SSTI Digest

The ability of states to deliver the services promised to its residents relies on their fiscal soundness. With most states beginning their fiscal year in July, SSTI has reviewed the current fiscal standing for each state and here presents a snapshot of our findings.

Most states ended their fiscal year with a surplus and continue to recover from the Great Recession, with a growing economy and job gains. However, they face continuing demands on their budgets, with expanded Medicaid payments and the growing opioid crisis confronting nearly every state. Such decisions affect the state’s ability to fund innovation efforts, from the amount of support available for higher education and STEM programs, to funding for entrepreneurship, and forging public private partnerships to strengthen innovation programming that the private sector cannot fully support.

Our analysis found that some states that rely on the energy sector to fund their spending priorities continue to struggle, while others are already factoring in anticipated revenues as a result of new Supreme Court rulings involving gaming and online sales tax collections.

Governors are continuing their annual address to legislators and constituents and workforce development continues to take center stage, with the governor of Oregon rolling out a new five-step plan she hopes will invigorate the economy and close the skills gap while Oklahoma acknowledged difficult times and Tennessee says it may achieve an education goal two years ahead of schedule.

State spending for the Oregon innovation economy during the 2017-2019 biennium in the Oregon Business Development Department received a sharp increase, thanks in part to nearly $14 million of funding for the new Oregon Manufacturing Innovation Center (OMIC).  According to the Business Oregon website, “OMIC brings together as founding partners The Boeing Company, the broader regional metals manufacturing industry and employers, Portland Community College (PCC), Portland State University (PSU), Oregon State University (OSU), Oregon Institute of Technology (OIT)” for collaborative applied research and to address advanced technical training needs in the industry. Funding is distributed among a number of sources in the state budget:

At least three dozen states offer reductions in tax obligations to companies for some portion of the costs of the businesses conducting research and development within their particular state. During the 2017 session, one fewer could be included among the ranks. With little documented opposition, the Oregon legislature decided to get out of the R&D tax credit business altogether (p. 41, source).  Why? Are there lessons for other states’ advocates for innovation?

From SSTI’s research, the Oregon decision appears unprompted by financial necessity. The cost to the state to extend the R&D tax credit couldn’t be a serious issue ($40 million over six years in a state budget surpassing $38 billion annually). It also appears not to have been because of any disagreement on the merits of increasing R&D activity in the state. Yet House Bill 2078 to extend the existing credit through 2024 was allowed to die in committee with the session’s adjournment in July.

Educational initiatives continue to dominate in state of the state, budget and inaugural addresses, with governors in North Carolina, New Hampshire and Oregon all acknowledging its importance in the workforce development sphere and the future competitiveness of the states.

North Carolina

Gov. Roy Cooper gave his first state of the state address to the North Carolina legislature Monday evening, reminding the General Assembly that, “Our constitution mandates that we work together to make North Carolina better…” He called the state of the state “promising” and the state itself “welcoming,” and immediately called for the repeal of HB 2, which he said has damaged the state. He laid out plans for what he called “common ground solutions,” one of which was education.

“When I’m recruiting a business to come here - to your legislative districts, the first thing they ask is whether North Carolina has the workers skilled enough to fill the jobs they create.

As new and supplemental state budgets are being proposed, SSTI is monitoring the proposals and will report on developments impacting prosperity through science, technology, innovation and entrepreneurship. The first budgets released – from Colorado, Mississippi, Oregon and Wyoming – represent a mixed bag with new initiatives proposed in three states and program elimination in the fourth.

Colorado

A bipartisan group of 17 governors signed the Governors’ Accord for a New Energy Future – a joint commitment to support the deployment of renewable, cleaner and more efficient energy technologies and other solutions to make the U.S. economy more productive and resilient as well as spur job creation in member states. The multi-state effort will work to implement clean energy policies and initiatives in four areas: clean energy, clean transportation choices, a modern electrical grid, and plan for a new energy future. Although the accord doesn’t provide specific efforts, senior advisors to participating governors are expected to convene shortly to discuss initial steps to pursue their shared priorities and commitments according to solarindustrymag.com.

Oregon announced an agreement with the four regional economic development organizations to improve business development coordination, help existing Oregon businesses expand, recruit new companies, and align other economic developments efforts to grow Oregon's economy and job creation. To achieve the goals of the program, the partners will share office space, hold regular planning meetings, and develop ongoing communications through shared software tools. Business Oregon will provide $100,000 ($25,000 per regional economic development organization) during the next two years to help offset expenses related to the increased cooperation. The pilot program will serve 11 counties, 127 cities, and about two-thirds of the state's population. Read the announcement…

Over the past few weeks, the State of Oregon has announced a number of new capital opportunities for small businesses. Business Oregon, the state’s economic development agency, will invest $250,000 to support a new Inclusive Startup Fund that will invest in Portland-area startups founded by women and people of color. Fund leaders hope to raise a total of $3 million and match portfolio businesses with mentoring and business advising services. The agency also announced a new $250,000 loan program to help small manufacturers expand. The Oregon Growth Board announced its own $250,000 investment in an angel fund launched by TiE Oregon. The TAP Fund will co-invest with TiE Angels Oregon to support early-stage startups.

Now that many governors have signed spending bills and legislative sessions are drawing to a close, the SSTI Digest will check on the status of proposals related to the innovation economy, and examine the state of technology-based economic development funding in the states. This week, we review spending bills in Delaware, Hawaii, Oregon, and Wisconsin.

Many promising technologies created by Oregon startups wither on the vine due to a shortage of high-risk angel capital and many other startups leave the state in search of funding, according to a new report from the Technology Association of Oregon (TAO) – Oregon Angel Investment: The Economic Impact of High-Risk Investment in Oregon's Entrepreneurial Enterprises. The authors highlight the rapidly growing entrepreneurial ecosystem that includes a growing number of willing, talented entrepreneurs and entrepreneurial support organizations (e.g., incubators, accelerators). However, the state still lags significantly behind other areas of the country in terms of actual dollars invested, as well as the number of high-risk investment deals that are made.

This week, governors in Oregon and North Dakota released their budget proposals for the upcoming budget cycle. Although the budgets differ in both size and scope, education, workforce development, and other programs related to technology-based economic development are set to receive considerable amounts of state funding. 

Oregon

Oregon Gov. John Kitzhaber’s FY2015-17 budget calls for $18.6 billion in spending over the next biennium. Approximately half of the governor’s budget goes toward education to support the state’s goal of every Oregon student having a diploma and 21st century skills by 2025. The proposal also projects a budget surplus by 2021-23. Within the budget, notable initiatives related to economic development include: