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SSTI Examines Trends in Innovation Policy from the State Legislatures

July 17, 2013

As many state legislative sessions wind down, a clearer picture of the current direction of state innovation policies is emerging. This week’s SSTI Weekly Digest presents a few of the major trends in technology-based economic development initiatives approved by state legislatures during their most recent sessions. While this review is not meant to be comprehensive, it should illuminate the shifts states are making to refine their investments in the high-tech economy by providing smarter, more targeted support.

Over the past few months, the Digest has reported on several major capital access initiatives, transparency efforts and agency reorganizations that have made headlines amid a slow economic recovery and renewed attention to accountability in economic development.

While other stories in this issue will examine some of the trends in legislation that previously have gone unreported in the Digest, several major legislative efforts have appeared in earlier issues, but represent other intriguing developments in state innovation policy.

States Launch Venture Capital Funds for High-Tech Growth
This week in Wisconsin, Gov. Scott Walker signed legislation to create a $75 million early stage seed capital fund-of-funds to support high-growth sectors including agriculture, information technology, engineered products, advanced manufacturing, and medical devices and imaging. The state will contribute $25 million to the fund, with an additional $50 million derived from private sources. The fund is the result of years of debate in Wisconsin, but ultimately passed with overwhelming support in the state Senate and Assembly. Read more in the June 19 issue...

The Wisconsin fund-of-funds joins two other major capital efforts in New York and Georgia intended to build local capital ecosystems and help bridge the funding gap for promising companies unable to tap into the national venture capital market. In New York, a $50 million fund will support new companies, particularly startups associated with the state’s new incubator network and university-affiliated tax-free zones, as reported in the April 3 issue. Georgia Gov. Nathan Deal has authorized a $100 million fund, though as of yet, it remains unseeded with actual dollars, as reported in the May 1 issue. Many anticipate that the Invest Georgia Fund will receive its state allocation over the next few years.

Legislation Emphasizes Accountability in Economic Development Investments
A wave of transparency efforts were approved in states during the past session in response to several controversies over the accountability of economic development programs. This week, an overhaul of Rhode Island’s economic development efforts became law without the signature of Gov. Lincoln Chafee, according to the The Providence Journal. The bill creates a new Executive Office of Commerce to manage the state’s economic development efforts as well as the Department of Business Regulation, as reported in last week’s Digest. Meanwhile, the Rhode Island Economic Development Corporation, which previously oversaw economic development, would be rebranded the Rhode Island Commerce Corporation.

The debate over accountability in Rhode Island stemmed from a well-publicized failed investment in video game company 38 Studios, drawing attention to other economic development agencies across the country. In Indiana, Gov. Mike Pence signed a bill requiring performance and impact metric data from the Indiana Economic Development Corporation, as reported in the May 8 issue. In Texas, the Emerging Technology Fund was allocated $57.2 million for the biennium, but lawmakers in the Texas House passed legislation to separate fund decisions from the Office of the Governor. Ultimately, the bill was removed from the calendar in the Texas Senate and never became law, but sparked a great deal of discussion in the state about transparency, as reported in the May 29 issue. Another measure, intended to increase oversight of the grant review process at the Cancer Prevention and Research Institute of Texas, was signed by the governor in June.

Lawmakers Restructure State Economic Development Agencies
Even larger state overhauls of economic development are underway in North Carolina and California as a result of governor-driven strategies, as reported in the June 26 issue. California Gov. Jerry Brown called for ending the state’s enterprise zone program, and instead will focus on three new tax incentive programs to be administered by the Governor's Office of Business and Economic Development. The Governor signed the bill earlier this month. North Carolina continues to debate its own economic development restructuring, one that shifts the focus of economic development efforts from public support to public-private partnerships.

California, Georgia, Indiana, New York, North Carolina, Rhode Island, Texas, Wisconsinstate tbed, tax credits, incubators