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MD Gov Proposes $100M Venture Fund; Recommends 19% Increase for Stem Cell Research

January 26, 2011

Gov. Martin O'Malley last week unveiled details of his proposed $100 million venture fund announced last year during his re-election campaign as an initiative to grow the state's knowledge-based industries, particularly within the life sciences sector (see the June 9, 2010 issue of the Digest). The governor's budget also provides funding for the state's 10-year Bio 2020 initiative, including $12.4 million for stem cell research, $8 million for biotechnology tax credits and $3.8 million for the Maryland Biotech Center.

The InvestMaryland initiative is designed to fill a financing gap for new startup technology companies and would be funded through tax revenue to insurance companies. Half of the investments would be allocated to the Maryland Venture Fund, a now depleted state fund established in the 1990s to invest in technology and life science companies. The other half of the investments would be allocated to the Maryland Small Business Development Finance Authority and selected private venture capital firms. Those investments would be distributed using a traditional VC model, whereby 100 percent of the principal must be returned to the state before profit-sharing distributions are made, according to the bill summary. The plan seeks to invest $20 million annually for five years.

Though similar to a traditional CAPCO, the plan diverges on several fronts, according to an article in the Baltimore Sun. Under the governor's plan, the state would set up an auction to sell access to tax credits, which would take effect in 2015. Also, the state would invest in companies with expectations of recouping its entire investment, plus 80 percent of the profit, the article states.

The FY12 executive budget recommends $58.4 million in general funds for the Department of Business and Economic Development, up from $56.6 million last year. The Maryland Technology Development Corporation (TEDCO) would receive $15.7 million, up from $13.9 million. This includes $12.4 million to administer the state's stem cell research program, a 19 percent increase from last year. The remainder of the funds ($3.3 million) is slated for the Maryland Technology Transfer Fund and the University Development Transfer Fund, a slight decrease from the FY11 appropriation.

Additional investments in support of Bio 2020 include $8 million for the biotechnology investment tax credit awarded for investments in qualified biotechnology companies, and $3.8 million for the Maryland Biotechnology Center, created in 2009 to showcase the state's biotechnology efforts and provide resources for entrepreneurial programs. This is the same amount appropriated for the initiatives last year.

Funding for the University System of Maryland would increase to $4.5 billion in FY12, a 2.4 percent increase. An additional $8.7 million in state funding also is included to hold tuition increases at 3 percent, according to budget documents.

The governor's $3.1 billion capital budget provides $5.8 million in general obligation bonds for the One Maryland Broadband Network, a project connecting three existing broadband networks across the state, and $2.5 million for the East Baltimore Biotechnology Park.

Gov. O'Malley's FY12 operating budget, which aims to close a $1.4 billion deficit, is available at: http://dbm.maryland.gov/agencies/operbudget/Pages/FY2012OperatingBudgetDocs.aspx. Capital budget documents are available at: http://dbm.maryland.gov/agencies/capbudget/Pages/Home.aspx

Marylandr&d, public equity funds, state tbed, tax credits, bio, commercialization, capital, higher ed, state budget, broadband