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Privatization Moves Underway in Indiana, Minnesota

May 23, 2003

Within two years, Indiana's agency for promoting economic development will become a quasi public-private partnership similar in concept to the Michigan Economic Development Corporation.

While in Minnesota, an agreement that resolved the budget impasse gives the state's lead science and tech organization a 12-month timeline to fully privatize from the state's support.

Indiana's and Minnesota's are the latest moves to test the largely uncharted waters of privatized public technology-based economic development, moves that stem, in part, from governors and state legislatures trying to maintain momentum in the knowledge economy without identifying alternate revenue sources within state government.

Indiana

Legislation passed this spring will take much of the activity within the $83 million Indiana Department of Commerce, fold in a half dozen other state agencies, including the $37.5 million 21st Century Research and Technology Fund, and create the quasi-public Indiana Economic Development Corporation (IEDC) before the end of FY 2005.

The two-year time frame allows the IEDC's new 23-member executive board to develop a strategy to ensure the smoothest transition. The schedule also permits time to seek the critical-but-yet-to-be-committed private contributions. Already decided is that some components of the existing Commerce agency, including community development, energy assistance and tourism, will remain entirely within the state's executive branch and outside the authority of the new corporation.

Minnesota

Minnesota Technology, Inc. (MTI), established in 1991, maintains 17 offices throughout the state to provide companies with assistance to create more effective manufacturing processes, improve communications, increase efficiency, expand market opportunities and develop corporate growth strategies. In addition, MTI has prepared several research and policy reports for state S&T policy, publishes news and information resources, and holds Technology Awareness Forums, educating hundreds of business leaders about advanced and emerging technologies.

Governor Pawlenty's proposal, as part of his FY 2004-2005 biennial budget request to defund the program completely, met stiff opposition throughout the state and in much of the state legislature. Short on cash, with the state deficit continuing to grow, legislators have agreed to give MTI a $3 million one-time appropriation for the first year and nothing for the second year of the biennium. MTI has received roughly $5.3 million annually in the past from the state in addition to $2 million in federal matching funds for the Manufacturing Extension Partnership, according to a report in the Duluth News-Tribune.

The 12-month lead time to evolve into a private organization provides MTI the opportunity to develop a strategy to identify other funding sources and a competitive fee structure for some of its client-based services.

Indiana