RI Governor to Legislature: Double Slater Funding, Attract VC

Rhode Island, like nearly every state in the country, is facing a projected budget deficit in FY 2004. To deal with a $175 million or 6.6 percent shortfall, 21 agencies are facing budget reductions in Governor Don Carcieri's first budget request to the Rhode Island General Assembly. However, demonstrating his commitment to "make strategic investments to promote job growth," Gov. Carcieri calls for increased support for several tech-based economic development initiatives. Topping the agenda is doubling funding for the Slater Centers of Excellence program to $5 million in FY 2004. Gov. Carcieri also proposed eliminating the state's graduated licensing fees to help Rhode Island start-up tech firms and spending $800,000 to jump-start two biotech initiatives.

The Slater Centers of Excellence — each focused on a specific technology niche — mine Rhode Island's research institutions for ideas with commercial potential, provide modest startup funds and critical business development support for inventors and entrepreneurs who want to start technology companies. Since the program's inception in FY 1998 and a total state investment of $6.8 million, the four independent, nonprofit Slater centers have helped to launch 66 new ventures, 18 of which have already leveraged more than $117 million in private venture capital.

The Governor's request would permit the state to allow the four Slater Centers to make 8-10 investments of $100,000 annually.

Rhode Island's graduated licensing fee, paid whenever a company makes changes to its authorized share of stock, would be replaced with a fixed, flat $160 fee with passage of the governor's FY04 budget proposal. The graduated licensing fee is described in the budget's executive summary as particularly burdensome for start-up technology firms: "Typically, in early phases of business development, when a firm has more potential than actual profits, a venture capitalist will invest real money in the firm in exchange for shares of the company's stock... For a start-up venture that wishes to increase its authorized shares of stock in order to transfer them to a prospective venture capitalist, [the current graduated licensing] fee in the tens of thousands of dollars to do so is counterproductive."

Gov. Carcieri's budget also requested $300,000 for architectural and engineering "seed money to assist in the development of a $10 million biotechnology training facility, which will prepare Rhode Islanders for employment in the growing bioscience industry." Additional financing would be provided by a public-private partnership between the state, biopharmaceutical manufacturers, and the makers of equipment used in the biopharmaceutical manufacturing process.

An additional $500,000 is requested over two years for initial planning of a $50 million Center for Biotechnology and Molecular Biosciences and the University of Rhode Island. The bulk of the funds to establish the center would be part of a bond referendum to be put before Rhode Island voters this fall.