SSTI Digest

Over the past few months, several states have announced efforts aimed at reducing the nation's dependence on oil. While the importance and urgency of such efforts is perhaps magnified in the wake of one of the worst U.S. environmental disasters, the shift to a renewable energy-focused economy also brings with it the expectation of job creation, new product development, and increased revenue for states struggling in the aftermath of the Great Recession.

Governors in Arizona and Rhode Island recently signed legislation supporting renewable energy R&D and offshore wind development, respectively. In California, a measure requiring electric utilities to generate one-third of the state's power from renewable sources is being floated, and in Utah, Gov. Gary Herbert announced a formal planning process to create a 10-year clean energy initiative for the state.

The $68.2 million FY 11 budget approved last week for the New York State Foundation for Science, Technology and Innovation (NYSTAR), allows the foundation to continue to provide 10 percent matching funds for research institutions and businesses in order to attract federal, private and industry funds. The budget allocates $29.5 million in FY11 for a matching grants program started with ARRA stimulus funding and $5.2 million for the state's six Centers of Excellence.

The appropriation is scaled down from Gov. David Paterson's original budget recommendation that would have provided $100 million for the program (see the issue of the Jan. 27, 2010 issue of the Digest). The NYSTAR budget also includes $1.5 million for state matching funds for the Manufacturing Extension Program and $343,000 for the Research Development Program.

A. 9705, providing the budget detail, is available at: http://public.leginfo.state.ny.us.

Illinois Gov. Pat Quinn recently signed legislation approving a new tax credit to encourage angel investment and extending the state's R&D tax credit one more year. The Innovation Development and Economy Act (SB 2093) allows eligible angel and early-stage institutional investors to take a 25 percent tax credit on investments in small, technology firms. Up to $2 million may be claimed on an individual investment for a $500,000 tax credit. The program is capped at $10 million and will be effective on Jan 1, 2011.

Passed unanimously by the Illinois General Assembly, SB 3655 extends the state's R&D tax credit for one more year. The provision allows for a tax credit equal to 6.5 percent of qualifying expenditures that increase R&D activities in Illinois. These expenditures include, for example, technological and experimental research whose purpose is to develop new or improved components, functions, performance, reliability or quality.

SB 2093 is available at: http://ilga.gov/legislation/publicacts/96/PDF/096-0939.pdf.

Touted as a tool to help the state attract and retain jobs, South Carolina Gov. Mark Sanford last week signed into law H. 4478, the Economic Development Competitiveness Act. The new law directs one-third of the state's endowed chairs money be administered by the Coordinating Council on Economic Development — a reform measure that the governor says will help shift its focus to job creation and allow private sector investment to lead public sector investment. Funding previously was administered by an academic panel. The Act also provides several incentives for manufacturing, including renewable energy tax incentives.

To support the state's manufacturers and attract new facilities, the Act includes the following incentives:

A national space agenda based on competition and national pride — the space race as it has been called — fits bygone times, according to the new National Space Policy statement released by the Obama administration on June 28. The new era outlined in the 14-page document calls for space-venturing nations to embrace shared principles of responsibility, peace, transparency, no claims of national sovereignty, and recognizing "purposeful interference" with another nation's space systems is an infringement of that nation's rights and grounds for self-defense or deterrence.

U.S. leadership in space is expected to be maintained through space-related research, assured access to space (e.g., using American-manufactured vehicles for payload launches), enhanced spaced-based global positioning, navigation satellite and timing systems, quality of space professional workforce and interagency cooperation.

U.S. manufacturing competitiveness will continue to decline, according to the 2010 Global Manufacturing Competitiveness Index (GMCI). Index projections suggest, by 2015, Brazil will have overtaken the U.S. for fourth in the global rankings behind China, India and the Republic of Korea. The report concludes the increasing talent pools worldwide, coupled with higher U.S. wages, have placed U.S. manufacturing at a disadvantage in the global markets. However, the U.S. should remain at the forefront of manufacturing innovation due to a focus on strengthening science and technology research, the strong intellectual property rights (IPR), technology transfer policy, and STEM initiatives.

The report was created through a partnership between Deloitte's Global Manufacturing Industry group and the U.S. Council on Competitiveness. Based on survey responses from more than 400 senior global manufacturing executives and key government decision makers, researchers developed an index that ranked the "10 drivers of global manufacturing competitiveness." Respondents also were asked to rate the overall manufacturing competiveness of 26 countries for 2010 and 2015.

In 2007, the federal government dedicated $111.4 billion to R&D, an amount roughly equal to 0.81 percent of the U.S. gross domestic product (GDP), according to a recent report from the National Science Foundation (NSF). While research-intensive states, such as California, Maryland, Massachusetts and Virginia are the leading targets for federal R&D spending, several other states attracted a comparable amount of federal funding relative to their economies between 2002 and 2007. Montana, Washington, Utah, Tennessee and Colorado led the country in expanding their federal R&D obligations during that five-year period. The District of Columbia and New Mexico rank with the top states in federal obligations relative to their gross state product (GSP). Despite a general pattern of positive growth around much of the country, federal obligation rates fell in many southern states during this period.

On June 11, Gov. Donald L. Carcieri signed the Job Creation Guaranty Program. Sponsored by House Finance Chairman Steven M. Costantino and Senate Finance Chairman Daniel Da Ponte, the legislation establishes a $125 million dollar loan-guarantee program for the knowledge and technology-based sectors. Under this program, the state will not directly issue any loans. Instead, it will provide state backing to facilitate private loans. The Rhode Island Economic Development Corporation (RIEDC) will administer the program.

Under the program, 75 to 90 percent of each loan made by private lending institutions to qualified businesses will be guaranteed by the RIEDC. Responsibility of the loan only would be assumed by the state if the company defaulted. In cases of default, the RIEDC would request appropriate funding from the state's General Assembly. They also would seize assets from the defaulting business to cover the loss.

Based on change in Gross Metropolitan Product (GMP), four of the nation's top 100 metro areas are beginning to rebound sharply, moving from the worst impacted by the Great Recession to some of the fastest growing for the most recent quarter: Oxnard-Thousand Oaks-Ventura, CA; Cleveland-Elyria-Mentor, OH; Bradenton-Sarasota-Venice, FL; and Phoenix-Mesa-Glendale, AZ. These upbeat conclusions, drawn from Brookings' latest quarterly MetroMonitor, are coupled with troubling signs for many metro areas across the country.

Cleveland-Elyria-Mentor, OH, and Bradenton-Sarasota-Venice, FL - two more metro areas among the 20 that experienced the worst effects of the Great Recession - moved up three quintiles by the most recent quarter to be among the second strongest 20 metro areas for GMP. Only one other metro area jumped three quintiles between maps: Phoenix-Mesa-Glendale, AZ, moved from the second overall weakest 20 metro areas to be the nineteenth fastest growing area in the most recent quarter.

A $3 million grant from the New Economy Initiative for Southeast Michigan recently was awarded to a group of four business accelerators working together to support area entrepreneurs and grow Michigan's knowledge-based economy. The grant will support efforts of the newly formed Business Accelerator of Southeast Michigan, which includes Ann Arbor SPARK, Automation Alley, Macomb-OU INCubator, and TechTown. Projects involving venture capital funding, the development of best practices and intellectual property, and plans to build a statewide database listing all business resources for entrepreneurs are in discussion.Read the press release.

A job creation program to replace New York's Empire Zone Program, often criticized by Gov. David Paterson for its lack of results and soaring cost, was approved this week by lawmakers. The Excelsior Program carries a much smaller price tag than its predecessor and limits the focus to seven industry sectors seen as having high job growth potential. Funding for the program is capped at $50 million per year for a total $250 million when fully implemented. Annual Empire Zone expenditures exceeded $550 million, according to the governor's office.

Benefits offered under the new program include a jobs tax credit of up to $5,000 per job based on salary and benefit levels, an industrial tax credit of 2 percent of qualified investments, and an R&D tax credit of 10 percent of the federal R&D tax credit that can be allocated to the state. Businesses located within existing investment zones and regionally significant projects also are eligible to receive 50 percent of the Real Property Tax Credit in one year, phasing down to 10 percent in year five.

The vast majority of basic research performed in this country is funded by the federal government, so odds are most innovations also stem from our federal research investments, right? The generalization may seem logical but it could never be proven. Let alone following research through to any resulting technologies, it is currently impossible even to tell the number of jobs resulting from federal research investments–supporting people in positions ranging from top of the field faculty researchers to research assistants, lab technicians, and administrative/custodial support staff.

Apart from anecdotes of individual success stories and single-program assessments, it is difficult to develop a reliable sense for impact federal R&D investment has on the economy. That finally may be changing as a result of a new multi-agency initiative lead by the National Institutes of Health, the National Science Foundation and the White House Office of Science and Technology Policy, that promises to monitor the impact of federal science investments on employment, knowledge generation, and health outcomes.