state budget

Several bills from the 2008 legislative session were signed into law by Gov. Ed Rendell during the past two weeks, including the fiscal year 2008-09 budget, providing enhancements to K-12 programs encouraging science, technology, engineering and mathematics (STEM) and a measure to significantly expand the Keystone Opportunity Zone (KOZ) tax incentive program.
 
Last week, Gov. Rendell signed SB 1412 into law enabling the Pennsylvania Department of Community and Economic Development (DCED) to designate up to 15 new zones, allow for expansion of existing zones, and extend the expiration dates of existing unoccupied parcels. The KOZ program was created in 1999 and provides state and local tax incentives to businesses that develop old industrial sites and underused areas. DCED also will receive $50.7 million in general funds from the FY 2008-09 budget for the Ben Franklin Technology Development Authority Fund -- $1 million less than last fiscal year and $15.1 million for the Manufacturing Extension Partnerships Industrial Resource Centers, down from $15.2 million in FY08.
 
Lawmakers supported several of Gov. Rendell’s STEM proposal’s aimed at building a highly-qualified workforce. The following K-12 initiatives are slated to receive funding in the upcoming fiscal year:

Arizona legislators approved the fiscal year 2009 budget last week, providing funds for proposals aimed at stimulating the state’s economy through investments in higher education infrastructure and increasing R&D activity.
 
Proceeds from an expansion of the state’s lottery will finance $1 billion in bonding for construction projects across the state’s three universities, including $470 million for completion of the Phoenix biomedical campus and upgrades to several buildings.

Coming together for a special one-day session last week, the South Carolina Legislature voted to override a line-item veto issued by Gov. Mark Sanford concerning the funding of the state’s Endowed Chairs program, now called the S.C. Centers for Economic Excellence. The override raises the budget allocation for the program from $20 million to $30 million, which surpasses the original multi-year cap of $200 million set for the Endowed Chairs/Centers of Economic Excellence program, when enacted in 2002. The program uses lottery proceeds to fund strategic faculty positions at the state’s three public research universities: Clemson University, the Medical University of South Carolina, and the University of South Carolina.
 
In a message to the General Assembly dated June 11, Gov. Sanford outlined the following reasons for his office’s concern with the legislation:

Legislators in Alabama, South Carolina and Tennessee recently approved spending plans for the upcoming fiscal year. Highlights of appropriations supporting TBED are included below.
 
Alabama
Alabama legislators wrapped up a special session over the weekend resulting in the passage of a $6.4 billion education budget. Lawmakers agreed to a $5 million increase ($40.8 million total) for the Alabama Math, Science, and Technology Initiative. The appropriation is $5 million less than Gov. Bob Riley’s recommendation of $45.8 million. The initiative, which received a substantial boost during the last legislative session (see the June 13, 2007 issue of the Digest), was created in 2002 to improve math and science education throughout the state.
 
South Carolina
Legislators supported the governor’s recommendation to fund the Endowed Chairs program, providing $10 million in FY09. The endowment program was created in 2002 to receive $30 million per year from lottery profits through 2010. A bill to extend the matching endowment program indefinitely by allowing interest earnings from the fund to be used for programmatic support, H. 4494, did not make it out of conference committee, however.
 
Lawmakers did, however, pass S.1252, a bill allowing the interest earnings from the Centers of Excellence Matching Endowment Fund to be used at the Research Centers of Excellence Review Board’s discretion for additional state awards.
 
Gov. Sanford vetoed a major priority of the state’s three research universities -- $4.5 million to implement SC LightRail, a high speed data network connecting the universities and three partner hospitals. The governor reduced funding for the project by $2.1 million from the General Appropriations bill and $2.4 million from the Capital Reserve Fund Appropriations bill. In his veto message, Gov. Sanford stated that the research universities have other ways to complete the project, specifically through their carry-forward and reserve accounts.
 
Hydrogen research grants were cut by $2.5 million for FY09. Gov. Sanford relayed the same veto message as last year when the grants were also cut, stating that while he is supportive of hydrogen research, tangible results are first needed for the investments already made. Additionally, the governor held his position stating, “We don’t believe the role of the government is to lead the private sector.”

Operating with a $152 million surplus for the current fiscal year, Gov. Mike Easley unveiled his recommended budget adjustments for FY 2008-09 earlier this week, providing additional funding for university projects and expanding TBED initiatives. North Carolina is one of a shrinking number of states to still project black ink for its next fiscal year.
 
Lawmakers approved the FY 2007-09 biennial budget last July, allocating $20.7 billion each fiscal year and making appropriations for fiscal year 2008 (see the Aug. 1, 2007 issue of the Digest). The proposed $21.5 billion budget for FY 2008-09 includes reductions, expansions and adjustments among state agencies, reflecting $396 million in general fund budget cuts and tax increases for alcohol and cigarettes. Appropriations recommended by the governor for the Department of Commerce include:

Beginning in 2003 with its $510 million investment to lure the Scripps Research Institute (see the Oct. 31, 2003, issue of the Digest), the state of Florida has drawn national attention over the past few years for its aggressive pursuit of major life science research institutions. This year, however, it looks like that strategy will have to be put on a temporary hiatus.
 
After extended debate about broadening the sectors that benefit from the Innovation Incentive Fund (IIF) – the source of money used to bankroll the post-Scripps package of incentives available to these institutions – the Florida legislature has decided not to replenish the fund altogether. Though funding may resume in future years, the fund is currently depleted and state leaders are considering reprioritizing their economic development initiatives in light of changing economic conditions.
 
The IIF was established in 2006 to lure larger R&D projects and to take advantage of opportunities to improve the state's innovation economy. Since that time, the fund has mostly been used to attract branches of some of the world's most recognizable life science institutions including the Burnham Institute for Medical Research, SRI International, the Max Plank Society, the Torrey Pines Institute for Molecular Studies, and the Vaccine and Gene Therapy Institute. The fund also provided $80 million for the Miami Institute of Human Genomics.
 
Part of the rationale for the investments targeted to a single sector was to develop a life science cluster in the state. While the original facilities of many of the induced research institutions reside in close proximity to each other in Southern California, Florida’s cluster is taking on a more dispersed shape. Click here to view a map of Florida's six life science investments through the IIF and the Scripps deal.
 
That support, however, was costly. From Scripps through the final deal of the IIF, the state has invested nearly $1 billion. The fund was initially seeded with $200 million in 2006 and renewed with $250 million in 2007. Though Enterprise Florida proposed another $250 million investment this year, the state's overall revenue shortfalls prevented even a $25 million proposal from passing.
 
Scripps and the six IFF organizations have promised to create a total of 1,693 direct jobs. The state is counting on much more than that being created by ancillary and other indirect jobs, as well as additional life science businesses wanting to locate in the area given the concentration of bioscience research centers.
 
While the state's Quick Action Closing Fund will receive another $45 million for the year – and bioscience deals are eligible for those funds along with any other potential relocation – it appears Florida will have to slow the pace of its long-term biotech strategy.

In a deal ironed out earlier this month by Gov. Ted Strickland and legislative leaders, the state will move forward with an economic stimulus plan that borrows far less than the governor’s original proposal while using existing state revenue such as tobacco settlement funds to supplement the plan – a move that has prompted legislative action to secure control of the tobacco funds.

Legislators passed the fiscal year 2008-09 budget last week, increasing spending by 4.9 percent over last year and investing in New York’s Upstate economy despite projected shortfalls for several years to come.
 
Lawmakers approved $700 million for the Upstate Revitalization Fund, an initiative that Gov. David Patterson continued to push forward following the resignation of Gov. Eliot Spitzer last month. In January, former Gov. Spitzer unveiled the Upstate proposal, asking lawmakers for $1 billion to encourage economic growth through targeted investments in high-technology development, agriculture, housing, transportation, and state parks (see the Jan. 23, 2008 issue of the Digest). Many of Gov. Spitzer’s initial requests for funding were fulfilled, including $120 million for the Regional Blueprint Fund - $200 million less than Gov. Spitzer’s recommendation - and $180 million for City-by-City investments, which was $65 million above the governor’s original recommendation. Additional components of the approved fund include:

A growing number of state governments face revenue uncertainties in the near future. More than half now expect budget deficits and shortfalls in the upcoming fiscal year and beyond. Despite the bleak outlook, however, legislators nationwide are continuing to invest in science and technology with many lawmakers projecting high returns to their state in the coming years. Following are highlights of TBED investments and reductions in recently approved budgets in Kentucky, Maine and Nebraska.
 
Kentucky
Recognizing the statewide economic benefits of strategic investments in university research, Kentucky legislators concurred with Gov. Steve Beshear’s proposal to continue support for the Bucks for Brains initiative. Lawmakers approved $60 million in bonds under the fiscal year 2008-10 biennial budget agreement to expand the state’s endowment matching program used to attract high-quality researchers. 
 
The total funds appropriation under the budget agreement for the Economic Development Cabinet is $29.3 million in FY 2008-09 and $31.8 million in FY 2009-10. The budget agreement also includes language directing interest income earned on the balances in the High Tech Construction/Investment Pool and loan repayments received to be used to support the Department for Commercialization and Innovation. The approved Capital budget provides another $20 million for the Economic Development Cabinet for projects and loans approved by the Kentucky Development Finance Authority.
 
Gov. Beshear vetoed $1.2 million each fiscal year in New Economy Funds from the High-Tech Investment Pool to administer the ConnectKentucky program, a statewide broadband initiative. The governor expressed support for the initiative in his veto message but objected to the lack of oversight in spending for the program. Instead, he directed the Cabinet for Economic Development to structure a funding plan and identify program needs for the continuation of the initiative.
 
The Office of Energy Policy would receive $13.4 million over the biennium under the budget agreement, with $3.5 million each fiscal year for the Energy Research and Development Fund. Projects slated for funding include research into clean coal, development of alternative transportation fuels and other coal research targeted solely to Kentucky’s Local Government Economic Development Fund-eligible counties in coordination with state universities and related community and technical college system programs.
 
Also included in the appropriation to the Office of Energy Policy from the Local Government Economic Development Fund is $2 million over the biennium to be matched with federal or private funds to support R&D activities at the University of Kentucky Center for Applied Energy Research directed toward development and demonstration of technologies for carbon management. Technologies may include chemical or mechanical capture, chemical or biological utilization and mitigation through the use of alternative fuel sources.
 
The budget agreement cuts base funding for state universities and the Kentucky Community and Technical College System by about 3 percent in FY 2008-09 with level funding remaining in FY 2009-10, the Louisville Courier-Journal reports.
 
The FY 2008-10 approved biennial budget is available at: http://www.lrc.ky.gov/record/08RS/HB406.htm
 
Maine
Several state initiatives supporting TBED fell victim to budget cuts in a package of revisions to the fiscal year 2008-09 budget, LD 2289, signed into law earlier this month by Gov. John Baldacci.
 
Facing a $190 million revenue shortage, legislators reduced funding for numerous state programs, including $220,000 in FY09 for the Office of Innovation’s Maine Technology Institute Innovation Cluster Program. There is an additional reduction in funding for management and operating costs of a bond program administration by the Maine Technology Institute by $300,000 in FY08 and $150,000 in FY09. Funding for research projects at the Centers for Innovation is reduced by $18,000 over the FY08-09 period.
 
The supplemental budget also reduces Maine Manufacturing Extension Partnership funding within the Department of Economic and Community Development by $50,000 in FY08 and $80,000 in FY09 and reduces funding to the Maine Procurement Technical Assistance Center by $70,000 in FY09.
 
Nebraska
Lawmakers are expected to pass the final version of Gov. Dave Heineman’s Super Advantage proposal (LB 895) this week, according to the Nebraska Department of Economic Development. The bill aims to lure companies that create high-salary jobs that pay well above the state’s average wage by expanding tax incentives.
 
The legislation stipulates that all businesses qualify for the tax breaks, excluding retail. Companies are required to create 75 new high-salary jobs with a $10 million investment or 50 new high-salary jobs with a $100 million investment.
 
The jobs would have to pay 150 percent of the state average wage, which is at least $50,700 based on current wage levels, according to the Omaha World-Herald, or 200 percent of the average wage in the county where the business is located. Qualifying companies will receive a 15 percent tax credit and 10 percent wage credit. Additional benefits include direct sales tax refund and a 10-year exemption on all tangible personal property.

Idaho’s entrepreneurial support centers managed to survive the legislative session with half of their annual appropriation intact in the fiscal year 2009 state budget, despite being zeroed out in Gov. Butch Otter’s budget recommendation earlier this year.
 
Lawmakers allocated $150,000 for the TechConnect Centers within the Department of Commerce – down $150,000 from the previous two years. The legislation requires TechConnect to report to the Joint Finance Appropriations Committee at the interim spring meeting on all activity dating back to FY06, including detailed information on all interactions with businesses, the amount of time and money invested, and the outcome of the investments.
 
The Department of Commerce will receive $33.9 million, down from the estimated $54.9 million in FY08 expenditures. This includes $600,000 for the Business and Jobs Development Fund, $100,000 for the Rural Initiative Program and $100,000 for Small Business Assistance Grants. No funding was included for the Entrepreneurial Fund.
 
The total funds appropriation for colleges and universities in FY09 is $422.8 million, down from $445.1 million in FY08. Lawmakers also restored funding of $1.6 million for the Center for Advanced Energy Studies at University Place in Idaho Falls. The State Board of Education requested $3.8 million to operate a 50,000-square-foot facility expected to serve as headquarters for the program, which was zeroed out by the governor, according to the Post Register.
 
The approved budget also includes $1.4 million for program goals of the Higher Education Research Council and a one-time appropriation of $1.6 million for competitive research grants. Another $1.5 million is earmarked for instructional projects within the State Board of Education specifically designed to foster innovative learning approaches using technology and to promote the Idaho Electronic Campus.
 
Community colleges would receive a slight increase in funding for a total of $30 million, including $5 million in ongoing funding for the new College of Western Idaho.
 
The corresponding budget bills are HB 610, SB 1489 and SB 1494.