As Budgets Tightens, State TBED Investments Grow More Targeted

With less money to spend on risky endeavors, many states are taking more targeted approaches toward economic development, seeking out sectors of the economy they consider most likely to grow and be sustainable beyond current conditions. In Hawaii, for example, lawmakers established an Aerospace Advisory Committee this session seeking long-term growth in aerospace-related industries. Missouri legislators, meanwhile, passed an "emergency jobs bill" expanding tax credits for technology business projects, and North Dakota lawmakers increased funding for agricultural research and infrastructure. The following overview provides highlights of approved budgets and legislation from the 2009 sessions in Hawaii, Missouri and North Dakota.

Hawaii
Lawmakers agreed to a scaled-back restructuring plan for the Department of Business, Economic Development and Tourism (DBEDT), separating one division from the department and transferring two attached agencies to other departments.

A proposal introduced earlier in the session called for the removal of several programs from DBEDT, including transferring the state's lead TBED organization, the High Technology Development Corporation (HTDC), to the Department of Commerce or the higher education system. Although the legislature has indicated they will likely review DBEDT again next year, only the Creative Industries Division, which supports copyright-based industries such as film and digital media and performing and visual arts, would be split up in the coming year, according to an article in the Honolulu Advertiser.

Placing new restrictions on Hawaii's high-technology investment tax credits, SB 199 establishes a temporary 80 percent tax credit cap and restricts carryover credits on the high-tech business investment tax credit and the technology infrastructure renovation tax credit for investments made between May 1, 2009 and Jan. 1, 2011. Some in tech community voiced concerns that the changes could drive away out-of-state investors, but legislators said it would plug a $150 million hole in the state budget, reports the Pacific Business News. Gov. Linda Lingle's budget proposal called for tightening the investment tax credits, known as Act 221, to conform to the federal tax code (see the Jan. 7, 2009 issue of the Digest).

Gov. Lingle signed Act 052, establishing an Aerospace Advisory Committee within the Office of Aerospace Development of DBEDT to advise the legislature and state agencies in monitoring, assessing and promoting aerospace development statewide. The committee will track state, national and global trends in aerospace development, identify opportunities to expand and diversify aerospace-related industries in the state, and develop public-private partnerships to support the growth of aerospace development. The 16-member council will be made up of representatives from the aerospace industry, economic development boards, and members of the department of education and university and community college system.

The 2009-11 biennial budget passed by the legislature earlier this month includes $10.8 billion in FY10 and $10.4 billion in FY11 for the state's operating expenses and reflects approximately $800 million in total-reductions, reports the Honolulu Advertiser.

For HTDC, lawmakers approved $9.8 million in FY10 total funds and $9.7 million in FY11 total funds, including $3.8 million each year in special funds, $1.5 million each year in revolving funds, and the remainder from general funds and federal funds. In the 2007-09 biennium, HTDC received just under $19.6 million in state appropriations. HTDC facilitates the development and growth of Hawaii's high technology industry.

The total budget amount approved by the legislature for the Hawaii Strategic Development Corporation (HSDC), is $6.9 million for each fiscal year. HSDC works to develop a sustainable venture capital industry in Hawaii.

Gov. Lingle has until July 15 to act on the 2009-11 budget and remaining legislation.

Missouri
A major focus of the Missouri legislative session centered on a jobs bill, HB 191, which expands the state's Quality Jobs and BUILD incentives programs, providing financial resources to help businesses expand and create jobs, according to the governor's office.

The passed bill eliminates the $500,000 per-company annual cap on technology business projects within the Quality Jobs tax credits, eliminates the per-company annual cap on high-impact projects within the program, which is currently $750,000 to $1 million, and increases the state's exposure for the program from $60 million to $80 million. The legislation also increases the total amount of tax credits that can be authorized annually for the BUILD program from $15 million to $25 million. A proposed tax credit to pay for a percentage of company research expenses was left out of the final version of the bill, reports the Associated Press.

Providing supplemental appropriations for FY09 through the state's share of federal stimulus funds, Gov. Jay Nixon also signed HB15, which includes $30.9 million to the Department of Economic Development for employment and job training programs. A portion of the funding will support the Next Generation Jobs Team, a summer employment program connecting youth with internships and work experiences at high-tech, cutting-edge businesses beginning this month, according to the governor's office.

In addition, lawmakers passed a $23.1 billion FY10 budget last month, allocating a combination of state and federal funds to support job creation programs throughout the state. The budget for the Department of Economic Development allocates $13.3 million in FY10 from the Life Sciences Research Trust Fund for the Life Sciences Research Board to fund projects related to increasing Missouri's research capacity. This is about the same amount approved for new grants in FY09. Established in 2003, the fund was created to support life science research, commercialization, and technology transfer using a portion of the state's tobacco settlement funds.

The General Assembly did not fund the governor's $60 million Missouri Promise proposal. The plan would have expanded the state's A+ Program, which provides community college tuition to eligible high school graduates only from designated schools, to include all public high schools, and provide an additional two years' tuition to students who earned an associate's degree through the program.

Higher education tuition, however, will remain level in the upcoming school year as a result of an agreement between Gov. Nixon and leaders of the state's two- and four-year institutions. 

Within the Department of Elementary and Secondary Education budget, lawmakers allocated $1 million from the federal budget stabilization fund - the same as last year - for the eMINTS grant program, a statewide instructional model for teachers in support of the Missouri Mathematics, Engineering, Technology and Science Initiative.

North Dakota
After the conclusion of the 2009 legislative session last month, Gov. John Hoeven signed into law several bills supporting economic growth through targeted investments in agricultural R&D, energy, workforce training, and higher education. 

One of only a handful of states still operating with a surplus, state lawmakers funded several priorities outlined in the governor's budget proposal designed to diversify the state's economy (see the Dec. 10, 2008 issue of the Digest). Department of Commerce appropriations include:

• $20 million for Centers of Excellence grants (the same as last biennium), including $10 million for enhancement grants at the University of North Dakota and North Dakota State University (NDSU) that can be used to support research opportunities made possible with military base realignment;
• $2.5 million to support innovation and entrepreneurship, including $1 million for a technology-based entrepreneurship grant program to be developed by the Department of Commerce, $400,000 for Innovate ND, which is a business competition that provides funds for innovative startup ideas, and seed financing to support new business incubators and entrepreneurs; and,
• $1 million for the workforce enhancement fund to assist two-year colleges to respond to business and industry workforce training.

The 2009-11 budget provides $3 million for the Renewable Energy Fund and enacts a law regulating geological storage of carbon dioxide. Lawmakers also approved the governor's full recommendation of $2 million for installation of blender pumps at motor fuel retailers to promote expanded use of ethanol and biodiesel.

Building on the angel fund investment income tax credit established during the 2007 session, lawmakers passed and Gov. Hoeven signed SB 2269, creating an angel fund investment tax credit. The tax credit provides an incentive for pools of investors, or angel funds, to invest in high-risk economic development projects, including information technology entrepreneurial ventures.

Gov. Hoeven also signed into law SB 2020, the Agriculture Research and Extension bill, providing $17 million for agricultural research infrastructure. The funding includes $11.4 million for Phase II of the NDSU Research Greenhouse and $2.9 million for expansion to the state's Research Extension Centers.

With a 25 percent increase over last biennium, the $795 million Higher Education appropriation bill includes $1.5 million for science, technology, engineering and mathematics (STEM) grants. Funding allocations are to be used to enhance the use of STEM in existing teacher education program curriculums, according to budget documents.

A STEM measure that failed to pass in the Senate would have encouraged college students to pursue studies in STEM fields, participate in internship programs, and remain in the state after graduation. The legislation would have revised the technology occupations student loan program to include STEM occupations and increase the maximum loan amount to $2,000 per academic year.