SSTI Digest

As revenues continue to tighten, many states entered fiscal year 2027 (FY 2027)—which began July 1 for most—with cautious or constrained spending priorities. With the exception of South Carolina, all states have now enacted their FY 2027 budgets. Most adopted maintenance‑level or reduced spending plans that limited new recurring expenditures, reduced one‑time appropriations, and reprioritized core services such as Medicaid and education.

States and policymakers are seeking a better understanding of the risks and vulnerabilities of extreme heat and its associated weather events; and, in doing so, are beginning to develop strategies for a hotter future, including anticipated fiscal impacts. Arizona, California, Delaware, New Jersey, New York, North Carolina and Wisconsin have all developed and begun implementing those heat action plans. Meanwhile, a recent report on the impact of extreme heat found that Mississippi is among the states with the largest heat-related economic losses. The United States loses an average of $100 billion annually from heat-induced declines in labor productivity.

According to NSF and the SEMI Foundation, “By 2030, the United States is projected to face a shortfall of approximately 127,000 to 157,000 semiconductor and microelectronics workers.” In an effort to counteract the potential challenge to U.S. competitiveness, the foundation is serving as the Hub Operator for the National Network for Microelectronics Education (NNME) and recently announced the launch of the first four Regional Nodes of the NNME. Three of the four nodes are led by SSTI members: Boise State University, the University of Texas at Austin, and the Arizona Commerce Authority. The fourth node is led by NY Creates. 

Illinois lawmakers passed landmark legislation  to regulate America’s leading AI companies. While the recently passed Senate Bill (SB) 315, the Artificial Intelligence Safety Measures Act, mirrors existing provisions in enacted legislation in California and New York, which require frontier AI companies like OpenAI and Anthropic to create, publish and annually update plans to address severe or catastrophic risks from their AI models; the new measure would also mandate annual independent third-party audits of such AI companies on safety issues, which would be a first for any AI legislation in the U.S. Gov. JB Pritzker has indicated he intends to sign it.  

On April 13, Indiana Gov. Mike Braun announced that the Indiana Economic Development Corp. (IEDC) is committing $15 million to a new venture capital initiative designed to attract high-tech Israeli startups to Indiana. The investment is part of the "Iron Nation–Indiana" partnership, a $60+ million initiative aimed at creating a "strategic bridge" to connect Israeli technology firms with Indiana's industrial and research ecosystem. The funding will come from the IEDC’s 21st Century Research and Technology Fund. 

Innovation districts have become a central tool in contemporary economic development, promoted for their ability to revitalize underused urban areas, attract high-growth firms, and strengthen regional competitiveness. Influenced by early work from Bruce Katz and colleagues at the Brookings Institution, many districts were intentionally located in formerly industrial or disinvested neighborhoods and initially delivered clear economic gains.

The proposed Biomanufacturing Excellence Act of 2025 would establish a single National Biopharmaceutical Manufacturing Center of Excellence within the U.S. Department of Commerce’s National Institute of Standards and Technology (NIST). H.R. 6089 was introduced by Rep. Chrissy Houlahan (D-PA) with bipartisan cosponsors and paired with a Senate companion bill (S. 3188) led by Senators Chris Coons (D-DE) and Ted Budd (R-NC). It authorizes $120 million in FY 2026 for NIST to conduct a competitive process to select one non-federal entity to build and operate the center. Eligible applicants include public-private partnerships, institutions of higher education, and multi-institution consortia. Because only a single awardee will be chosen, the proposed legislation likely sets up what is likely to be a stiff competition among many states which have made life sciences and manufacturing key elements of their innovation strategies.

When Daniel Pelaez took a job with the Town of Southbury, Connecticut Public Works Department after his first year at Worcester Polytechnic Institute, he learned lessons that, a few years later, would become the basis for his startup, Cyvl. Daniel spent a season on the public works road crew fixing issues flagged by residents or found by the road foreman. He asked the public works director how they kept track of road conditions, and the director explained that they conventionally paid civil engineering consultants to capture the data by hand by walking and driving the streets with clipboards.

Massachusetts’ Gov. Maura Healey recently proposed a multi-year funding strategy (Five-Year Massachusetts Capital Investment Plan (CIP) [FYs 2026-2030] that  would include investment of $890.4 million, including general obligation bonds and private sector contributions, for many of the state’s TBED and innovation initiatives (programs are outlined below). If approved by the state legislature, the package would also provide capital funding resources to implement the Mass Leads Act passed last fall (see this Digest article for more information).

In 1978, Massachusetts took a risk and made an $8.5 million investment into one of the earliest technology-based economic development (TBED) initiatives in the world. The commonwealth, among the states hard-hit by the global manufacturing restructuring underway at the time, which led to the deep recession of the early 80s, knew it needed to try something different to restore its economy and its long-term competitiveness. A new independent impact analysis of the cumulative impact from what became known as MassVentures, spanning its 46-year history, should serve as an example of what public seeding and sustained support for TBED can deliver as a highly effective, game-changing economic development strategy. 

MassVentures President and CEO Charlie Hipwood said at the report’s release, “MassVentures is one of the most successful and impactful government-initiated programs on a per dollar basis in the United States.” The annualized impact figures and VC-envying returns bear out the proud statement.

As this week’s recent research article mentions, R&D tax credits work, so it isn’t surprising several states have either proposed, amended, or enacted research and development (R&D) tax credits for both the current fiscal (2025) and new (2026) fiscal year in efforts to encourage innovation and economic growth. Some specifically target life sciences or biotechnology sectors while others focus on attracting new or existing companies and startups or to further develop life sciences and/or biotech sectors and hubs.

The following is a brief wrap-up of some states that have recently introduced or implemented notable R&D credits in their innovation space.

With the start of the new year, most governors deliver State of the State addresses or Budget addresses laying out their priorities for the coming year. With revenues for many states relatively consistent with forecasters expectations, lawmakers, with a few exceptions, continue to maintain cautious or constrained views of their funding priorities and proposed initiatives. As a result, many governors in SSTI’s analysis of addresses delivered so far this season, are speaking more about previously implemented programs and their continued successes rather than rolling out many new programs. However, new priorities for growing stronger innovation economies have not been completely overlooked.

The following highlights have been selected excerpted from eight of the 20 State of the States or Budget addresses given between Dec. 2024 and Jan. 16, 2025, by governors from Arkansas, Colorado, Connecticut, Iowa, Kansas, Massachusetts, New Jersey, and New York.