SSTI Digest

While the topic of embryonic stem cell research has been at the forefront of S&T policy since 2001, attention has shifted to the states in the last six months. Last fall, California voters overwhelmingly approved a $3 billion bond issue to support embryonic stem cell research over the next decade. This vote triggered action in a number of states concerned about the loss of researchers to California and increased activity on Capitol Hill to overturn the Presidential directive that limits the use of federal research funds to only those embryonic stem cell lines derived before Aug. 9, 2001.

Recognizing the economic benefits of engaging young people in science and technology, Ontario's McGuinty government recently launched the Youth Science and Technology Outreach Program. The new program links high school students with researchers to support in-depth mentorship experience and postsecondary career advice.

The Provincial government will provide $3 million over three years to fund projects that include speaking engagements, workshops and demonstration projects, short-term projects in a lab or field research site, student science competitions, expert-in-residence programs, and lab mentorships. According to the Ministry of Economic Development and Trade, the goals of the program are to:

The Research and Innovative Technology Administration (RITA) of the U.S. Department of Transportation (DOT) recently released Research Activities of the Department of Transportation: A Report to Congress, identifying DOT’s current and projected research, development and technology priorities.

A newly formed DOT agency as of November 2004, RITA will lead cross-departmental efforts to identify and implement research priorities, and ensure that those investments are effective and align with DOT’s objectives. In addition, RITA will manage the University Transportation Centers program, which invests in university-based centers of excellence to advance innovation, research, education, and technology transfer.

Glenwood Springs, Colo., is the nation’s most entrepreneurial region, according to a study recently released by the U.S. Small Business Administration's Office of Advocacy and the Edward Lowe Foundation. The region's ranking is based on the Regional Entrepreneurship Index, a measure intended to standardize assessment of entrepreneurship within and across regions.

The study, The Innovation-Entrepreneurship NEXUS, attempts to show that innovation without entrepreneurship yields minimal economic impact. The authors note, “Whether they are building new firms or reinventing existing ones, entrepreneurs, through the application of new ideas to products and services, capture locally the economic benefits of innovation.”

The Small Business Administration (SBA) is anticipated to release its latest summary statistics for Small Business Innovation Research (SBIR) awards soon. Unfortunately, the data typically do not include proposal figures, a useful measure of the general effectiveness or need for SBIR technical assistance and outreach in any given state. For several years, the Useful Stats column of the SSTI Weekly Digest has attempted to rectify this omission and FY 2004 is no exception.

For FY04, SSTI has aggregated Phase I award, proposal and award-to-proposal conversion percentages for all 50 states and the District of Columbia for 10 of the 11 participating agencies. (The Commerce Department's National Oceanic and Atmospheric Administration refused to provide proposal statistics.) The table is available at: http://www.ssti.org/Digest/Tables/042505t.htm

Venture capital investments in Montana may have become a little more attractive last Friday as the Montana House of Representatives passed the Montana Equity Capital Investment Act, moving the legislation to Gov. Brian Schweitzer for his consideration and expected signature.

To maximize the rate of return for investors, Senate Bill 133 calls for the creation of a $60 million Montana Equity Fund, which will be used as a provisional financial safety net for investors and distributed as tax credits should investments go badly. Adopting what is commonly referred to as the Oklahoma model, the act also establishes the Montana Capital Investment Board to oversee the fund's activities.

Tech firms in New Mexico received happy tax news on April 4 as Gov. BIll Richardson signed several bills to encourage economic growth across New Mexico. House Bill 410 authorizes the Small Business Technology Tax Credit, created to attract R&D investment into the state by providing small companies with a three-year “tax holiday.” The tax credit is available to businesses with total revenue of $5 million or less, no more than 25 employees, and qualified research expenditures of at least 20 percent.

Gov. Richardson also signed H.B. 518, the SMART Money Initiative, which creates a $10 million fund to be used as loans for companies looking to build or expand in New Mexico, particularly in rural areas. The initiative will be administered by the New Mexico Finance Authority and is estimated to grow to $30 million over 10 years with loan paybacks. The governor anticipates the state's one-time $10 million investment will net approximately 3,000 jobs over the decade.

New York's Empire Zones Program dodged a veto from Gov. George Pataki as an agreement was met with the legislature to restructure the program. The state budget, signed into law last week, extends the program and allows for an additional 12 zones to be created throughout the state.

Under the agreement with the legislature, Gov. Pataki will give up some control of the administration of the program to a new board, which will oversee creation of the new zones and rule on boundary issues for all existing zones, according to an article in the New York Times. The new board will consist of a panel of representatives appointed by the legislature and the governor.

Legislation that would extend and expand the federal research tax credit was introduced in the U.S. Senate last month. Senate Bill 627 seeks to make permanent the research credit that was first enacted in 1981 and is set to expire Dec. 31, 2005. The bill, sponsored by Orrin Hatch (R-Utah), also would provide an alternative simplified credit for qualified research expenses and increase the rates of the alternative incremental credit.

The simplified credit addresses changes in business models and economic circumstances that currently prevents some businesses from using the credit. Under S.B. 627, companies could receive a credit of 12 percent for qualified research expenses that exceed 50 percent of the average of those expenses for the three previous years. The credit would be 6 percent for companies having qualified research expenses in just one year.

Do tax credits pave the way for more investment in R&D and equity investments in new enterprises? Or, do they reward companies and venture capitalists for investments they would have made anyway?

Discussions on these questions can become quite heated and fueled by data supportive of both sides, as two new academic analyses demonstrate.

The recent studies examine two Canadian business tax credits, but come to opposite conclusions. One study reviews the impact of Canadian R&D tax credits, a permanent feature of the Canadian tax code. A second study focuses on a Quebecquoise investor credit established a decade ago to encourage local venture capital to the region.

Gross State Product (GSP) is considered, at least in theory, to be an effective measure of the "value added" by a state's economy. That is, the figure represents the sum of all net industrial activity within the state, where net activity is defined as total outputs (sales or receipts and other operating income, commodity taxes, and inventory change) minus total inputs (consumption of goods and services purchased from other industries or imported).

Comparing states' GSPs is difficult without some form of standardization, such as population or "per capita." Examining standardized trends over several years for an individual state or for comparison among two or more states may serve as a macro indicator of the state's economic health or direction.

To test this, SSTI has prepared a table presenting:

On the final day of March, Gov. Brad Henry signed legislation establishing a $475 million bond issue for a slate of higher education projects, much of which targets research and laboratory facilities. The Oklahoma Higher Education Promise of Excellence Act of 2005, which the governor called "desperately needed," was one of his top legislative priorities for the year (see the Feb. 7, 2005, issue of the Digest). The bill containing the bond issue, H.B. 1191, also provides $25 million in the form of a bond bank to finance future improvements at the state's colleges and universities.