R&D and innovation funding sees some increases, more decreases in state budgets: CA, IL, MS, NC, OH

Breaking a two-year impasse, legislators in Illinois were able to pass a state budget that reinstitutes an R&D tax credit and implements workforce development programs. In California, the Governor’s Office of Business and Economic Development (Go-Biz) will see a 28 percent increase in funding, while other innovation initiative are receiving level funding. In other states whose budgets SSTI analyzed this week for TBED-related funding, we found that Innovate Mississippi was able to maintain state funding and new funding was appropriated for workforce development at the state’s community and junior colleges; a variety of programs were cut in North Carolina; and, Ohio will not get funding for a state office focused on commercializing research across key industries that the governor had proposed. More findings from California, Illinois, Mississippi, North Carolina and Ohio are detailed below.

California

Go-Biz, the Governor’s Office of Business & Economic Development, received a 28 percent increase for the new fiscal year, growing to $6.531 million. The agency’s staff will grow from 22.0 full time equivalent positions to 33.6 as well.  GO-Biz serves as the governor's lead entity for economic strategy and the marketing of California on issues relating to business development, private sector investment, economic growth, export promotion, permit assistance, innovation and entrepreneurship.

The Innovation Hub/iHub program is funded through the California Business Investment Services account, which also includes the state’s industry site selection services. General fund appropriations remain flat at $1.702 million in the new budget year.

The California Institute for Regenerative Medicine received level funding of $268.906 million. The Institute, which makes grants and loans to support stem cell research, is financed from the $3.0 billion general obligation bond passed by the voters in 2004.

The FY 2017-2018 budget includes $7.1 million for the cigarette-tax-financed Breast Cancer Research Fund, a cut of $8.68 million or 55 percent from the prior year.  Additionally, the FY 2017-2018 budget includes the first $81.956 million in research funding and $50 million in graduate medical education funding generated by passage of Prop 56, the Research and Prevention Tobacco Tax Act of 2016, which assessed new taxes on traditional tobacco and e-cigarette products.

More information regarding the California FY 2017-2018 budget is available here.

Illinois

The Illinois legislature voted to override vetoes from Gov. Bruce Rauner last month, providing a resolution to the state’s 736-day budget impasse. Under the state’s new FY 2018 budget                              , several programs related to technology-based economic development will receive funding.

Within the Department of Commerce and Economic Opportunity, the Office of Entrepreneurship, Innovation and Technology will receive $1.4 million in FY 2018. The state’s Department of Agriculture will receive $100,000 to implement and design programs and activities that help promote, develop, and enhance the state’s biotechnology industry.

The state’s research and development tax credit, which had expired in January 2016, will be extended until January 2022 under the bill. The credit is valued at up to 6.5 percent of an Illinois company's qualified research expenditures.

Several workforce development programs will also receive funding:

• $2.0 million for the state’s Workforce, Technology, and Economic Development Fund;
• $1.5 million for a job training program with the Illinois’ Manufacturers Association; and,
• $977,500 for a job training program with the Illinois Manufacturing Excellence Center, the state’s MEP center.

Mississippi

Through SB 3006, the state will commit $19.7 million (2 percent decrease from FY2017 appropriation) to the Mississippi Development Authority including a transfer of $500,000 to Innovate Mississippi (flat funding from FY2017). In Gov. Phil Bryant’s budget proposal, he proposed a cut of all state funding to Innovate Mississippi.

Through SB 2955, the Board of Trustees of State Institutions of Higher Learning will receive $31.9 million to support the eight universities' designated institutes, laboratories, and programs for which they are responsible including (both general and special funds):

• $16.7 million (4.4 percent increase from FY2017) for the Research Institute of Pharmaceutical Sciences at the University of Mississippi;
• $4.4 million (6.4 percent decrease) for the Center for Advanced Vehicular Systems (CAVS) at Mississippi State University;
• $2.6 million (3.7 percent decrease) for the Haley Barbour Center for Manufacturing Excellence at the University of Mississippi;
• $1.3 million (3.7 percent decrease) for the Mississippi Small Business Development Center; and,
• $587,625 (7.8 percent decrease) for the Mississippi Polymer Institute.

In SB 2964, the state’s Community and Junior College Board will receive $4.5 million in new funding for the purpose of establishing and operating Workforce Development Centers at each of the public community and junior colleges as well as $2.3 million in new funding to establish and operate Advanced Training Centers.

North Carolina

Many of the proposals included in Gov. Roy Cooper’s proposed FY 2018-2019 biennial budget were not included in the bill ultimately passed by the North Carolina state legislature.

The North Carolina Biotechnology Center will receive $13.6 million in each year of the biennium under the bill (no change from FY 2016-2017). Of this amount, more than $8.8 million will go toward science and technology development, Centers of Innovation, business and technology development, education and training. Approximately $2.9 million will go toward the state’s AgBiotech Initiative, economic and industrial development, and other job creation related activities. Approximately $1.8 million will go toward funding Center operations.

The Office of Science, Technology and Innovation within the state’s Department of Commerce will receive 332,505 in each year of the biennium.

Two notable research centers in the state will receive funding. The public-private Food Processing Innovation Center in Kannapolis will receive $4.4 million in FY 2018-2019 and an additional $700,000 in each year of the biennium for operations; the budget also creates an advisory committee to oversee the center’s creation. The National Institute for Innovation in Manufacturing Biopharmaceuticals, a part of the Manufacturing USA Network, will receive $2.0 million in new funding in FY 2017-2018.

The  UNC Research Opportunities Initiative, which provides funding for innovative university-based research projects that support the state’s economic development activities around prioritized industries (e.g., advanced manufacturing, marine and coastal science, pharmacoengineering, data sciences) will receive $1.0 million for FY 2017-2018 (66 percent decrease from FY 2016-2017).

Beginning in FY 2018-2019, the budget will authorize the NC Promise Tuition Plan at $11.0 million. This plan will reduce tuition costs for in-state undergraduate students to $500 per semester at three University of North Carolina (UNC) institutions.

Two programs that were originally proposed in Cooper’s budget will not receive funding. NC Invents, a new program to assist universities with identifying and developing technologies with commercial potential, would have received $10 million in the governor’s proposed budget. The governor also proposed the creation of NC GROW (Getting Ready for Opportunities and the Workforce) Scholarship beginning in FY 2018-19. Using $19.4 million from lottery funds, this scholarship would have covered all tuition and required fees at community colleges for recent high school graduates.

Additionally, funding is not included for the following programs related to technology-based economic development:

• The Office of Science, Technology, and Innovation’s One NC Small Business Fund, which provides matching dollars for Phase I SBIR and STTR recipients, would have received $3.0 million. The Innovation Fellowship (IF) Program, a new program that enable recent graduates or postdocs to transition to a full-time role in a startup would have received $445,000 in each year of the biennium.
• The Community Innovation Fund (CIF), which would award competitive funds to micropolitan and underserved communities within metro areas to implement strategies to accelerate their local innovation ecosystems, would have received $3.0 million in non-recurring funding.
• The Cancer Research Fund at UNC-Chapel Hill, would have received $20 million in each year of the biennium (25 percent increase from FY 2016-2017). 
• $3 million in new funding during each year of the biennium for grants would have gone toward industry-focused workforce development training at community colleges.
• $20 million in new funding over the biennium would have gone toward increasing broadband access to underserved households, businesses, and community anchor institutions in the state.

Ohio

The budget passed by the Ohio legislature and approved by Gov. John Kasich includes funding for technology-based economic development, but does not include funding for Kasich’s proposed Ohio Institute of Technology, an office that would have been led by the state’s Chief Innovation Officer and focused on commercializing research across key industry areas.  The governor had asked for $750,000 for the office.

The Ohio Third Frontier initiative will receive $110.9 million in each year of the biennium (30.6 percent decrease from FY 2017) for research and development projects, and $2.5 million in each year of the biennium (13.7 percent decrease from FY 2017) for operations. The budget also allocates $8.0 million in each year for the Research Incentive Third Frontier Fund (no change from FY 2017). Of this amount, up to:

• $2.0 million in each fiscal year may be allocated toward research regarding the improvement of water quality;
• $1.0 million in each fiscal year may be allocated toward research regarding the reduction of infant mortality;
• $1.0 million in each fiscal year may be allocated toward research regarding opiate addiction issues in Ohio;
• $750,000 in each fiscal year may be allocated toward research regarding cyber security initiatives; and
• $500,000 in each fiscal year may be allocated toward the I-Corps@Ohio program.

Additional funds for technology-based economic development purposes include:

• $13.6 million in FY 2018 (12.2 percent decrease from FY 2017) and $13.3 million in FY 2019 for technology programs and grants within the Development Services Agency.
• $5.0 million in each year of the biennium (50 percent decrease from FY 2017) for the Innovation Ohio program, which provides loans to growing Ohio companies that work in targeted tech-related industries;
• $5.0 million in each year of the biennium (50 percent decrease from FY 2017) for the Research and Development Loan program;
• $1.8 million in new funding in each year for the biennium for the Ohio Federal Research Network, which helps commercialize research around areas such as national defense, space exploration and aeronautics;
• $1.5 million in each year of the biennium (no change from FY 2017) for the Appalachian New Economy Workforce Partnership, an effort to link Ohio’s Appalachian communities with the innovation economy around areas such as entrepreneurship, education, and technology; and,
• $500,000 in each year of the biennium (no change from FY 2017) for Biomedical Research and Technology Transfer.

There are also several non-financial items in the bill of interest to the economic development community. First, the legislature paved the way for commercialization to be considered as a pathway to faculty tenure at the state’s research universities. Second, the legislature decided to allow funding for the arts to be included in programming that was once limited to science, technology, engineering and mathematics education. Third, within the Development Services Agency, the state has changed the name of the Office of Small Business to the Office of Small Business and Entrepreneurship.