Arkansas House Passes Bill to Allocate 12-Year Funding Base for R&D, Seed Capital

The perennial or biennial efforts to secure funding from state legislatures to support tech-based economic development (TBED) programs can create significant limitations on the design and execution of programs targeting research or early-stage, seed capital investments. Fixed endowments such as the one created by Wyoming and the Permanent Big Sky Economic Development Fund proposed in Montana (see both stories above) are ideal, but getting the initial payment approved by a legislature can be difficult.

The Arkansas House of Representatives unanimously passed a measure last week taking an alternate approach that may be a useful model for other states to consider: redirecting bond payments, once the bonds are paid in full, to specific TBED uses. In Arkansas's case, annual funding of $500,000 previously used to pay off bonds made for construction of convention or tourist facilities, would support research and seed capital investment programs in the Arkansas Science and Technology Authority (ASTA) through the year 2017.

Through House Bill 2462, the funding would be split evenly between the Arkansas Research Matching Fund and the Seed Capital Investment Program. The Arkansas Research Matching Fund provides state funds to Arkansas colleges and universities to match federal awards for research and research equipment. The Seed Capital Investment Program provides working capital of up to $500,000 to help support the initial capitalization or expansion of tech-based companies located in Arkansas. The program is supported by a $4 million revolving loan fund, initially capitalized by the state with $1.8 million in 1985. No subsequent injections of state money have been appropriated; however, the proposed funding would increase the cash available for new deals. According to ASTA's FY 2004 annual report, three-fourths of the fund already was tied up in portfolio firms.

HB 2462 was referred on March 9 to the Joint Budget Committee for consideration. The brief bill is available at: http://www.arkleg.state.ar.us/