SSTI Digest

New projections from the Congressional Budget Office (CBO) of key economic variables reveal an expected sharp contraction in the economy in the second quarter with the unemployment rate projected to average 15 percent during the second and third quarters of 2020 and remaining as high as 9.5 percent by the end of 2021. CBO projects GDP will decline by about 12 percent during the second quarter. Federal debt held by the public is projected to be 101 percent of GDP by the end of the fiscal year, up from 79 percent at the end of FY 2019, but below the all-time high of 106 percent in 1946 following World War II. CBO expects the contraction in the second quarter will ease in the third quarter this year with an increase in economic activity. However, the report cautions, “challenges in the economy and the labor market are expected to persist for some time.” The new projections from the CBO take into account the estimated effects of the deficit of relief packages due to the coronavirus, but is still more limited than an updated baseline, which CBO expects to publish later this year. In mid-May, CBO plans to release details underlying its economic outlook for 2020…

After finally beginning to find their footing following the Great Recession of 2008 and having built up their state rainy day funds, states are now finding that it’s not just raining — they are facing a tsunami. With their two main sources of revenue, the income tax and sales tax, both seriously impacted by the historic levels of unemployment claims and shuttered businesses, states are just beginning to try to manage a budgetary storm that could have lasting impacts on their economies. And while some lessons from the most recent recession may help in their recovery, the continuing unknowns from the pandemic will be difficult to measure. The last three recessions indicate that it will take a considerable amount of time just to get back to pre-recession revenue levels. Image source: NASBO “The longest economic recovery in U.S. history has ended…that is clear,” said Barbara Rosewicz, Pew’s project director of research and content, state fiscal health, in a conversation this week with SSTI. Rosewicz noted that the pandemic hit just as states were closing out their current fiscal years and…

Although uncertainty and fear about the state’s fiscal situation continue to grow, New York’s 2021 budget stands strong in its commitment to deliver a green economy and resilient communities, preserve natural ecosystems and ensure access to clean drinking water. The State of New York has recently approved its budget for the fiscal year of 2021, which includes investments focusing on environmental resilience, conservation, green energy, and carbon-free transportation. To continue the state’s commitment towards renewable energy development, the New York State Energy and Research Development Authority (NYSERDA) will be tasked with administering the newly created Clean Energy Resources Development and Incentives Program to “work with its state partners and local communities to rapidly advance new ‘Build-Ready’ projects, prioritizing the development of existing or abandoned commercial sites, brownfields, landfills, former industrial sites, and abandoned or underutilized sites. Once sites are fully permitted and developed, NYSERDA will competitively auction the developed sites, bundled with contracts for renewable energy payments, to provide a fully de-risked package for…

Last week, $6 million in funding was approved by the Michigan Strategic Fund for startup companies in the state. The $3 million Pre-Seed Fund III granted by the Michigan Economic Development Corporation will be administered by the Michigan State University Foundation and will support early-stage startups. The other half of the total funding ($3 million) as announced by the MEDC and Detroit-based ID Ventures, will support the newly-established Tech Startup Stabilization Fund which will focus on sustaining technology-based startups affected by the COVID-19 outbreak. The Pre-Seed Fund III will be deployed across Michigan to provide support to entrepreneurs and technology startups as well as offer capital support, coaching, assistance with grant funding, and more. The list of companies eligible for the funding include companies involved in advanced automotive, manufacturing, information, IT, software, and alternative energy. ID Ventures, which will be administering the Tech Startup Stabilization Fund, will provide direct investments or loans of between $20,000 and $100,000 that can then be converted into equity. According to Fred Molnar, vice president of the…

Earlier this week, the United Kingdom announced a £1.25 billion ($1.6 billion) initiative to support the country’s startups. One program within the initiative provides £500 million in the form of loans up to £5 million that are matched by private funders to companies that have raised at least £250,000 in the last five years. The remaining £750 million will be managed by Innovate UK and provide loans and grants to R&D-focused companies. The U.K. is not the only European country to invest in startups: France announced a plan in March to spend €4.0 billion ($4.3 billion) through a combination of refinancing, early payments on tax credits and planned investments, and guarantees, and Germany has €2.0 billion ($2.2 billion) committed to funds that continue making investments.

SSTI’s Innovation Advocacy Council has sent letters to congressional leadership outlining emergency actions needed to support tech- and innovation-driven businesses and recovery-focused programs to leverage American ingenuity for economic stimulus. The letters call for expanding SBA’s technical assistance to startups, leveraging EDA’s Build to Scale program, catalyzing new programs for equity investment and commercialization, and incorporating innovation into any infrastructure initiative. Additionally, SSTI responded to a request from the House Committee on Science, Space and Technology with a letter recommending items from this list that fall within the committee’s jurisdiction. The recommendations in the letter to congressional leaders are reproduced below, or download the Senate leadership, House leadership, and House science committee letters.   Expand emergency technical assistance to small businesses In response to the COVID-19 epidemic, Congress has taken unprecedented steps to assist small businesses across the country. The assistance already approved will do a great deal to help mitigate the immediate need and help small…

Last week,  U.S. Secretary of Education Betsy DeVos announced that more than $6 billion of the roughly $14 billion in funding for higher education through the Coronavirus Aid, Relief, and Economic Security (CARES) Act would be made available to colleges and universities to provide direct emergency cash grants to college students whose lives and educations have been disrupted by the coronavirus outbreak. Those disruptions reflect just a piece of the larger upheaval the coronavirus has inflicted on the entire higher education community. Institutions across the country are wrestling with ways to stem the damage from the pandemic, from easing admission standards and furloughing employees to delaying a return to campuses and possibly even closures. And some are saying that the funds that have been provided, just a fraction of the $50 billion the higher education community had sought, won’t be nearly enough.

In early April the Department of Labor announced a $42.5 million grant opportunity for the Youth Apprenticeship Readiness Grant Program. The program is to support the development of new or expanding registered apprenticeship programs (RAPs) for youth, including quality pre-apprenticeship programs that lead to a RAP. The grant program supports the president’s executive order and the Department of Labor, Employment and Training Administration’s goals to promote pre-apprenticeships, to develop a strong youth apprenticeship pipeline, and to expand access to youth apprenticeships. Such programs provide both a pipeline of educated workers for industries, as well as greater opportunities for youth exploring career options. SSTI recently took a look at some of the pre-apprenticeship programs in different states across the country and the impact some are having.

The PitchBook-NVCA Venture Monitor for Q1 of 2020 shows just a few signs of investment activity slowing down. The high and low ends of the VC spectrum appear particularly robust, with the number of angel (653) and mega (62) deal counts both almost exactly on track to match 2019’s figures. Seed deals (335) appear to be behind, at about 50 percent of last year’s pace — although reports of these investments often lag well behind when they occur, and early-stage VC deals (634) are also well behind the pace of the last several years. On the fundraising side, total funds closed were down from last year’s pace by about 20 percent ($21 billion into 62 funds). Q1 included only a few weeks of COVID-19’s national presence, and the next report will likely tell a much fuller story of the pandemic’s impact for equity investment.

SBA released data on the Paycheck Protection Program (PPP) this week for all approved loan activity through April 13 and told banks Wednesday night that the program is nearly out of funds. The data show more than 1 million loans worth more than $247 million approved across all states and territories. While the average loan is $239,000, 70 percent of the loans are less than $150,000. On average, states are seeing 3.1 loans per 1,000 population and nearly $747,000 per 1,000 population. While Texas (88,434) has seen the most loans, many Great Plains states are leading in per capita terms, with North Dakota (10.8 per 1,000 population), Wyoming (9.9), Montana (9.7), Nebraska (9.6), and South Dakota (9.0) comprising the top five. State data is in the table below. Looking at NAICS subsectors, construction is receiving the most loans with nearly 14 percent of approved funds, followed by professional services and manufacturing (each at 12 percent). According to SBA data (xls), accommodations and food services accounted for nearly 20 percent of 7(a) loan (the parent program of the PPP) volume over the past three years, but are just 9 percent of the PPP approved PPP loan volume. …

A new set of technology transfer strategies designed to incentivize rapid utilization of available technologies that may be useful for preventing, diagnosing and treating COVID-19 infection during the pandemic has been established by a group including Stanford and Harvard universities and Massachusetts Institute of Technology. The licensing strategies are meant to facilitate rapid global access of available technologies to help fight the pandemic. The patenting and licensing strategies include rapidly executable, non-exclusive royalty-free licenses to intellectual property rights that the signatories have the right to license, for the purpose of making and distributing products to prevent, diagnose and treat COVID-19 infection during the pandemic and for a short period thereafter.  In return for these royalty-free licenses, the signatories are asking the licensees for a commitment to distribute the resulting products as widely as possible and at a low cost that allows broad accessibility during the term of the license. Additional signatories as of April 15 include Broad Institute; Cornell University; Georgetown University; University of Maryland, College Park;…

The U.S. Department of Agriculture unveiled a one-stop-shop of federal programs that can be used by rural communities impacted by COVID-19. The resource guide lists programs that can be used to provide immediate and long-term assistance in support of recovery efforts for rural residents, businesses and communities through: Technical, training and management assistance; Financial assistance; and, State and local assistance. The resource matrix organizes funding opportunities identified in the CARES Act and other federal resources and are categorized by customer and assistance type. This resource has also been added to SSTI’s COVID-19 resource and information page, which is available here. The page contains links to federal, state, and other programs providing guidance on the both the latest stimulus package and other sources of aid.