State's biotech plan may top peers' Specialists: Outline hints it may be more flexible, cost-effective
BYLINE: Stephen Heuser Globe Staff
Governor Deval Patrick's proposal to inject $1 billion into medical research and biotechnology is a complex plan whose details have yet to be worked out, and it depends on the Legislature's willingness to fund it over a decade. But his strategy could also be more flexible and cost effective than competing plans in California and other states, according to policy specialists and a Globe analysis.
Patrick unveiled his Life Science Initiative this month before a packed crowd in Boston at the world's largest biotech convention, saying it would combat "competitor states and foreign nations" trolling aggressively for a piece of the state's marquee industry. He promised money for a new stem-cell bank, job training, and biomedical research, as well as tax breaks for companies hiring new workers.
Behind the $1 billion promise is a stream of money that is far from guaranteed. The Senate and House would need to find $25 million in the state budget every year for 10 years. They would also need to authorize $500 million in new bonds and write a new law making life-science companies eligible for up to $250 million in tax benefits.
"This is an initiative that's probably just starting - that's going to require a lot of moving parts to come together to make it go," said Patrick Kelly, a vice president at the national Biotechnology Industry Organization who tracks state biotechnology policies.
Although the uncertainty behind the funding could put Massachusetts at a disadvantage against states offering a stream of guaranteed cash, Patrick has also won praise for crafting a plan that doesn't lock Massachusetts into spending money it might not have.
"I'd be much more concerned if it was $100 million in new spending every year," said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a nonpartisan research group.
Life-science booster programs have become an almost obligatory piece of state economic policy nationwide. A 2006 survey by the Battelle Memorial Institute found that nearly every state had an initiative to support bioscience, from university lab construction to more disputed programs that use taxpayer money to fund private start-up firms.
By far the largest is California's stem-cell initiative. After President George W. Bush in 2001 banned federal funding of research on new embryonic stem cells in 2001, California voters approved $3 billion of bonds to be sold over 10 years. The bonds guarantee an annual flow of up to $350 million for stem-cell research, which could start being disbursed later this year.
Another high-profile program is the state of Washington's plan to use tobacco-settlement money to guarantee $35 million annually for life-science research. Connecticut granted $20 million to stem-cell researchers in November and has committed to spend another $10 million a year until 2015, and in Florida, former governor Jeb Bush lured a major biomedical research institute by offering more than $300 million in state subsidies.
But such funding plans also have strong critics, especially in California, where stem-cell money has been held up by lawsuits from conservatives who oppose the research on ethical grounds. Washington's program has been criticized by a prominent scientist for its lack of focus, and Florida's subsidy for the new Scripps Research Institute has been attacked locally as a handout.
"Giving away money wisely is a lot of work. It's not a piece of cake," said Lee Huntsman, executive director of Washington's life-sciences funding center.
The Patrick proposal, by contrast, has already won wide endorsement from both local business and civic leaders, partly because it spreads its largesse so widely that no one segment appears singled out.
But that doesn't mean it won't face challenges in the Legislature. The first sign of trouble came the week after Patrick's speech at the Boston Convention and Exhibition Center during the BIO International Convention, when the Senate released its proposed budget for 2008. State Senate president Therese Murray, a Democrat who supports the Patrick plan, said the $25 million each year would come from the state's budget surplus - essentially diverting it from the state's "rainy day" fund.
Under that scenario, if the state failed to run a surplus of at least $125 million a year, the funding for the governor's program would dwindle; if the surplus were less than $50 million, it would disappear entirely. In three of the past 10 years the surplus would have been too small to fully fund the plan, according to the Senate.
A spokeswoman for the governor, Cyndi Roy, called the Senate plan a "step in the right direction" that would need more discussion.
Even if the Legislature agrees to provide the $25 million, who gets the money remains to be determined. The Patrick administration's early outline contains a number of innovative ideas, including "bridge grants" for promising researchers who narrowly miss out on National Institutes of Health funding. The criteria for grants would be set by the Massachusetts Life Sciences Center, a board established last summer to distribute a one-time allocation of $10 million to biomedical research. That board would likely be reconstituted, a move that would also require new legislation.
The $500 million from the sale of bonds, much of which is expected to go to the University of Massachusetts to build a pioneering stem-cell bank, awaits a capital plan by the governor, which would likely be submitted to the Legislature this summer. Because the state has a $1.25 billion annual limit on issuing bonds, already oversubscribed, any new life-science bonds would have to displace other spending.
Finally, the tax-credit component also requires a new law. Administration officials say the state hopes to make the credits "revenue neutral," essentially offering money to companies only if there's a reasonable chance the state will earn the money back in future taxes generated by new jobs.
Tax credits are a favorite of business lobbies but pose a difficult question for policy makers trying to determine the true payoff for the state.
"One of the key questions always is, would these jobs have been created anyway?" said Widmer of the Massachusetts Taxpayers Foundation.
Policy researcher Eric Nakajima of the UMass Donahue Institute, who recently prepared a report on the state's bioscience industry, said the Patrick plan should get credit for its sophistication - wisely, it doesn't funnel all the cash into a single arena of research, he said.
He also said its lack of early specificity could be an asset, especially with so many parties needing to sign on to the plan.
"I think there's a pretty poor track record for the idea that you simply look at the Senate president and the speaker and say, `Do what I say,"' Nakajima said.
Stephen Heuser can be reached at sheuser@globe.com
WHAT IS BIOTECH?
For a special report on biotechnology and its impact on the Bay State, go to boston.com/business.
(THIS LINK MAY EXPIRE WITHIN 6 MONTHS OF PUBLICATION)