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Recent State Budget Actions Produce Mixed Results for TBED

April 16, 2008

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.

Kentucky, Maine, Nebraskastate budget