions for the remainder of the biennium. Virginia is facing a projected budget deficit of $973.6 million in FY09 and $1.5 billion in FY10, according to estimates reported by the state to the National Conference of State Legislatures. Gov. Kaine recommends withdrawing $490 million from the Revenue Stabilization Fund to help balance the FY09 shortfall.

To stimulate the state's economy during the national downturn, Gov. Kaine recommends smaller reductions and adding new investments for economic development agencies and programs. This includes a $5 million increase in the Governor's Opportunity Fund, which provides grants and loans to assist in job creation. Gov. Kaine also has proposed a new income tax credit and a sales tax exemption designed to attract green industries. The proposed Renewable Energy Income Tax credit provides both individual and corporate tax breaks for installation of renewable energy property and the Energy Efficient Systems Sales and Use Tax Exemption applies to renewable energy systems installed on residential property.

Funding for the Virginia Economic Development Partnership was cut by $1 million in FY09 as part of the approved budget reduction plan. Gov. Kaine recommends an additional reduction of $1.43 million in FY10 for a total budget of $16.1 million in FY09 and $16 million in FY10.

The combined reduction for the Innovative Technology Authority - the governing body of the Center for Innovative Technology - is $1.5 million over the biennium. The budget reduction plan approved by the governor in October reduced by 30 percent the number of companies supported by the Growth Acceleration Program and reduced by $250,000 funding to the Virginia Electronic Commerce Technology Center. Gov. Kaine recommends consolidating the Innovation Technology Authority board with the research and development board and replacing general fund appropriations with lease revenue related to a newly proposed public-private partnership for a cost savings of $458,003 in FY10.

Higher education funding would be cut by 15 percent in the second year of the proposed budget and funding to community colleges would be reduced by 10 percent.

The FY 2009 Executive Budget is available at: http://dpb.virginia.gov/budget/buddoc09/index.cfm.

A press release outlining the Renew Virginia Initiative is available at: http://www.governor.virginia.gov/MediaRelations/NewsReleases/viewRelease.cfm?id=832.

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Governor's Budget Continues Washington's Efforts in STEM Education
Many of Washington's programs aimed at enhancing the skills of educators in science, technology, education, and mathematics (STEM) fields will continue to receive state support in the coming biennium under Gov. Christine Gregoire's budget proposal - while other TBED initiatives did not fare as well.

The governor's fiscal year 2009-11 budget recommends a total of $17.5 million from the general fund and the Education Legacy Trust Fund to support the state's "foundational math and science effort," which includes school district math and science coaches, math and science standards and curriculum development, after-school math assistance and support for the LASER science program. Specific recommendations include:
  • $7.5 million to provide grants for instructional coaches in math and science for middle and high schools;
  • $3.1 million each fiscal year for the LASER program, a statewide program designed to implement an inquiry-based K-8 science education program;
  • $1.85 million for specialized professional development for one math teacher and one science teacher in each middle and high school;
  • $1.4 million for three additional professional development days for middle and high school math and science teachers;
  • $244,000 each fiscal year for conditional stipends for certified teachers to receive training in mathematics or science fields; and
  • $139,000 each fiscal year for the office of the superintendent of public instruction to coordinate and promote efforts to develop integrated STEM programs across the state.
To help address a projected $5.7 billion shortfall, the governor recommends cutting 13 percent across-the-board for the state's research and regional institutions and 6 percent for community and technical colleges.  Budget documents note that the lower rate of reduction to community and technical colleges is in recognition of their mission in job training and skills essential to the development of the state's economic recovery.

Gov. Gregoire's budget requests $2 million each fiscal year for the Washington Technology Center, down from $2.8 million each fiscal year approved last biennium by lawmakers, and $246,000 for the Manufacturing Innovation and Modernization Account to help small- and mid-size manufacturers access innovation and modernization technical assistance. Legislators approved $306,000 in FY09 for the initiative.

The FY09-11 budget includes another installment of $63.3 million transferred to the Life Sciences Discovery Fund from the Tobacco Settlement Account. The $350 million fund was created by the legislature in 2005 to invest in life science companies using tobacco settlement funds and is expected to reach $1 billion over ten years (see the May 16, 2005 issue of the Digest). In December, the fourth round of awards distributed more than $18 million.

The governor's budget for Natural Resources includes $24.8 million across general funds, other funds, transportation funds and the capital budget to support a variety of climate change initiatives. This includes creating green-collar jobs and investments in renewable energy.

Gov. Christine Gregoire's FY 2009-11 budget proposal is available at: http://www.governor.wa.gov/priorities/budget/default.asp.

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North Carolina Charts a New Innovation Framework
North Carolina is a nationally-recognized center for basic research due to its sustained investment in higher education and TBED-related projects. Many in the state believe, however, that North Carolina is not translating as much of that research throughout its innovation economy as it should be. Advancing Innovation in North Carolina, a new report from the North Carolina Board of Science and Technology, argues that in order to have a truly prosperous high-tech economy, North Carolina will have to increase the adoption of new technologies throughout rural regions of the state and improve its performance in areas not related to its higher education system, including the availability of capital and percentage of R&D workers as a share of the workforce.

North Carolina faces several challenges in creating a rich innovation ecosystem according to the report. The first is a relatively low overall investment in research and development. In 2004, North Carolina ranked 23rd in R&D investment as a share of gross state product. The state's innovation economy is also heavily dependent on just a few innovative geographic clusters for development. The rate of successful innovation varies widely across the state, with only a few cities and regions having taken off as high-tech centers. Other concerns include a continuous need to train more high-tech workers and to improve the state's ability to translate its ideas and intellectual property into successful companies.

The report calls for the reestablishment of the State Science Advisor position, and for the appointee to that position to work with the General Assembly and the Board of Science and Technology to implement a new innovation framework. Recommendations along with their estimated costs include the following:
  • State-funded competitive grants for UNC system faculty- Awards would support research collaboration and technology commercialization and would require a one-to-one match. Estimated cost- at least $5 million annually.
  • Public/private partnership to promote the state as a high-tech center- The effort would coordinate a strategic marketing effort to attract researchers, companies and grants. Estimated cost- at least $2 million annually.
  • Repurposed UNC technology transfer offices- Offices would focus less on licensing and more on industry engagement and job creation. Estimated cost- $3 million annually.
  • Continued development of the UNC Millennial Campuses- Use these new campuses to support feasibility study and planning grants, start-up activities and research collaborations.
  • Support for SBIR/STTR applicants- Increase funding for the One North Carolina Small Business Program and the Small Business and Technology Development Center (SBTDC). Estimated cost- at least $7 million.
  • Additional rural assistance through the North Carolina Industrial Extension Service and the SBTDC- Increase funding and add new programs to support technology adoption in regions with traditionally lower levels of innovation. Estimated cost- at least $1 million annually.
  • Technology- and workforce-training programs- Enhance existing innovation-oriented workforce training programs, particularly in the community college system. Estimated cost- at least $5 million annually.
Download Advancing Innovation in North Carolina at: http://www.ncscitech.com/NCBST_reports.htm.

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Recent Research
Nanotech Safety, Risk and Accountability Issues Raised by National Academies
A recent assessment by the National Research Council (NRC) of  the National Nanotechnology Initiative's (NNI) Strategy for Nanotechnology-Related Environmental, Health, and Safety Research concluded the NNI's research plan does not provide a clear picture of the potential risks of nanotechnology, nor does the plan include adequate research goals and comprehensive research needs regarding nanotechnology-specific health and safety issues.The NRC's assessment finds the NNI's strategy for environmental, health, and safety research is lacking in accountability because no single organization or person has responsibility for health and safety results.

The NNI is the coordination mechanism for the nanotechnology-related activities of various federal agencies, each with their own research and regulatory responsibilities. The NNI does not have the authority to make budgetary or funding decisions. According to the report, the aggregate R&D funding for FY 2007 through 12 reporting agencies was $1.43 billion.

The NRC's assessment process compared the NNI research plan for environmental, health and safety to the nine elements the NRC deems as integral to any effective risk-research strategy:

  • a statement of purpose
  • a series of goals
  • an evaluation of the current science
  • a road map
  • a measure-based evaluation
  • a review incorporating new findings
  • an assessment of resources
  • mechanisms to reaching goals, and
  • an accountability component.
Because the NNI research plan was gauged as lacking several of these elements, the NRC has called for a new national strategic plan for nanotechnology-related environmental, health, and safety research. Due to NNI's structure as a coordination mechanism rather than a central authority for decision making, the NRC says that it would be "extraordinarily difficult" for NNI to develop a national health and safety research strategy.

The creation of a new strategic planning process, including initiatives for nanotechnology-specific health and safety issues, was contained in HR 5940, the National Nanotechnology Initiative Amendments Act of 2008. After passing the House last June, it was referred to the Senate's Committee on Commerce, Science, and Transportation, but did not emerge from the Senate before the end of the session.

Reauthorization of the NNI in the 111th Congress, which commenced this week, is included in the agenda of House Committee on Science and Technology. The overview of the Committee's agenda can be found at: http://democrats.science.house.gov/Media/File/ForReleases/111thSTAgenda.pdf

NRC's Review of Federal Strategy for Nanotechnology-Related Environmental, Health, and Safety Research can be accessed at: http://www.nap.edu/catalog.php?record_id=12559

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Hawaii Expected to Limit Tax Credits for Technology Investments
Tax cuts for economic development purposes are supposed to be revenue-neutral over the long term for the government, with job creation, corporate income growth, and increases in property value ultimately making up for lost revenue. Hawaii's beleaguered tech tax credit, the subject of much debate over the past decade, may have exhausted the patience and pocketbook of Hawaii leaders based on a recent study by the state's Department of Taxation.  

Hawaii's tax credits for research and investment in high-tech companies have cost the state more than $747 million since it was instituted in 1999 through the end of 2007, according to the study. The Department found that the state's investment has yielded only one full-time job at the associated firms per $535,000 in credits. In response to the report and the state's tightening fiscal situation, Governor Linda Lingle announced that more restriction would be put on these credits under the upcoming biennial budget.

Under the state's High Technology Business Investment Tax Credit, Hawaii residents who invested in qualifying business received more than $657 million in income tax credits between 1999 and 2007. Ninety-five percent of these residents made more than $200,000, according to the Honolulu Advertiser in an article that claimed the credits were "geared toward wealthy investors who typically invest at levels allowing them to substantially reduce or eliminate their state income tax." On the other hand, a study requested by the state Legislature in June 2007 found that almost half of all high-tech employers in the state said that the credits played a role in their decision to locate and expand in Hawaii.

The High-Technology Business Investment Tax Credit originally allowed investors to receive a tax credit equal to ten percent of their investment in a high-tech firm, up to $500,000 per year. The credit was expanded in 2001 to allow investors to recoup 100 percent of their investment back in tax credits, spread out over five years. The maximum single-year credit was raised to $700,000. The 2001 changes also removed a requirement that the company be involved in a minimum amount of research to qualify investors for the credit. In 2004, eligibility for the credit was limited by a requirement that investee firms be certified a Qualified High Technology Businesses (QHTBs) by the Department of Taxation.

Many, however, remained concerned about the lack of information about investors and QHTBs. In 2007, the Hawaiian Legislature introduced a requirement that QHTBs submit information about the investors, employment, job creation, wages, revenues, expenses and other data to the state. This information could be used by the state to evaluate the effectiveness of the program. The first such report was submitted to the legislature in November 2007. It revealed that a large portion of these credits were given to performing arts firms instead of research-based companies. Many of the jobs that were produced by these performing arts companies were part-time, temporary and lower-paying than their counterparts in energy and information technology.

The current report poses questions about viability of the current tax credits, but also includes encouraging data on the quality of jobs being created at QHTBs. The average salary of these new jobs is over $76,000, well above the overall state average. Also, participating QHTBs were responsible for 63 percent of high-tech job creation in the state between 2002 and 2007.

Governor Lingle's budget proposal for the 2010 and 2011 fiscal years calls for tightening the Act 221 investment tax credits to conform to the federal tax code. The credits are scheduled to sunset in 2010. High-tech industry representatives had been preparing to push for an extension of the credits during the upcoming legislative session, but may now have to work to preserve them through 2010, according to another Honolulu Advertiser report (available for purchase on the Honolulu Advertiser site).

Download the report at: http://hawaii.gov/tax/pubs/2008hitec_rpt08b.pdf.

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Useful Stats
Department of Energy R&D Obligations per State 2001-2005
Energy issues are anticipated to be a central focus of the Obama Administration. Its first budget request, expected in late February for FY 2010, will show if money for R&D will follow that focus. Which states stand to gain most from an increased emphasis on energy research?

Looking at historical energy obligations is not a crystal ball for the future, particularly as newer, alternative energies take on increased importance. However, historical spending does show where some of the infrastructure is in place to support an initial surge in energy research spending.  Just as some states were better positioned to capture the early increases in biomedical research spending when the research budget doubled for the National Institutes of Health (NIH), there will most likely be early winners in an Energy R&D blitz as well.

SSTI has prepared a table displaying the amount of R&D obligations from the Department of Energy for each state from 2001 to 2005, the most recent years available. The table also tracks the percentage of each state's total federal R&D obligations that originated from the DOE. This statistic shows the critical importance of energy research for some states, or for states with large amounts of federal R&D coming in, the degree of diversification in the state's R&D portfolio.

For the U.S. as a whole, DOE R&D obligations increased every year, rising from $6.67 billion in 2001 to $7.73 billion in 2005. However, as a percentage of total federal obligations dedicated to R&D, the DOE's percentage steadily declined over that same period, from 8.5 percent in 2001 to 7.2 percent in 2005.

Whereas the NIH facilities are heavily concentrated in Bethesda, MD, the Department of Energy labs, while fewer in number, are more widely scattered across the country and, in some cases, were selected for geophysical or demographic considerations because of the nature of their work.

With Sandia and Los Alamos labs, New Mexico led the country with $1.97 billion from the DOE in 2005, just over one-quarter of all DOE R&D obligations. This was followed by California with $1.54 billion, New York at $657 million, Illinois at $597 million, and Tennessee at $470 million. These five states alone accounted for 68 percent of the DOE's total obligations in 2005.

For each year from 2001 to 2005, Idaho had at least 61 percent of their total federal R&D obligations coming from the DOE. Over this same period, New Mexico had at least 60 percent every year from the Energy Department. In a similar fashion, Nevada's percentage didn't dip below 58 percent, Tennessee percentages were consistently above 36 percent, and Illinois' shares of federal R&D from the DOE were always higher than 29 percent.

On the other end of the scale, there were 20 states from 2001 to 2005 where DOE R&D obligations did not exceed 2 percent of the state's total federal R&D obligations.

From a policy perspective, some states were able to improve their NIH standings with strategic investments in their research universities and companies. Similar approaches may be useful for energy-related research, should the 2010 budget request reflect heightened importance for the sector. In interpreting the data, states should note that all federally funded energy research does not originate in the Energy Department.

SSTI's table is available at: http://www.ssti.org/Digest/Tables/010709t.htm
 
The original data for each state, including the R&D breakouts for every agency in addition to the DOE, can be found at the NSF's Federal Funds for Research and Development series. They can be accessed at: http://www.nsf.gov/statistics/fedfunds/.