SSTI Editorial: Can the Partnership be Restored?

For those interested in technology-based economic development, you'll be hard-pressed to find any good news in the President's Budget Request for FY 2006 unless, that is, you're hoping to go to Mars or heavily involved in homeland security. It's become a matter of routine to expect bad news when the federal budget comes out. It's never a surprise to see the Advanced Technology Program (ATP) or Community Technology Centers (CTC) on the chopping block, and there's always a guessing game as to what level the Administration will propose for the Manufacturing Extension Partnership (MEP). (This time the Administration proposes $46.8 million for MEP, a $60.7 million decrease from FY 2005.)

What is striking about this year's budget request, though, are two general themes: 1) cutting community and economic development spending, and 2) the lack of any type of strategic response toward building tech-based economies across the United States.

Cutting $3B in Community and Economic Development Spending

The Administration is proposing the elimination of some 28 programs in five agencies that received $6.7 billion in funding in FY05. Replacing some of those programs, the Administration proposes the creation of the Strengthening America's Communities Grants Program, a $3.7 billion initiative proposed within the Department of Commerce to provide performance-based grants for both community and economic development. (See below for more details on the proposal.)

Among the programs to be consolidated under the Administration's proposal are the Economic Development Administration (EDA) and the Community Development Block Grant (CDBG) program.

We have long argued for a more rational approach from the federal government in the area of economic development. In particular, one that fundamentally encourages coordination and collaboration between and among agencies and states. Retooling the federal government's approach to encourage economic growth is a laudable goal. Improving the effectiveness of government programs is even more laudable. And if either of those were truly the goals of this proposal, we would not be as skeptical as we are.

It seems clear to us, however, that the goal behind this consolidation is simply to cut spending on community and economic development programs and try to make it more palatable by wrapping it up in the guise of reform. The simple fact is the Administration's proposal would cut spending on these programs by almost 45 percent with spending slashed by $3 billion from $6.7 billion to $3.7 billion. It would pit community development groups purchasing fire trucks and trying to improve poverty-stricken areas against tech-based economic development trying to encourage the commercialization of university research, growth of technology companies and private investment in innovation.

Strategic Response to Building Tech-based Economies

There is the larger question, however, of how the federal government is responding (or not responding as this budget reemphasizes) to a dramatically shifting global economic reality, one that is becoming more focused on technology and innovation than ever before -- where countries as diverse as Bolivia and China are investing heavily to compete in the technology sector.

Back in the U.S., the federal government will and always should be the largest funding source for basic research. The government also can play, and has played successfully in the past, a critical role in encouraging the commercialization of that research to the marketplace, improving the competitiveness of regions, and catalyzing action on the state and local level.

Yet, this budget continues an almost decade-long lack of creativity on the federal level to addressing the changed economy. Examining key federal TBED programs based on what they received in FY 2000 (the first year the Digest did a thorough examination of the federal budget) and FY 2005 and what the Administration is proposing for FY 2006 vividly illustrates the decreasing involvement the federal government is having in technology-based economic development. (A table showing budget requests for select programs in FY00, FY05 and FY06 is available at: http://www.ssti.org/Digest/Tables/021405t.htm)

While most states have heard the clear message and are aggressively addressing the fact that the economy has changed and new approaches are needed (check any back issue of the Digest for examples), our leaders in Washington, D.C. have not.

Perhaps the only positive result that may stem from the Administration's budget proposal will be discussion on the Hill regarding the real priorities, appropriate approaches, and adequate funding levels required to truly strengthen the ability of America's communities to thrive in a knowledge-based global economy. We hope our Congressional representatives, at least, remember the state partnership that created this country in the first place, helped to make it the world's greatest nation, and provides the foundation for maintaining our edge through education, research and innovation.

As every issue of the Digest has demonstrated for the past nine years, states and communities are making the investments to sustain that partnership. It is unfortunate, with the budget proposal released earlier this week, to see the federal government walking away from it.