SSTI Digest

With the start of the new year, most governors deliver State of the State addresses or Budget addresses laying out their priorities for the coming year. With revenues for many states relatively consistent with forecasters expectations, lawmakers, with a few exceptions, continue to maintain cautious or constrained views of their funding priorities and proposed initiatives. As a result, many governors in SSTI’s analysis of addresses delivered so far this season, are speaking more about previously implemented programs and their continued successes rather than rolling out many new programs. However, new priorities for growing stronger innovation economies have not been completely overlooked.

The following highlights have been selected excerpted from eight of the 20 State of the States or Budget addresses given between Dec. 2024 and Jan. 16, 2025, by governors from Arkansas, Colorado, Connecticut, Iowa, Kansas, Massachusetts, New Jersey, and New York.  

The U.S. Department of Treasury has announced its approval of $801.4 million in SSBCI funding for eleven U.S. states and territories: Arkansas, Delaware, Guam, Kentucky, New Jersey, Puerto Rico, Rhode Island, Tennessee, the U.S. Virgin Islands, Wisconsin, and Wyoming. The addition of these states and territories means 46 states and three territories have been approved for State Small Business Credit Initiative (SSBCI) funding. Treasury has now approved over $7 billion in SSBCI funding. This news comes alongside the upcoming two-year anniversary of the passage of the American Rescue Plan Act on March 11, 2021.

Arkansas

The recently approved Inflation Reduction Act with new incentives for electric vehicle ownership and energy efficiency is likely to continue a trend among states for the location of major economic development projects, a trend toward everything mega—megasites, megadeals, mega factories, and mega projects. These large-scale manufacturing projects typically feature incentives from state and local governments, such as access to shovel-ready megasites or large tax incentive packages. These new "mega" trends have raised the stakes and increased competition between states as they advocate for the bid of electric vehicle and battery companies looking to expand.

An inaugural report looking at the landscape of capital resources in Arkansas may be useful to others who are interested in examining the capital access in their state or region. The report will serve as a baseline for trends in public, private and philanthropic investments in entrepreneurship across the state and may be a useful resource as the state plans its State Small Business Credit Initiative strategy.

Topics covered in the report include core economic indicators, angel and venture capital investments, SBIR/STTR awards and small business loans. A team at the University of Arkansas coordinated the 2020 Arkansas Capital Scan, with input from an advisory committee of local stakeholders, and compared their findings to neighboring states Oklahoma, Missouri and Tennessee.

Whether or not your state embraced strict measures in an attempt to reduce virus spread, the current pandemic has created the need for reflection and revision of how each of us go about our lives. The same opportunity has arisen for the public and private sectors to rethink how they engage in many core functions.  Civic leaders in Arkansas did just that and today released a strategic plan with recommendations to guide economic development in the new era.  Its central themes, including strong focus on innovation, entrepreneurship, and talent, could have broader applicability to other states as we move forward.

Across the country, the governors have begun delivering their State of the State addresses, an annual ritual where they have the opportunity to review where the state’s economy stands and preview their plans for the coming year. This year’s remarks reflect the dire conditions most states are experiencing with the pandemic, economic fallout, racial strife and national political upheaval. Despite the heavy focus on states’ efforts to respond to the pandemic, governors have struck a hopeful note and are focusing on recovery. Some governors have noted that the fallout in their state was not as severe as they originally anticipated and there are resources for new initiatives. Some, like Arizona and Virginia are considering gaming revenue to boost their budgets, while legalization of marijuana is being pursued in Connecticut, Kentucky (medical marijuana) and Virginia.

The Walton Family Charitable Support Foundation is making a $194.7 million grant to advance research and economic development at the University of Arkansas and will allow a new research institute to become reality. The grant is expected to grow the university’s cross-disciplinary research capability, expand the scope of discoveries made by U of A researchers and increase the speed in transferring such discoveries to the marketplace. The new research institute, the Institute for Integrative and Innovative Research (I3R), will receive the bulk of the grant, and will create a flexible, collaborative framework that will facilitate the integration of research across five overlapping clusters of innovation: materials science and engineering; food and technology; bioscience and bioengineering research in metabolism; data science; and, integrative systems neuroscience.

In general, the effect of the pandemic on states’ budgets due to the wave of business, retail, and commerce shutdowns, as well as other reduced economic activity across the nation, is not entirely known, or too early to forecast; however, a number of states are beginning to experience the initial impacts of a substantial downturn. With several states having already enacted their 2020-21 budgets, special sessions are expected later this year to deal with declining revenues. Others ended sessions early without a new fiscal year spending plan in place. Many are also acting quickly to help mitigate the effects of lost revenues and an increased demand for services. Some of the states’ impacts and actions are outlined below.

In 2019, the administrations and legislatures in many states grappled with if and how to adjust state economic development initiatives to leverage the federal Opportunity Zone (OZ) program. The actions of 12 states that implemented new activities are described below.

Notably, many of these state efforts require applications and reports on OZ projects — unlike the federal OZ incentive. Some created a new requirement specific to OZs and some states placed the OZ benefits within existing initiatives that already require such information sharing. Investor use of state OZ benefits, therefore, may be one means by which the costs and benefits of the federal program will be able to be evaluated.

Universities frequently play an integral role in providing activities, research, and products that positively affect or support local, regional, state and national economic development or strategic goals.  In higher-education’s efforts to align its participation in innovation and entrepreneurship systems, universities’ incubators, accelerators and fund programs are essential in assisting their faculty, staff, or students in the services and support needed to create startups, bring products to market, or provide critically needed funding.

Late last year, the Walton Family Charitable Support Foundation announced a $23.7 million investment to strengthen technology-based economic development efforts at the University of Arkansas. Additional details on this investment became clearer this week, as the university announced three subsets of its Chancellor’s Fund, which invests in strategic initiatives under the direction of the vice chancellor for research and innovation.

Governors are reaching into their toolkits to build tech-based economies, utilizing Opportunity Zones, tax credits, broadband infrastructure and workforce development initiatives among other things. This week, as we continue to review their state of the state addresses for TBED news, we see some governors still trying to reshape their states’ struggling economies while others are building on past successes and proposing new initiatives.

Arkansas wants to become a technology hub and is proposing a Technology and Innovation Council to help achieve that goal. Delaware is hoping to build on its Angel Investor Tax Credit and utilize Opportunity Zones to spur development. Energy and climate change are on the agendas for many governors, and this week we see it called out by governors in Delaware, Hawaii, New Jersey, New Mexico and New York. Tools for rural development are on the radar in Georgia, while workforce development and education are just part of the plan in New Jersey and New York.

In his Jan. 15 state of the state, Arkansas Gov. Asa Hutchinson highlighted his goal of making the state a technology hub: