SSTI Editorial: States Respond to Call for Innovation

Last week's Digest reported on three reports that have been issued recently raising concerns about America's standing in the world in encouraging innovation. Each of the reports suggested stronger action on the part of the public and the private sector to ensure the U.S. will remain competitive.

Since the beginning of the year, the Digest has reported through its Tech Talkin' Govs series that the states are making investments for the future. This week, we devote this edition of the Digest to a sampling of how the governors are proposing to put money up to match their rhetoric.

Even the most cursory review of state budgets shows that once again the states are setting the direction for the U.S. battle for competitiveness. From $10 million in Connecticut for embryonic stem cell research to new tax credits in Hawaii to spur venture capital, from $41 million in Indiana for building the research enterprise to $38 million for biomedical research in Maine, state action defies classification by geography, size, economic composition and political party. Transcending all of those concerns, the one item that the 14 states described below have in common is a concern for the economic direction and well being of their citizenry.

And while we provide descriptions of 14 states in this issue, activity is occurring and commitment is obvious in each of the states. We hope our friends on Capitol Hill will demonstrate a similar level of commitment as it considers the federal budget in the coming months.

Connecticut

Connecticut is one of a growing number of states considering providing funding for embryonic stem cell research. With a projected $335.6 million surplus for the current fiscal year, Gov. Jodi Rell's budget proposes setting aside $10 million for each of the next two years for stem cell research. The funding would provide grants for qualified stem cell research companies, in turn promoting jobs within the biosciences industry.

Continuing support of $2 million for research is requested for the University of Connecticut. The university has established centers and institutes to encourage and facilitate multidisciplinary research, including the Biotechnology/Bioservices Center, Center for Science and Technology Commercialization, Connecticut Global Fuel Cell Center, Connecticut Information Technology Institute and the Institute of Materials Science.

The governor's budget request includes $3 million for a new 21st Century Skills Fund to help retrain workers who have lost their jobs, specifically those requiring technology skills. It also includes $2.5 million for job creation and job training programs under a new Next Generation Manufacturing initiative.

Gov. Rell's budget is available at: http://www.opm.state.ct.us/budget/2006-2007Books/2006-2007GovBudget.htm

Georgia

With his FY 2006 budget, Gov. Sonny Perdue introduces two new tax credits to promote economic growth in Georgia. One of the two, the Entrepreneur and Small Business Growth Initiative, targets small businesses making capital investments less than $410,000, enabling them to write off up to $102,000. More than $25 million in tax savings would be provided within the first three years to small business throughout the state. The second of the two new tax credits, the Strategic Industries and Innovation Initiative, provides a $500 per job tax credit for expanding companies that are generating jobs. For more information on the new initiatives, visit: http://www.gov.state.ga.us/press/2004/press629.shtml

To promote economic growth and support entrepreneurship in Georgia, the governor requests $22.3 million for the budget of the University of Georgia System for the Advanced Technology Development Center/Economic Development Institute (ATDC/EDI) at Georgia Tech. Included in the Governor's request is $416,914 to establish a Small Business Innovation Research Program and a Science and Technology Policy center at ATDC/EDI. Furthermore, $4.6 million in funds was requested to provide equipment and lab renovations for Georgia Research Alliance projects.

Overall funding for the Georgia Research Alliance would total $27.4 million for FY 2006. The Georgia Research Alliance Innovation Fund would receive $6.4 million, $197,000 less than FY 2005.

Additional information on Georgia’s FY 2006 state budget can be found on the Governor’s Office of Planning & Budget website: http://www.opb.state.ga.us

Hawaii

Gov. Linda Lingle's budget includes proposals for two new tax credits benefiting science and technology enterprises and encouraging venture capital investment. The first, the State Private Investment Fund, would result in $36 million in venture capital fund to invest in Hawaii companies. The purpose of the bill is to include insurance premium taxes to the list of taxes for which tax credits may be provided and to authorize the Hawaii Strategic Development Corporation to borrow funds and transfer credits to credit purchasers, as necessary.

The second, the Business-Research Institute Tax Credit, would promote development and growth of new technology-intensive businesses. This would provide a 20 percent tax credit to companies who partner with the University of Hawaii on research projects in order to foster world class research institutions in Hawaii.

The FY 2006 budget also includes $1.5 million in state funds and $3 million in matching federal funds from the National Science Foundation through the Experimental Program to Stimulate Competitive Research grant.

More information is available on Hawaii’s Department of Budget and Finance website at: http://www.state.hi.us/budget/

Indiana

Gov. Mitch Daniel's 2005-07 biennial budget recommends $41.59 million in each fiscal year of the biennium for the Indiana 21st Century Research and Technology Fund, a 70 percent increase over the FY 2004-05 estimated amount. Created in 1999 by the General Assembly, the fund aims to diversify the state's economy through the development and commercialization of advanced technologies in Indiana.

To assist with capital and operational expenses incurred by Certified Technology Parks, the governor requested $4.5 million each fiscal year for the Technology Development Grant Fund Program in the form of dedicated funds. Within the governor's General Fund request was $621,250 each fiscal year for the Capital Access Program, a small business credit enhancement program that targets high growth, high tech companies.

Gov. Daniel's budget is available at: http://www.in.gov/sba/budget/2005_budget/as_submitted/index.html

Kansas

Gov. Kathleen Sebelius proposes the Kansas Technology Enterprise Corporation (KTEC) receive a total of $12.3 million in state funds in FY 2006, an increase of $19,000 over FY 2005. KTEC is a state-owned corporation that promote advanced technology economic development. Funding for four of the agency's program areas is shown in parentheses: Commercialization ($1.7 million),Mid-America Manufacturing Technology Center program ($3.6 million), Product Development Financing ($1.4 million), and the University & Strategic Research program ($5.6 million), which finances five centers of excellence.

The governor's budget also calls for $2.9 million in federal funding to go to KTEC. The agency will continue work in the coming year on the planning and development of the Bioscience Authority (see the April 19, 2004, issue of the Digest).

More information on the Kansas FY 2006 state budget can be found at: http://da.state.ks.us/budget/gbr.htm

Maine

Gov. John Baldacci proposes a $197 million bonds package to support critical research and development (R&D) projects and includes a $78.9 million Jobs Proposal, which includes spending on natural resource-based industries, job preservation, growth and careers, biomedical R&D and creative economy investments.

At $34 million, supporting and growing biomedical R&D within the state is the single-largest portion of the governor's Jobs Proposal. This includes $22 million for biomedical research statewide, $5 million for R&D at the University of Southern Maine Biosciences Institute, $4 million for UM's R&D Lab Surface Science Technology clean room equipment, and $3 million for the University of Maine Biomedical Research Triangle.

Also included in the Jobs Proposal is $9 million for the Marine Research R&D Competitive Fund, $6 million for the Franklin USDA Aquaculture R&D Facility, $5 million for Forestry and Agricultural R&D Competitive Fund, $3 million for FAME business loans, and $2 million for Small Enterprise Growth Fund Recapitalization.

The governor's General Fund request for FY 2006-07 includes $6 million each fiscal year for the Office of Innovation in the Maine Department of Economic and Community Development. This includes $5.7 million each fiscal year for the Maine Technology Institute, a private, non-profit organization to enhance the competition of Maine’s technology sectors, support clusters of industrial activity within those sectors and create new jobs for Maine residents; $255,000 each fiscal year to assist in management and operation of Applied Technology Development Centers, seven technology incubators; and $156,853 each fiscal year for the Centers for Innovation to support the Franklin USDA Aquaculture R&D Facility.

Gov. Baldacci's budget is available at: http://www.maine.gov/budget/fy0607.htm

New Jersey

Despite a looming deficit and major budget cuts across several departments, science and technology programs and research initiatives fared well in the budget request recently submitted by New Jersey Acting Gov. Richard Codey.

The governor requests continuation funding of $5.5 million in his FY 2006 budget for the initial planning and development of the Stem Cell Institute of New Jersey. During his State-of-the-State Address in January, Gov. Codey announced a $150 million investment in bond funds that remained from a prior securitization for construction and start-up costs of the Institute (see the Jan. 17 issue of the Digest). In addition, he called for a $230 million ballot initiative to fund stem cell research grants.

The FY06 budget also requests $32.3 million for cancer research, prevention and treatment. This includes $23.3 million to support the Cancer Institute of New Jersey. The remaining $9 million is recommended for various cancer programs, according to the governor's office.

The New Jersey Commission on Science and Technology (NJCST) would receive $8 million in FY06 funding, the same amount as the FY05 appropriation. NJCST encourages economic development and job growth in the state by promoting technology commercialization, supporting entrepreneurship, and strengthening research collaborations among universities. The Manufacturing Extension Program, however, would receive a $600,000 decrease from the FY05 appropriation.

Gov. Codey's budget is available at: http://www.state.nj.us/treasury/omb/

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New York

Gov. George Pataki's FY 2005-06 budget recommendations include funding to support New York's existing high tech and biotechnology programs, new investments in technology industries, and tax credits designed to spur job creation.

Included in the budget recommendations is $250 million for a new High Technology and Development Program that would allow the state to make financial contributions in support of priority high tech and economic development projects across the state. The program would support the recently announced $1.9 billion investment by IBM to build and operate the next generation semiconductor plant, as well as other initiatives.

Gov. Pataki proposes tax credits and grants to support Operation SPUR (Strategic Partnership for Upstate Resurgence), a job creation and economic growth initiative announced during his State-of-the-State Address in January (see the Jan. 10 issue of the Digest). Under this proposal, new or emerging businesses affiliated with the Centers of Excellence (COE) would be eligible for the SPUR Tax Credit, and qualified companies working with COEs across the state would be allowed to convert unused tax losses into refundable tax credits. The governor also proposes elimination of the Alternative Minimum Tax and a single sales factor for manufacturing businesses that create jobs or make a significant investment in SPUR communities.

To support high technology programs, tech transfer, and research development programs, the governor recommends $50 million for theOffice of Science, Technology and Academic Research (NYSTAR). The governor also proposes $3.3 million ($75,000 decrease from the FY 2004-05 appropriation) to support the agency's operating costs.

Gov. Pataki's budget is available at: http://publications.budget.state.ny.us/executive.html

Ohio

Investments in new research, product and process innovation, and job creation through the Third Frontier total more than $134 million in Gov. Bob Taft's fiscal year 2006 budget request. In addition, the governor proposes to amend the Ohio Constitution for a special bond issue to be placed on the November ballot. According to the governor's office, funding would be used to invest in research that will help transform Ohio's economy, although the funding level has not yet been released. Voters previously rejected a bond issuance for the Third Frontier (see the Nov. 7, 2003 issue of the Digest).

As part of the governor's budget request, $16.8 million is recommended for the Third Frontier Action Fund to support tech-based economic development by focusing on creating more early-stage capital for start-up companies, early-stage growth companies, and new fuel cell technologies and companies. Also included in the budget as a Third Frontier component is $50 million for the Innovation Ohio Loan Fund to assist companies with below-market financing for investments in fixed assets necessary to develop new commercial products.

Within the Technology Division of the Ohio Department of Development, Gov. Taft recommends a funding level of $15.4 million for the Thomas Edison Program, the same amount as the FY05 appropriation. This program supports economic development by providing technical and business assistance to existing and emerging industry sectors. Also included is $50 million for the Research and Development Loan Fund, which targets large, private sector R&D investments that create high wage jobs.

The governor also requests funding for the creation of an Economic Growth Challenge, based upon recommendations from the Commission on Higher Education and the Economy. According to the governor's office, the Challenge will help the state maximize the world class research, innovation, and technology commercialization capacities of its public and private higher education institutions to drive economic growth and create jobs through three independent, but related programs. Funding requested for the programs include $18 million in each fiscal year for the Research Incentive, $2.3 million in FY06 and $4.7 million in FY07 for the Innovation Incentive, and $500,000 to begin implementation of the new Technology Commercialization Incentive in FY07.

Gov. Taft's budget is available at: http://www.obm.ohio.gov/budget/executive/0607/

Oklahoma

Perhaps the focal point of Gov. Brad Henry's FY 2006 budget is an initial deposit of up to $100 million toward a $1 billion endowment fund to promote research and economic development in Oklahoma. The Economic Development Generating Excellence (EDGE) endowment would be a joint effort, with the state providing one-half and private donations comprising the other half. Interest earned by the endowment would be used to create research teams focusing, in part, on improving the competitiveness of Oklahoma businesses. The initial deposit from the state would come from the state's surplus general revenue collections, which were estimated at more than $140 million in late 2004.

The governor's budget proposes $21.7 million (86 percent increase) for the Oklahoma Center for the Advancement of Science and Technology, including $10 million in combined funding for two S&T initiatives. Half would go toward technology commercialization and health and applied research to support project proposals with outstanding potential, the budget states. The remaining $5 million is allocated for the state's Centers of Excellence program. This money would be dedicated for the recruitment and employment of faculty, research scientists, graduate students and postdoctoral students at Oklahoma's two higher education institutions.

Gov. Henry's FY 2006 budget is available at: http://www.osf.state.ok.us/bud-book.html

Oregon

Commercializing research and Oregon's first signature research center are among those initiatives slated for funding in the governor's 2005-07 proposed biennial budget for the Oregon Economic and Community Development Department (OECDD). Gov. Ted Kulongoski's recommended budget, the "Oregon Principles," is centered around six core principles for targeted investments to deliver a strong return on taxpayer dollars.

Gov. Kulongoski recommends $18.4 million in 2005-07 General Fund support for OECDD, a slight increase from the $18.1 million 2003-05 approved budget. Also included is $9 million from the Lottery Fund for a pre-seed or "proof of concept" fund for commercializing research into business ventures through the newly established Oregon Nanoscience and Microtechnology Institute (ONAMI). The fund would be available to businesses with fewer than 100 employees.

ONAMI, established through a partnership between Hewlett-Packard and Oregon's institutions of higher education, has leveraged more than $22 million from federal research dollars and $3 million from the private sector since opening in May, according to the governor's office.

Gov. Kulongoski's 2005-07 budget is available at: http://www.governor.oregon.gov.

Pennsylvania

The centerpiece of Gov. Edward Rendell's FY 2005-06 budget is a $101 million Job Ready Pennsylvania initiative to improve the state's workforce development system and reform its high schools. The initiative totals $198 million when combined with $71 million of existing state resources and $26 million in private sector match funds.

Included in Job Ready Pennsylvania is $51 million ($15 million increase) for customized job training and other programs to increase the skills of those currently employed. These funds would be allocated by the Department of Labor and Industry. The initiative also includes a $22.8 million increase in the state share of tuition costs, targeting funds to courses designed to impact the workforce. Another $2 million is set aside to support the debt service on $20 million in capital funding for community colleges.

The Department of Community and Economic Development (DCED), the state's lead economic development agency, would receive $360.2 million. For DCED's technology development arm, the budget allocates $67.6 million in general fund expenditures. One of the department's main initiatives, the Industrial Resource Centers (IRCs) program, would get $15.2 million to promote manufacturing, the same level as FY 2004-05. The Ben Franklin Technology Development Authority would receive the lion's share of technology funding with $50.2 million to support traditional and emerging manufacturing industries and small businesses; the total represents a $2.8 million cut from the FY 2004-05 level.

Gov. Rendell's budget is available at: http://www.governor.state.pa.us/governor/cwp/view.asp?a=1101&q=440128

South Carolina

Gov. Mark Sanford's budget targets $55.88 million ($22,800 decrease) in general fund expenditures to the South Carolina Commission on Higher Education (CHE), an agency which shares governance with the boards of trustees of 33 public institutions. Funding for the state's Manufacturing Extension Partnership program ($1.23 million), Experimental Program to Stimulate Cooperative Research ($300,000), and Endowed Chairs Program ($20 million) falls under the CHE line item.

While the budget request for MEP and EPSCoR reflects no change over FY 2004-05 levels, funding for the Endowed Chairs Program would experience a $10 million decrease and be maintained at current available match levels. Gov. Sanford's budget explains, "Of the $90 million budgeted to CHE in the past three years, $72.5 million of it has been awarded, but only $17 million has been distributed due to the difficulty of obtaining matching funding. Given the current excess capacity that is available for match, we believe that a $20 million appropriation in lottery funds would be more than sufficient next year."

The governor also proposes $2.5 million in funds for the South Carolina Research Authority to sponsor projects at the state's three research institutions. Approximately $1 million is dedicated for the Hollings Cancer Center at the Medical University of South Carolina for cancer research and prevention; another $1 million is slated for the University of South Carolina to support nanotechnology research. The remaining $500,000 would go to Clemson University for wireless research.

Gov. Sanford's FY 2005-06 budget is available at: http://www.scgovernor.com/

Utah

The Utah Legislature recently passed a bill that includes $7.35 million to support tech-based economic development by the state's two largest public universities.

Senate Bill 192, backed by the Salt Lake Chamber, appropriates $3 million for the purchase of equipment and supplies to support high tech R&D at the University of Utah. Another $4 million in ongoing funds for high tech R&D recruitment efforts is targeted for the University of Utah and Utah State University. The bill also calls for $350,000 for developing, planning and implementing the high tech R&D initiative. All monies would come from the state's General Fund.

Proponents of SB 192 had wanted up to $14 million to support the high tech R&D initiative, according to the Deseret Morning News of Salt Lake City. Supporters would like to have $301 million, in all, to provide for research infrastructure, regional technology innovation centers and related needs, the newspaper reports.

SB 192 is available through the Utah State Senate, http://www.utahsenate.org/perl/spage/index.pl. To view Gov. Huntsman's FY 2006 budget, including his plan for higher ed, please visit: http://governor.utah.gov/gopb/budget.html