SSTI Digest

Although the U.S. broadband infrastructure has expanded rapidly over the past decade, 45 percent of rural areas still lack access to high-speed Internet services. A recent issue brief from the National Governors Association (NGA) Center for Best Practices provides a number of strategies that have proven effective in expanding broadband access, particularly in underserved rural areas.
 
The brief highlights a number of state efforts that have been successful in expanding and improving service in recent years. These include the California Broadband Initiative, ConnectKentucky, Maine's ConnectME Authority and the New York State Council for Universal Broadband. Together, these profiles offer an overview of how states are approaching the digital divide.
 
NGA also presents a number of specific strategies that can be implemented in states with high-speed Internet gaps to create a comprehensive broadband access initiative. For example, the report provides a guide to 14 state tax credit programs that have been used to increase demand for broadband services or to encourage the development of new broadband infrastructure.
 
Other strategies discussed in the brief include:

“I recognize the importance of attracting venture capital and new investments to Maine,” Gov. John E. Baldacci said. The governor later added, “However, as it is currently written the bill carries enormous risk. This bill would guarantee a rate of return for venture capital investors while Maine would shoulder all the risk. The potential liability for the State is too great for me to sign this bill.”
 
By not signing the bill, Gov. Baldacci pocket vetoed LD 2320, entitled "An Act To Stimulate Capital Investment for Innovative Businesses in Maine.” The act would have created a Maine Fund of Funds program within the state’s Small Enterprise Growth Board to increase availability of venture capital.
 
Modeled on statutes in Arkansas, Iowa, Michigan, Montana and Utah, LD 2320 authorized up to $80 million in refundable tax credits to capitalize the fund. No more than $10 million in tax credits could be redeemed in a single year; however, the fiscal note for the legislation determined the maximum potential loss in revenue to the state for any one fiscal year could reach $18.96 million.
 
The legislation permitted the Small Enterprise Growth Board to hire a director, who in turn had the authority to invest outside Maine to minimize the risk to the state of the tax credits actually being redeemed and to maximize returns.
 
That balance between local economic development and maximizing returns to investors is a perennial challenge for public efforts to increase access to capital, SSTI found in its research for A Resource Guide for Technology-based Economic Development.
 
Gov. Baldacci isn’t opposed to identifying a better model, however.
 
“This idea deserves more investigation and discussion and holds the potential to be a new economic development tool,” the Governor said as he withheld his signature from the bill.
 
LD 2320 is available at: http://www.mainelegislature.org/legis/bills/ld.asp?ld=2320

A recent study prepared for the Maine Technology Institute and the Office of Innovation within Maine’s Department of Economic and Community Development examines and ranks 16 identified technology clusters in Maine - defining eight as sustainable clusters, five as potential clusters, and three as emerging clusters. These labels are based upon an extended view of clusters, namely that successful clusters depend on knowledge generation and knowledge spillovers and not just specification within certain industries. Along with measures of entrepreneurship and product production and distribution, Maine’s Technology Sectors and Clusters: Status and Strategy examines 7,300 records of patents, grants and publications in the state to determine potential research strengths and opportunities within the state’s clusters.

A growing number of state governments face revenue uncertainties in the near future. More than half now expect budget deficits and shortfalls in the upcoming fiscal year and beyond. Despite the bleak outlook, however, legislators nationwide are continuing to invest in science and technology with many lawmakers projecting high returns to their state in the coming years. Following are highlights of TBED investments and reductions in recently approved budgets in Kentucky, Maine and Nebraska.
 
Kentucky
Recognizing the statewide economic benefits of strategic investments in university research, Kentucky legislators concurred with Gov. Steve Beshear’s proposal to continue support for the Bucks for Brains initiative. Lawmakers approved $60 million in bonds under the fiscal year 2008-10 biennial budget agreement to expand the state’s endowment matching program used to attract high-quality researchers. 
 
The total funds appropriation under the budget agreement for the Economic Development Cabinet is $29.3 million in FY 2008-09 and $31.8 million in FY 2009-10. The budget agreement also includes language directing interest income earned on the balances in the High Tech Construction/Investment Pool and loan repayments received to be used to support the Department for Commercialization and Innovation. The approved Capital budget provides another $20 million for the Economic Development Cabinet for projects and loans approved by the Kentucky Development Finance Authority.
 
Gov. Beshear vetoed $1.2 million each fiscal year in New Economy Funds from the High-Tech Investment Pool to administer the ConnectKentucky program, a statewide broadband initiative. The governor expressed support for the initiative in his veto message but objected to the lack of oversight in spending for the program. Instead, he directed the Cabinet for Economic Development to structure a funding plan and identify program needs for the continuation of the initiative.
 
The Office of Energy Policy would receive $13.4 million over the biennium under the budget agreement, with $3.5 million each fiscal year for the Energy Research and Development Fund. Projects slated for funding include research into clean coal, development of alternative transportation fuels and other coal research targeted solely to Kentucky’s Local Government Economic Development Fund-eligible counties in coordination with state universities and related community and technical college system programs.
 
Also included in the appropriation to the Office of Energy Policy from the Local Government Economic Development Fund is $2 million over the biennium to be matched with federal or private funds to support R&D activities at the University of Kentucky Center for Applied Energy Research directed toward development and demonstration of technologies for carbon management. Technologies may include chemical or mechanical capture, chemical or biological utilization and mitigation through the use of alternative fuel sources.
 
The budget agreement cuts base funding for state universities and the Kentucky Community and Technical College System by about 3 percent in FY 2008-09 with level funding remaining in FY 2009-10, the Louisville Courier-Journal reports.
 
The FY 2008-10 approved biennial budget is available at: http://www.lrc.ky.gov/record/08RS/HB406.htm
 
Maine
Several state initiatives supporting TBED fell victim to budget cuts in a package of revisions to the fiscal year 2008-09 budget, LD 2289, signed into law earlier this month by Gov. John Baldacci.
 
Facing a $190 million revenue shortage, legislators reduced funding for numerous state programs, including $220,000 in FY09 for the Office of Innovation’s Maine Technology Institute Innovation Cluster Program. There is an additional reduction in funding for management and operating costs of a bond program administration by the Maine Technology Institute by $300,000 in FY08 and $150,000 in FY09. Funding for research projects at the Centers for Innovation is reduced by $18,000 over the FY08-09 period.
 
The supplemental budget also reduces Maine Manufacturing Extension Partnership funding within the Department of Economic and Community Development by $50,000 in FY08 and $80,000 in FY09 and reduces funding to the Maine Procurement Technical Assistance Center by $70,000 in FY09.
 
Nebraska
Lawmakers are expected to pass the final version of Gov. Dave Heineman’s Super Advantage proposal (LB 895) this week, according to the Nebraska Department of Economic Development. The bill aims to lure companies that create high-salary jobs that pay well above the state’s average wage by expanding tax incentives.
 
The legislation stipulates that all businesses qualify for the tax breaks, excluding retail. Companies are required to create 75 new high-salary jobs with a $10 million investment or 50 new high-salary jobs with a $100 million investment.
 
The jobs would have to pay 150 percent of the state average wage, which is at least $50,700 based on current wage levels, according to the Omaha World-Herald, or 200 percent of the average wage in the county where the business is located. Qualifying companies will receive a 15 percent tax credit and 10 percent wage credit. Additional benefits include direct sales tax refund and a 10-year exemption on all tangible personal property.

Measuring the strength of a state or region’s economy, particularly the elements related to tech-based economic development, is a tricky but vital tool for developing and updating TBED policies. Several challenges present themselves when deciding what information to present on the elements of the innovation system and assessing the region’s health and performance relative to appropriate surrogates.

 

Fortunately for the field, two states that have been leaders in using an index as a policy development tool, released reports last week which display an array of methods to analyze their own state’s relative TBED performance. Each report provides a unique perspective and can provide models for emulation and customization by other states.

 

Massachusetts

One of the forefathers and continual innovators in design and delivery of innovation indices is the Massachusetts Technology Collaborative (MTC), which released on Feb. 1 the 11th edition of its Index of the Massachusetts Innovation Economy. The report continues to benchmark Massachusetts in 20 indicators against selected states – California, Connecticut, Illinois, New Jersey, Minnesota, New York, North Carolina, Pennsylvania and Virginia.

 

New to this year’s edition, the Index benchmarks Massachusetts and the other states relative to other countries from around the world. This global perspective allows the selected state economies to be compared to countries typically considered the most innovative or competitive:

A complete description of this opportunity and others is available at http://www.ssti.org/posting.htm.



The Maine Technology Institute (MTI) is seeking someone to serve as manager of cluster and commercialization support programs. This position is primarily responsible for managing MTI's programs supporting the development of vibrant technology-intensive clusters and its activities supporting awardee commercialization and capital access.

Sally Bilancia was selected to replace Sally Bates as the development director in the City of Bangor, Maine.

Voters in four states will consider several TBED-related measures at the polls next week, including a $3 billion cancer research proposal, state funding for stem cell research, and an R&D bond proposal to spark job creation in emerging technology sectors.

 

Texas

Texas voters will consider 16 separate ballot items this year, including Proposition 15, a bond proposal to authorize the state to issue $300 million a year in bonds over 10 years for grants to fund scientific research at the newly created Cancer Prevention and Research Institute. Gov. Rick Perry signed HB 14 earlier this year, establishing the institute and dedicating funding of up to $3 billion, pending a voter approved constitutional amendment (see the June 27, 2007 issue of the Digest).

 

Opponents of the proposition argue the proposal is an unfair burden on taxpayers, citing $1.6 billion in interest that could accrue over the 10-year period, according to an article in the Austin American-Statesman.

 

Also appearing on the 2007 ballot is Proposition 2, a measure to allow the Texas Higher Education Coordinating Board to issue $500 million in general obligation bonds to finance low-interest student loans. Since 1965, voters have reauthorized the bonding authority for this program six times, and, without reauthorization, all current bond funds will be exhausted in spring 2009, according to the University of Texas-Pan American.

 

New Jersey

Voters will consider a proposal to provide grants for stem cell research. The New Jersey Stem Cell Research Bond Act authorizes the state to issue bonds totaling $450 million over 10 years to fund stem cell research projects at institutions of higher education and other nonprofit and for-profit entities in the state. Grants would be awarded to researchers by the Commission on Science and Technology.

 

The bond referendum is part of the state’s ongoing effort to position New Jersey as a national leader in stem cell research. Lawmakers approved $270 million last year for construction of five biotechnology research facilities across the state (see the Jan. 8, 2007 issue of the Digest). A groundbreaking ceremony for the first facility to be approved for funding, the Stem Cell Institute of New Jersey, took place last week. In 2005, former Gov. Richard Codey proposed a $380 million stem cell initiative that included $150 million for a world-class stem cell research facility and a $230 million ballot initiative to provide stem cell research grants. However, lawmakers did not vote on the measure in order to move it to the ballot.

 

Maine

A $55 million R&D bond proposal in Maine is aimed at stimulating economic development and job creation for targeted technology sectors through loans and grants administered by the Maine Technology Institute. The bulk of the money - $50 million - will be distributed as grants that must be matched dollar-for-dollar with federal grants or private funding.

 

The R&D bond proposal is a component of the $295 million three-part package that also includes funding for infrastructure improvements within the University of Maine System (see the April 9, 2007 issue of the Digest).  

 

Washington

A ballot measure in Washington would make increasing taxes more difficult. If passed, Initiative 960 will require two-thirds legislative approval or voter approval for tax increases, legislative approval of fee increases, certain published information on tax-increasing bills, and advisory votes on taxes enacted without voter approval.

A bill designed to keep new Maine graduates living and working in the state after college became law last week with Gov. John Baldacci’s signature. The Opportunity Maine bill, LD 1856, creates a tax credit to assist graduates with their student loan payments and enables employers of graduates to pay off the student loans.

 

Under the bill, tax credits of up to $2,100 per year or $8,400 total are provided for graduates who spend all four years in the University of Maine System or Maine Community College System. The credits can only be claimed while the person resides and works in the state. The legislation also allows for employers of Maine graduates to assume the student loan debt and collect the tax credits.

 

Program goals are to ensure access to training and higher education, bring higher paying jobs to the state, offer educational opportunity and retraining, and retain a workforce of young, educated individuals.

 

The fiscal impact to the state will rise substantially over time and require a commitment by future legislatures. Unused credits may be carried over for up to 10 years and more graduates and employers are expected to be added to the program each year, according to the fiscal note. Under the bill, $148,000 is directed to the program for fiscal year 2008-09 and this amount is expected to increase to $9.1 million in FY 2011-12 and $62.9 million in FY 2017-18.

As July 1 approaches, the beginning of the 2008 fiscal year for most states, several state legislatures are still working to wrap up their appropriation bills. Maine and Tennessee are two of the most recent to close their books on next year’s budgets, and each has included increased funds to support TBED initiatives. Highlights for both states are provided below.
 
Maine
In light of the $50 million R&D bond referendum passed by the legislature earlier this year, additional funds were included in the FY 2008-09 biennial budget for the Maine Technology Institute (MTI). MTI will receive $750,000 each year of the biennium to administer the bond that will be voted on in November (see the April 9, 2007 issue of the Digest). In addition, $2.5 million was appropriated for a new Cluster Enhancement Fund.
 
Lawmakers cut $55,000 from MTI’s Applied Technology Development Centers, and no new funds were included for the Maine Economic Improvement Fund, which supports university research. The much-larger bond, if passed, will provide competitive awards to continue to fund university R&D activities.
 
Manufacturing businesses that currently are not included in the designated geographic Pine Tree Development Zones will be eligible for the benefits, as requested by Gov. John Baldacci during his Inaugural Address (see the Jan. 8, 2007 issue of the Digest). The legislation expands the benefits to businesses that make a commitment to increase jobs by at least 20 and that have a minimum investment of $2 million.
 
The biennial budget also includes other new investments in higher education within the university system and community colleges. The University of Maine System will receive a $5 million increase to ease the need for pending tuition increases, and $3 million is allocated to the Maine Community College System for a proposed 500-student expansion.
 
Lawmakers did not include the governor’s proposed 50 percent tuition reimbursement for community college students, or a proposal for expanding the middle-school laptop program into high schools. 
 
Tennessee
Tennessee lawmakers approved several key legislative priorities championed by Gov. Phil Bredesen, including a $73 million alternative fuels strategy, a $45 million jobs package, and historic investments in education. 
 
The FY 2007-08 budget includes $41 million for a pilot switchgrass ethanol plant - the centerpiece of Gov. Bredesen’s alternative fuels strategy designed to position the state as a leader in the production of biomass ethanol and related research (see the March 12, 2007 issue of the Digest). The plant will be operated by the University of Tennessee and Oak Ridge National Laboratory, with the goal of producing ethanol in large volumes at a price that is competitive with gasoline.
 
Included in the Economic and Community Development budget is $45 million for the governor’s “Next Step Jobs” strategy to support high-tech industries across the state. The budget also allocates $4.2 million for the state’s broadband initiative and $1.2 million for the Rural Opportunity Fund to provide loans to targeted start-up businesses in rural communities. 
 
Several education-related measures aimed at improving the state’s graduation rates and increasing accountability also were approved during the legislative session. The budget appropriates $295 million to fully fund the state’s portion of the costs associated with at-risk students, expand funding for English language learning, and increase teacher salaries. In addition, the budget allocates $1.3 million for the Governor’s Institute for Science and Math and $2 million for Teach Tennessee to address teacher recruitment in specific shortage areas such as math and science. The budget takes effect July 1, pending the governor’s anticipated signature.

George Dycio was hired as an economic development specialist for the Lewiston-Auburn Economic Growth Council.

Nicole Witherbee has joined the Maine Center of Economic Policy as a federal budget analyst and communications coordinator.