SSTI Digest

The U.S. Department of Homeland Security (DHS) recently announced the recipient universities to conduct security research through five new Centers of Excellence. These centers will develop new technologies to prevent natural and man-made disasters, improve government response to such crises and monitor the nation's shores and borders. The Department's Office of University Programs, under its Science and Technology Directorate, will manage the five new centers, which will each receive multi-years grants of up to $2 million per year for 4-6 years.



The five centers include:

With a budget management plan for the current fiscal year making its way through the state legislature, Gov. Janet Napolitano announced increased funding and borrowing for university programs and research initiatives in her fiscal year 2009 budget recommendation.



Universities would receive a net funding increase of $25.4 million over the FY08 appropriation under the governor’s recommendation, including $7 million to recruit, teach and retain teachers in Science, Technology, Engineering and Mathematics areas. Gov. Napolitano recommends $3 million in FY09 to the University of Arizona (UA) and $2 million each to Arizona State University-Tempe and Northern Arizona University to expand on a student loan program for math, science and special education teachers approved by lawmakers last year (see the June 27, 2007 issue of the Digest). Additionally, UA’s budget includes $1.5 million to expand and implement programs for teacher training, entrepreneurship and commerce- and defense security-related disciplines that will meet the workforce needs of the southern parts of the state.



Lawmakers will be asked to approve a $470 million bond proposal that would be used to complete the Medical Education Building and Arizona Biomedical Collaborative at the Phoenix Biomedical Campus. This request – within the governor’s capital budget for universities – proposes establishing a Capital Acceleration Program to create a pool of funds that the universities can leverage to meet the financial obligations of two phases for the project, which totals $1.4 billion.



Under the proposal, Phase I, which requires the approval of $470 million to complete the Arizona Biomedical Campus, would be structured so that initial payments on the bonds begin in FY10. Phase II addresses remaining capital needs on each university campus and requires $966 million, with debt service payments beginning in FY11.



Gov. Napolitano’s FY09 budget offers continued support for TBED-related initiatives funded last year, including $25 million in the coming year for the Arizona 21st Century Fund and $1.5 million for the Arizona Biomedical Research Commission (see the June 27, 2007 issue of the Digest). Additional non-appropriated funds of $12 million (a decrease of $900,000) from the Health Research Fund and $4.4 million (the same level as FY08) from the Disease Control Research Fund also are included for the commission. These funds are statutorily appropriated and not subject to the annual and biennial appropriation process.

 

The University of Arizona Health Sciences Center is slated to receive $96.5 million in total funds – a slight increase over the FY08 appropriation of $95.1 million.



In October, Gov. Napolitano unveiled a newly structured model for economic development in the state through the Arizona Economic Resource Organization (AERO, see the Nov. 7, 2007 issue of the Digest). To strengthen the research administration and enable AERO to continue building a community and global-based focus, the governor recommends $774,400 for FY09 funding. This includes funding for two labor market economist positions and two previously unfunded vacant research positions to assist rural and small Arizona communities.



The funding level for the Department of Commerce is $19.8 million in total funds ($16.9 million from the General Fund), an increase over the FY08 allocation of $18.9 million, and $2 million is included for rural broadband connectivity within the Government Information Technology Agency (GITA) budget, an initiative that requires a partnership between the Department of Commerce and GITA, budget documents note.



Gov. Napolitano’s FY 2009 budget recommendation is available at: http://www.ospb.state.az.us/

The second installment of the Tech Talkin’ Govs series includes highlights from state-of-the-state, budget and inaugural addresses from Arizona, Colorado, Louisiana, Missouri, Nebraska, South Dakota, Vermont, and West Virginia.

Steven Zylstra is the new president and CEO of the Arizona Technology Council.

Listen or read the business news media and the dreaded “R” word, recession, is back in common parlance. State revenue cycles seem to feel it first. Already, with more than a dozen states projecting budget deficits for both current and coming fiscal years, it seems certain: Spending cuts in programs and services and/or tax increases are imminent. The nationwide housing market slump, the rising cost of energy and health care, and increased state spending are cited as a just a few of the reasons for shortfalls in state budgets. The lack of a fiscal year 2008 federal budget, now nearly one-quarter over, does not help state fiscal planning.

 

In June, the Government Accountability Office released State and Local Governments: Persistent Fiscal Challenges Will Likely Emerge within the Next Decade, which found that an unexpected explosion in health-related expenditures combined with no new policy changes will result in fiscal challenges for state and local governments over at least the next 10 years (see the Aug. 8, 2007 issue of the Digest).

 

Then, last week, the U.S. Conference of Mayors released a report forecasting a continued national economic slowdown into the coming year, negatively impacting state and local revenue. Addressing the fiscal impact of the mortgage crisis, the report predicts “profound economic effects” in 2008, including a $166 billion loss in U.S. gross domestic product and 524,000 fewer jobs created across the nation. State and local government revenue sources will be affected as local property tax growth generated from real estate values slows, consumer spending on taxable goods declines, and state revenues from realty transfer fees are diminished, the report states. 

 

And today, a report released by the National Association of State Budget Officers (NASBO) finds that although state fiscal conditions remained strong for most states in FY07, state spending growth is expected to be below the historical average in FY08 and many states face significant challenges in health care expenditures. The Fall 2007 Fiscal Survey of States reports overall conditions across the states varied widely in FY07, with some states cutting taxes and increasing funding for programs while others relied on budget stabilization funds and spending cuts to address lower-than-anticipated revenues.

 

While the outlook is certainly grim, conditions are not expected to be as harsh as the 2001-03 period following the national recession, during which time states were forced to close $264 billion in budget gaps over five years, according to an article in Stateline.org. Scott Pattison, executive director of NASBO, said in the article that states enjoyed a higher-than-normal growth rate in tax revenue over the past few years and are getting back to normal rates.

 

In the coming months, governors from across the nation will present their State of the State Addresses and release their budget recommendations – a key time to unveil new and expanded TBED programs.

 

While it remains to be seen what states can and cannot afford to fund, TBED programs have proven not exempt from the chopping block when revenues were tight across the country before. Shoring up and securing client and legislative support should be happening now for most states, regardless of their financial forecast. Following is a synopsis of recent news announcing budget deficits throughout the states and possible short- and long-term solutions from state officials.

 

Arizona

With a projected $600 million shortfall in the current two-year budget cycle, Gov. Janet Napolitano’s Office of Strategic Planning and Budgeting released in September a Budget Management Plan focusing on strategies to reduce state agency spending, capital financing in place of paying cash for school construction, and tapping into the state savings account. Current projections reveal the deficit is closer to $800 million and could reach $1.5 billion by January. Gov. Napolitano announced last month that tax collections continue to run far behind what was anticipated when lawmakers passed the budget earlier this year, according to an article in the Arizona Daily Star. The article states that Gov. Napolitano plans to present lawmakers with a plan to bring the budget into balance without raising revenues.

 

California

The nonpartisan Legislative Analyst’s Office released last month the Tax Expenditures Review, revealing that under existing conditions, the state would end the current fiscal year with a $1.9 billion deficit. Additionally, the state faces an $8 billion shortfall in FY 2008-09. When the FY 2007-08 budget was enacted in August, the budget plan focused on closing the gap between general fund revenues and expenditures for the fiscal year and maintaining a $4.1 billion reserve; however, since that time, the budget situation has deteriorated by almost $6 billion, according to the report. This is attributed to continued “softness” in the state’s economy lowering forecast of revenues, lower property taxes, a likely delay in the sale of a government agency, delayed implementation of new tribal gambling compacts, and a court-ordered payment to the state’s teacher retirement system. In FY 2008-09, revenues are projected to grow by 4.6 percent, while spending is projected to grow at 7 percent. In order to balance the FY 2008-09 budget, the state will have to adopt nearly $10 billion in solutions, the report states.

 

Florida

Gov. Charlie Crist convened a special legislative session in September to address an impending budget deficit that analysts have called the worst the state has faced since 2001, according to an article in the Miami Herald. In October, lawmakers approved $1.1 billion in budget cuts to balance the current fiscal year budget. The plan included a 5 percent increase for university and community college tuition and additional cuts were made in health care and the court system. If the housing market continues to remain stagnant as predicted, economists foresee a $2.5 billion deficit for the FY09 budget year. Florida, which has no state income tax, is one of several states to be severely affected by the declining housing market because of its reliance on real estate taxes.

 

Maine

With the start of a new legislative session in January, lawmakers are challenged with filling a $95.2 million deficit in the general fund over the 2008-09 biennium. The state’s Revenue Forecasting Committee released last month its revenue projections through fiscal years ending 2011 for the general fund, highway fund, fund for a healthy Maine and medicaid-dedicated revenue taxes. While Maine has not been as severely affected by the sub-prime mortgage crisis as other states, the skyrocketing cost of oil poses a significant problem for the state’s economy, according to the document. The decrease in general fund revenue was led by sales and use tax revenues, which were down $21 million for FY08 and $19.6 million in FY09. The only major tax line to show improvement in FY08 was the individual income tax, which was raised by $18 million.

 

Maryland

Facing a $1.7 billion structural deficit, Gov. Martin O’ Malley convened a special session in October to cut spending and reform Maryland’s tax structure. Last month, the governor signed legislation containing $1.3 billion in tax increases and approved a voter referendum that allows Maryland to capture an additional $700 million in slots revenue. The measure will be placed on the ballot in November 2008. Under SB 2, the Tax Reform Act of 2007, the state sales tax and vehicle title will increase by 1 percent, the corporate income tax will be raised from 7 percent to 8.25 percent, the state income tax rates for higher income earners will be raised, and the tobacco tax will be doubled to $2 per pack of cigarettes.

 

Massachusetts

Administration and Finance Secretary Leslie Kirwan announced last month the state is facing a $1.3 billion FY09 budget shortfall, adding that the state will likely have to dip into reserves to balance this year’s budget, according to an article in the Boston Globe. The article states that Kirwan told reporters the state is suffering from a “spending problem.” Gov. Deveal Patrick has introduced in the past proposals to sanction casinos, allow more local option taxes, and raise corporate taxes. Kirwan said in the article that state agencies are facing nearly $400 million in projected deficiencies and that lottery revenue shortfalls will likely fall below $200 million. Gov. Patrick’s budget recommendation is expected in January.

 

Michigan

Fiscal analysts are predicting a budget shortfall of about $500 million in FY09, according to an article in the Detroit News. Lawmakers recently approved $1.5 billion in tax increases to fill a deficit for FY08 (see the Nov. 7, 2007 issue of the Digest). Soaring health care and prison costs and a drop in state revenue are just a few reasons for the downfall. On the upside, the state could save $200 million if changes in federal reimbursement for Medicaid occur, the article states.

 

Minnesota

Minnesota is expecting a $373 million deficit for FY 2008-09, according to a fiscal report released last week by the Minnesota Department of Finance. Gov. Tim Pawlenty said in a press release that the shortfall is manageable, amounting to approximately 1 percent of the state general fund budget. State government should halt spending and not raise taxes as a solution, Gov. Pawlenty said. The report also projects a structural shortfall of $211 million for the next biennium.

 

Nevada

Last month, a memo was issued by Andrew Klinger, director of the Nevada Department of Administration, directing an increase from 5 percent to 8 percent in the amount agencies may lose from their budget reserves. The memo explains that the Budget Division has deemed the cuts necessary based on revised projections of the general fund shortfall for FY 2008-09. The increase will reduce general fund spending by state agencies by $286.1 million. Agencies are asked to submit recommendations for making those cuts by Dec. 5. The 3 percent increase brings the total reduction in line with the projection of how much the sales and use tax will actually fall short, according to an article in Nevada Appeal. In October, the Department of Taxation released data that indicate gaming and sales tax revenue was down for the fiscal year by $21 million, and projections compiled by the State Executive Budget Division indicated lower than expected revenues for this and next fiscal year. Gov. Gibbons requested all state agencies to institute a hiring freeze and identify reductions in anticipated spending.

 

New Jersey

Gov. Jon Corzine is expected to unveil his budget proposal for FY09 in January, which is not expected to include funding for new programs as previously anticipated. New Jersey is $3 billion short for FY09, and in October, the governor asked his Cabinet to find ways to cut spending, according to The Star Ledger. State debt has doubled since 2000 and is costing about $3 billion this year, according to the article. A new proposal would pay at least half of the $32 billion in state debt by increasing highway tolls.

 

New York

The New York State budget office released last month the 2007 Joint Report Receipts and Disbursements, projecting a general fund budget gap of $4.3 billion in FY 2008-09 and $6.2 billion in 2009-10, absent gap-closing actions. Based on current data, the budget shortfall is attributed to declining revenues from Wall Street, which the state typically relies on for 20 percent of its annual tax revenues, the ongoing housing market contraction, and uncertain credit market conditions. The report forecasts that national and state economic growth will grow modestly in 2008. The revenue outlook for the current and upcoming fiscal year remains uncertain given the current economic and Wall Street turbulence, the report states.

 

Rhode Island

Rhode Island faces a budget deficit of $400 million to $450 million in the next fiscal year -- nearly double Gov. Donald Carcieri’s original projection. The state is currently facing a budget shortfall of $150 million in the current fiscal year. Last month, Gov. Carcieri released a list of 483 state positions being eliminated or targeted for elimination. The state has targeted a total of 536 positions to be eliminated either immediately or through the course of the current fiscal year. The job cuts are projected to save about $41.6 million per year beginning next fiscal year, according to the governor’s office. The goal is to achieve approximately $100 million per year in savings by reducing the size of the state workforce, beginning in FY09. The governor will consider major additional cuts to meet his legal requirement to propose a balanced state budget in the coming year. A representative from the Department of Labor and Training testified last month that job growth – particularly in the manufacturing sector – has significantly slowed, resulting in less income tax revenue, according to an Associated Press article.

 

Tennessee

Last month, the Department of Finance and Administration reported that significant corporate tax refund requests led to a $100 million shortfall in October collections. Finance and Administration Secretary Dave Goetz said in a press release, “Continuing to be conservative is critical as we begin to navigate what appears to be a softening economy.” Year-to-date collections for three months were $135.9 million less than the budgeted estimate. The state may consider using money from the reserve fund, leading to spending cuts on state programs if sales and corporate taxes do not rebound.

 

Virginia

In anticipation of a $641 million budget shortfall in its current two-year budget cycle, Virginia Gov. Tim Kaine outlined steps to cut spending earlier this year. In a speech to the Senate Finance, House Finance and House Appropriations Committee, Gov. Kaine said Virginia is seeing signs of slower rate growths in jobs and income and faces significant challenges in the next biennial budget, as expenses grow in some of the state’s largest programs. To address the shortfall, Gov. Kaine directed agencies to cut spending by 5 percent and curtail any discretionary spending. Gov. Kaine said using short-term strategies to balance the budget in the current biennium will not put the state in the position it needs to be in for the next biennium. To this end, the governor will closely examine current programs for the next budget cycle to determine if they should be changed or discontinued.

In an effort to streamline economic development strategies and market the state as a globally competitive place to pursue new business ventures, Arizona Gov. Janet Napolitano recently announced the creation of a new model for economic development last month.

 

A year-long study on the overall economic health of the state resulted in the creation of the Arizona Economic Resource Organization (AERO) and a newly expanded Arizona Global Network (AGN). AERO will serve as an umbrella organization for all economic development activity in the state to coordinate and leverage assets, set workforce strategies, and provide policy leadership and branding. 

 

The partnership will operate as a nonprofit board, combining the efforts of government agencies, private businesses and universities. Gov. Napolitano will serve as AERO chair, which includes the integration of the following entities: Commerce and Economic Development Commission, Greater Arizona Development Authority, the Arizona Department of Commerce, Science Foundation Arizona, and a formalized Arizona Global Network. Directors and board members were announced last week.

 

The newly expanded AGN is charged with recruiting new companies to the state and promoting the state globally. In a video released in conjunction with her announcement, Gov. Napolitano said Arizona needs to diversify its economic base and raise per capita income. Over the past decade, the state has been overdependent on the residential housing market, which is facing a downfall, Napolitano said.



A recent analysis of key indicators in metropolitan Phoenix conducted by Arizona State University and The Arizona Republic echoes Gov. Napolitano's sentiment. The analysis, called Arizona Indicators, found that Phoenix is losing ground to peer cities in the global economy and experiencing a deteriorating quality of life. Similar cities have reinvented their economies around research and technology, and in order to compete, Phoenix needs to attract more engineers and scientists, retain an educated workforce, and create a sense of urgency among policymakers and business leaders, the analysis states.

 

More information about AERO is available from the governor’s office at www.governor.state.az.us/. For additional information regarding Arizona Indicators, please visit www.asu.edu/indicators/about.htm.

Gov. Rick Perry appointed Bill Morrow as the new chairman of the Texas Emerging Technology Advisory Committee. Morrow replaces David Spencer, who remains a member on the committee.

Earlier this year, Arizona Gov. Janet Napolitano and the Arizona State Legislature committed $100 million over four years to support Science Foundation Arizona, a nonprofit public-private partnership to coordinate the state’s R&D investments in science and technology. The catch? The law required a dollar-to-dollar match of non-government funding of the annual $25 million allotment before the state could release its funding to Science Foundation Arizona.

 

The initial $35 million appropriation for 2007 did not come with the restriction. Science Foundation Arizona allocated $30 million of that funding to 55 recipients for projects ranging from improving science and math education to commercializing new research discoveries.

 

The first funds to be affected by the tight purse strings are for fiscal year 2008, which potentially created a sizable hurdle for developing and sustaining a long-term S&T investment strategy for the organization and state.

 

In steps the Stardust Charitable Fund with a $25 million check to cover the FY 2008 obligation. The Stardust Charitable Fund, a foundation established by the Scottsdale-based real estate developer Stardust Companies, provided Science Foundation Arizona a $2.5 million grant earlier this year. Prior to the $25 million contribution, Stardust had donated approximately $10 million in the areas of science, research, engineering and innovation as part of its Discovery and Innovation Initiative.

 

More information is available at www.sfaz.org.

Over the past few months, several new research park announcements have been made, including a $2.5 billion public-private investment in Kentucky. Gov. Ernie Fletcher last month announced plans for the expansion of the Louisville Health Sciences Campus. The project will encompass the 30-block radius that houses the Louisville health sciences campus. A current U of L parking lot, known as the Haymarket property, will be converted into a 700,000-square-foot state-of-the-art laboratory and office space.

 

The project is being financed through a proposed tax increment finance (TIF) in which a portion of the tax revenue generated by the 20-year capital investment – about $300 million – is captured for reinvestment in the development. The TIF increment is expected to be enough to complete construction of the research park and many components of the U of L Health Sciences Master Plan, according to the governor’s office. Officials hope to begin initial investment and construction soon after the anticipated approval by the state’s TIF Commission.

 

New Mexico State University’s (NMSU) Arrowhead Center recently struck a deal with a private company to begin construction on the research park announced in January. Development on the first 11 acres of land will be completed in two phases with up to seven buildings and 120,000-square-feet of office and laboratory space for businesses that partner with NMSU. The research park is a public-private partnership, and the development company has agreed to donate 5 percent of the net proceeds of the development of the NMSU College of Business for an entrepreneurship program.

 

The Purdue Research Foundation announced the creation of a new technology park to help high-tech entrepreneurs create new businesses and promote the expansion of existing companies. The new Purdue Accelerator Park is the fourth technology park owned and operated by the Purdue Research Foundation and will accommodate up to 75 businesses and create 1,500 jobs with an average annual salary of $54,000, according to Purdue University. The accelerator park will include a 100,000-square-foot industrial flex building and a 50,000-square-foot multi-story office building.

 

Last month, the Economic Development Administration awarded a $100,000 grant to the University of Colorado at Colorado Springs to fund the Research Park business plan. The grant will supply a portion of the funds needed to create a research park targeting and promoting new industries to meet the need for new jobs.

 

A new life science based campus is scheduled to open this month in Worcester, Mass. Worcester Polytechnic Institute (WPI) and Worcester Business Development Corporation will open an 11-acre mixed use complex called Gateway Park to serve as a stimulus for economic development and a catalyst for life science cluster expansion in the region and throughout the state, according to WPI. Gateway Park will feature 750,000-square-feet of R&D and office space geared toward the life sciences.

 

Kent State University announced plans to develop a research park to house high-tech business accelerators. The Kent State Centennial Research Park is located in the former 10-acre bus garage on the Kent State Campus. The initial phase of the project is funded by a portion of the Ohio Third Frontier Commercialization Project for the Flexible Liquid Crystal Film Manufacturing Alliance. The alliance is supported by an additional $8 million in matching funds from the collaborators. 

 

The University of North Dakota (UND) Research Foundation broke ground last month on a $14 million Center of Excellence in Life Science and Advanced Technology facility at the new Research Enterprise and Commercialization Park. The 50,000-square-foot facility will house UND research ventures partnered with outside companies and corporations. Gov. John Hoeven presented a $3.5 million check to UND for the facility in December as part of the state’s Centers of Excellence program. Last month, the U.S. Department of Commerce Economic Development Administration boosted the effort, providing an additional $1.5 million for the facility.

 

A formal agreement was reached between the University of Arizona (UA) and builder, KB Home, on a land transaction that will swap 124 acres at the UA Science and Technology Park for about 65 acres that will serve as the future site of the Arizona Bioscience Park. Development for the Bioscience Park is expected to begin in 2008 and will consist of nearly 3 million sq. ft. of office, laboratory, educational and residential facilities. The Bioscience Park is designed to provide the facilities and infrastructure required by start-up and mature biotech companies, according to UA. 

 

Green County Industrial Development Agency, located in Coxsackie, N.Y., is partnering with Galesi Management Corporation and IDC Architects to develop a 60,000-square-foot mixed-use technology space at the Greene Business & Technology Park. The space will include all levels of clean room specifications for semiconductor and nanotechnology firms.

 

With a $70 million investment from the state and contributions from numerous public and private entities, South Carolina’s Innovista Research Park represents a $250 million total investment that is designed to raise the state’s per capita income level. Located at the University of South Carolina in Columbia, the first phase, Horizon Center and Discovery Plaza, will house university researchers and is expected to be completed in 2008. Horizon Center features 125,000 sq. ft. with dry and wet lab space. Discovery Plaza will consist of university wet lab research space with a privately developed building for private-partner companies.

Arizona Technology Enterprises, the organization responsible for overseeing licensing and commercialization activities at Arizona State University, has selected Augustine Cheng as its new managing director.

With less than two weeks to go before the new fiscal year, Arizona and New Jersey lawmakers approved funding for cutting-edge research at the close of their 2007 legislative sessions last week. Following is a synopsis of the TBED initiatives slated to receive funding under the respective budget agreements.

 

Arizona

Following several months of debate, Arizona lawmakers reached a budget agreement last week that is on target with many of Gov. Janet Napolitano’s priorities, including investments in innovation and education (see the Jan. 22, 2007 issue of the Digest).

 

The fiscal year 2008 budget, signed earlier this week by Gov. Napolitano, includes $25 million per year over the next four years for the 21st Century Fund "to promote bioscience programs and research." The fund was created by the legislature in 2006 as a public-private partnership to invest in medical, scientific and engineering research programs (see the June 26, 2006 issue of the Digest).

 

The Arizona Department of Commerce budget includes $1.8 million to foster business initiatives that include growth in high-tech sectors, foreign direct investment in Arizona, and strategic R&D.

 

The budget also includes increased funding for higher education and K-12 to support Gov. Napolitano’s One Arizona Education Initiative. General fund spending for universities would increase by 11.9 percent over last year, which includes $25 million for biomedicine initiatives. This funding is slated to:

Augustine Cheng was appointed managing director of Arizona Technology Enterprises.