Feb 2004

New initiatives announced by states to stimulate technology growth

As promised in her 2004 State of the State Address, Gov. Ruth Ann Minner released a New Economy Initiative last week that includes several new elements to encourage economic growth in Delaware. The $34 million package is expected to generate at least $16 million more in federal and private match. Many of the elements of the plan were recommended by the governor's Strategic Economic Council.

The largest component of Gov. Minner's proposal is a new $12.5 million Delaware Competitiveness Fund to make one-time investments in companies modernizing their production facilities. As presented in the governor's press materials, the uses for the fund could be quite broad: provided matching grants for implementing new manufacturing processes; bring in new product lines; abate taxes; find buyers for idled facilities; support employee training; and, bring R&D results into manufacturers' operations.

Other elements include:

• Creating a $1.5 million Technology-Based Small Business Seed Fund within the Delaware Economic Development Office to provide nascent tech firms with equity or competitive grants of up to $50,000 for start-up expenses such as lab equipment, working capital, lab and office space, patent filings, or prototyping;
• Injecting an additional $3 million into a Delaware-focused private sector venture fund for equity investment in emerging businesses. The new monies would attempt to leverage $6 million in Small Business Administration funds;
• Establishing a $1 million Virtual Emerging Technologies Incubator to provide statewide support for scientists, engineers and others with emerging technological entrepreneurial ideas to start and grow their businesses;
• Creating a fuel cell research center in partnership with the University of Delaware and private sector to position the state in the emerging hydrogen energy industry. Under the Governor's plan, the state would commit $200,000 annually for five years toward the Clean Energy Research Center; and,
• Offering up to $800,000 in Clean Energy Performance Grants to attract manufacturers of clean energy technology, such as photovoltaic cells, fuel cells and wind energy components.

A three-year $4.5 million commitment is included in the governor's proposal for Delaware's Experimental Program to Stimulate Competitive Research (EPSCoR). The National Science Foundation will match the state contribution on a two-to-one basis.

The remaining $10 million of the package would recapitalize the state's strategic fund, which is used by the Delaware Economic Development Authority for business recruitment, retention and expansion activities.

Funding for the New Economy Initiative would be included in Delaware's FY 2005 Capital Budget and must be appropriated by the state legislature. More information is available at: http://www.state.de.us/governor/new_economy_initiative.doc

MAINE-TBED Financing Included in Proposed Maine Bond Issue
Advanced research grants and equity financing are just two items slated for funding in Maine Gov. John Baldacci's $120 million revenue bond package, unveiled last week. The tech-based economic development (TBED) items would receive a combined $7 million in funding. The largest portion of the governor's package, $65 million, is dedicated to land conservation and parks. Other elements address housing, health and environmental issues.

For Maine's business and research community, highlights include:

• $5 million for Applied Research Fund competitive grants for applied research in natural resource-based industries, including forest bio-products, marine research, aquaculture, farming, and fishing. Administered by the Maine Technology Institute, the funds would be used to support development of new products, improved management practices and new technologies. The state funding is expected to leverage an additional $5 million in federal, private and other nonpublic support.
• $2 million for the Small Enterprise Growth Fund for equity investments of up to $500,000 in small Maine companies with potential for high growth in targeted technology areas. To date, the Finance Authority of Maine has used the fund to invest more than $7 million in promising Maine companies.

An additional $2 million is included for improvements to the State Research Library for Business, Science, and Technology at the University of Maine.

NEW JERSEY - Gov. Wants Money For Stem Cell Research, Tax Credits
"We cannot be satisfied with simply passing stem cell research legislation."

So said New Jersey Gov. James McGreevey during his State of the Budget Address on Tuesday, proposing the state fund research specifically in the controversial area. Stem cell research holds promise for treating and curing a host of devastating diseases and disorders, including spinal cord injury, brain injury, Alzheimer's disease, stroke, Parkinson's disease, diabetes, amyotrophic lateral sclerosis (Lou Gehrig’s disease) and coronary heart disease. The best source for human stem cells are embryos, which raises ethical questions.

Gov. McGreevey wants the state to make an initial investment of $6.5 million in FY 2005 toward creation of a New Jersey Institute for Stem Cell Research. The proposed center would be run by Rutgers, the State University of New Jersey, and the University of Medicine and Dentistry of New Jersey. According to news reports, the Governor's plan calls for approximately $25 million in state funds over five years to create the institute. Additional funding would be derived from private and federal sources.

The New York Times and Philadelphia Inquirer suggest New Jersey would be the first state to financially support stem cell research. Ohio made a $19.5 million commitment to create the Center for Stem Cell and Regenerative Medicine last summer, however. Case Western Reserve University, the Cleveland Clinic and the University Hospitals of Cleveland will provide $20 million in matching funds toward that project (see the June 20, 2003, issue of the Digest).

Gov. McGreevey's budget also requested a $20 million, or 50 percent, increase for the state's technology tax credit transfer program. The credit is one of the few in the country that allows eligible biotech or technology businesses to sell their unused net-operating-loss carry forwards and unused R&D tax-credit carry forwards to any corporate taxpayer in the state for at least 75 percent of the value of the tax benefits. They can then use the money raised for working capital to buy equipment or facilities or for other business expenses.

In FY 2005, half of the credits will be dedicated to companies located in new Innovation Zones, Gov. McGreevey says in his address. The governor's budget address is available at: http://www.state.nj.us

NORTH CAROLINA Biotech Plan Ambitious
A new plan to grow North Carolina's biotech industry to 48,000 jobs by 2013 and 125,000 by 2023 was released earlier this month by the North Carolina Biotechnology Center, a state-supported nonprofit organization. If implemented, the 108-page plan would cost up to $650 million over five years. That figure does not include the "to be determined" cost for 15 of the plan's 54 recommendations.

The 54 action steps span a variety of objectives:

• Enhance the ability of universities to conduct innovative research and transform new ideas into commercial opportunity;
• Encourage universities to support and reward faculty entrepreneurial activities;
• Support the attraction, retention and expansion of biotech companies, with an emphasis on biomanufacturing companies;
• Boost workforce training programs to prepare workers for jobs in research and biomanufacturing;
• Strengthen K-12 math and science education to help motivate and prepare future biotech workers;
• Spread the economic and societal benefits of biotechnology to all areas of the state; and,
• Address the societal and ethical issues of biotechnology research, development and application.

Many of the above strategies would require state investment, while others would ask for support from the state's biotech community. Three immediate priorities are targeted for state investment -- recruit and expand biomanufacturing companies, create and attract biotech start-up companies, and develop the sector throughout North Carolina.

The state's commitment to biotech was jumpstarted last year when the Golden LEAF Foundation and industry pledged $64.5 million to help build a statewide network of biomanufacturing training centers (see the August 22, 2003, issue of the Digest). Other initiatives slated for funding include $75 million for the One North Carolina Fund and $50 million to re-commit to endowed faculty chairs and establish a general fund for faculty start-up packages.

Gov. Mike Easley charged the Biotechnology Center in June 2003 with developing a long-term strategic plan to help guide future state investments in biotech. Business, education and government leaders statewide collaborated in preparing the plan. Led by a steering committee co-chaired by former Govs. Jim Hunt and Jim Martin, more than 120 participants shared ideas for strengthening key areas essential to biotech development.

North Carolina generates about $3 billion in annual biotech revenue, with 150 companies employing 18,500 workers. The state is said to be among the top five in the U.S. for biotech science, commercialization and revenue. It also represents 10 percent of the total U.S. biotech industry, according to the strategic plan.

New Jobs Across North Carolina: A Strategic Plan for Growing the Economy Statewide through Biotechnology is available through the Biotechnology Center: http://www.ncbiotech.org/strategicplan

CALIFORNIA - Treasurer Commits $1.5 billion Toward Green Tech
California's Treasurer Phil Angelides called earlier this month for the nation's largest and third largest pension funds to invest at least $1.5 billion into environmental technologies and environmentally responsible companies. The goal of Angelides' initiative is to improve long-term financial returns for pensioners and taxpayers through investments in the burgeoning environmental technology sector, while also reducing the risks to the pension funds posed by corporate environmental liabilities.

The treasurer’s Green Wave initiative calls on California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System to invest a combined $500 million in private equity investments, venture capital, and project financing to develop "clean" technologies that can provide the pension funds with positive, long-term returns. The two pension funds have a total of $250 billion in assets.

The initiative also calls for the two funds to invest an additional $1 billion into environmentally screened funds through leading active public equity investment managers with proven track records.

CalPERS has already begun studying a clean technology private equity program, with a goal of fashioning a broad, flexible and diversified portfolio of investments that can achieve positive returns in the emerging clean technology investment arena, according to Angelides' press office.

The impact of the investments, should the treasurer's Green Wave Initiative be adopted in full, could be felt across the country, as the two California pension funds are not limited geographically in where they make their investments. With the number of states committing funding and research resources toward clean energy technologies, their green firms could be on the receiving end of some of the investments.

The initiative, when implemented, also could provide a model for other states attempting to grow their clean energy industries.

More information on California's Green Wave initiative is available at: http://www.treasurer.ca.gov/news/greenwave.htm