Stories of Technology, Innovation, & Entrepreneurship in the Southeast

Knoxville Business News Tennessee Mountain Scenery Background
July 23, 2013 | Tom Ballard

SSTI summarizes state executive, legislative actions during 2013 sessions

SSTI-tekno(EDITOR’S NOTE: The State Science and Technology Institute – SSTI – always does a solid job of tracking state initiatives. About this time every year, the organization summarizes the major policy and program initiatives that state legislatures enact. The following items were excerpted from the latest issue of SSTI’s Weekly Digest. The list includes research, commercialization, workforce development, STEM and tax incentives.)

States Target Research, Commercialization for Economic Growth
A continued trend toward improved fiscal conditions gave rise to targeted and riskier investments in research for several states this legislative session. In particular, lawmakers dedicated funds for life sciences research and for initiatives aimed at commercialization through partnerships with higher education and the private sector. Other states dedicated additional funds to expand promising research and technology-focused initiatives already underway.

Lawmakers Support Efforts to Promote Research Commercialization
New funding commitments in life sciences occurred in Connecticut and Indiana. Connecticut lawmakers approved Gov. Dan Malloy’s proposal to create a $200 million fund to spur bioscience R&D as part of a broader economic development agenda announced in his State of the State address. With the passage of SB 842, Connecticut Innovations (CI), a quasi-public venture development organization, over 10 years will provide capital to early stage companies with the goal of driving efforts toward commercialization of new businesses and products. CI also plans to focus funds toward translational research and riskier investments for helping university faculty and students to commercialize bioscience research and ideas, reports the Hartford Business Journal.

Indiana lawmakers gave their stamp of approval to a major policy goal touted by Gov. Mike Pence during the campaign with a commitment of $25 million over the next two years to establish a biosciences institute. The governor and lawmakers hope to build an endowment of $300 million to $400 million over the next five to seven years drawn from corporate and philanthropic sources (see the May 29, 2013 issue of the Digest).

Investing in Knowledge-based Industries
Efforts to better nurture and grow startups recently have gained momentum in state legislatures, often times spearheaded by tech-based economic development groups.

To help foster technology-based companies in Oregon, lawmakers want to capitalize on the emerging research and community connections of the state’s universities. SB 241 creates the Regional Accelerator and Innovation Network (RAIN) with the goal of accelerating regional business formation by linking and expanding programs and facilities anchored in “RAIN Centers” around Oregon State University and the University of Oregon. The two centers will combine incubator-type housing, university-community designed accelerator programs, and one-stop shops to access regional assets. As companies grow, the external linkages provided by the program are designed to help supply additional talent management and investment capital beyond the region. The state is providing $3.75 million to jump-start the initiative.

With an additional $12 million in FY14 funding, the Iowa State University Research Park will build a new facility to house services and agencies that assist Iowa businesses, which currently are “scattered” around the campus, according to a press release. The planned expansion will bring together the Small Business Development Center, the Pappajohn Center for Entrepreneurship, the Office of Intellectual Property and Technology Transfer, and the Iowa State University Research Foundation, among others. Funding was appropriated in HF 648, signed by Gov. Terry Branstad in June.

Earlier this year, Florida Gov. Rick Scott signed into law a measure to help attract more seed funding for startups. HB 705 expands the state’s reach in working with innovative businesses by allowing Florida’s Institute for the Commercialization of Public Research to create corporate subsidies and develop or accrue ownership, royalty, patent or other rights in the companies it helps develop. The measure also creates a seed fund to encourage private-sector investment in startup companies. The enacted budget included $5.5 million for the effort (see the May 8, 2013 issue of the Digest).

Expanding Promising Research Initiatives
While many states continued to exercise austerity for established TBED initiatives, lawmakers in some states, including in Massachusetts and New Jersey, dedicated additional funding to expand the reach of promising research initiatives.

The Massachusetts Life Sciences Center, a quasi-public agency charged with implementing the state’s 10-year, $1 billion Life Sciences Initiative, will receive $19.5 million in FY14 for the agency’s investment fund, a $4.5 million increase over last year. The appropriation, which is contingent upon a consolidated net surplus for FY13, represents the highest level of funding the center has received from the state legislature to date. The original commitment was $25 million a year when the legislation was passed in 2008. Through the investment fund the center provides research grants and accelerator loans to researchers and early stage companies and supports workforce development efforts in the life sciences sectors. The center also is authorized to award up to $25 million per year in tax incentives to life Massachusetts-based life sciences companies.

New Jersey’s FY14 budget includes $20 million in new funding for cancer research and support for two cancer facilities – the Cancer Institute of New Jersey and the South Jersey Cancer program.

Lawmakers Move to Support Workforce Training, Strengthen Industry Clusters
At the close of many recent legislative sessions, states across the country moved to strengthen their high-tech workforce while supporting industry cluster development.

In Washington state, the Working Washington Agenda has received bipartisan support to strengthen the state’s economic foundations on a wide range of fronts. The final bill provides funding for STEM education, improves workforce training programs, and assists with the growth of key industries. One highlight of legislation supporting cluster development is the creation of a Joint Center for Aerospace Technology Innovation, backed by $1.5 million in state funding, which is being used to fund 18 research projects across the state. Each grant connects an in-state aerospace company with public university partners to support the commercialization of new technologies. Currently, the University of Washington, Washington State, and Western Washington are participating. The program is designed to assist aerospace companies of all sizes, and includes $300,000 in grants for 12 high schools to adopt aerospace assembly programs.

The Working Washington Agenda also directs $40 million toward the creation of the Governor’s Clean Energy Fund, which is being established to help finance energy efficiency and renewable energy technologies. Funding will help electrical utilities develop and use new technologies to cut costs for integrating renewable energy into the electrical grid, support clean energy R&D, and help establish a federal manufacturing innovation center. The bill also provides $6 million for the University of Washington to create a clean energy institute that will focus on next-generation technology for energy storage and solar energy. New York also is pushing to support industry clusters by providing $50 million for venture capital funding for the state’s regional economic development councils, as well as $55 million in challenge grant funding for SUNY universities to expand their research facilities.

Texas, Washington, and Hawaii are both investing in the foundation of their economy by passing legislation that supports inclusive workforce training. In Texas, legislation recently passed that will create a veterans entrepreneurship program. The program will serve as a clearinghouse for efforts to support the inclusion of the state’s veterans into state-supported entrepreneurship programs. Hawaii has channeled $6 million to the Hawaii Strategic Development Corporation to launch a new, comprehensive state-level program. The Hawaii Growth Initiative, will assist startup companies by providing tech commercialization assistance, training programs, access to mentors and connections with networks of investors. Washington’s recent legislation contains an initiative to strengthen STEM education in the state, providing more than $100 million to build facilities for science, technology, engineering, and math at state universities and colleges.

Texas, Washington and Pennsylvania also are pushing to promote closer connections between government and the private sector. In Texas, legislation recently passed that will create an entrepreneurship-in-residence program for state agencies, with resident entrepreneurs supporting the outreach of state agencies to the private sector. In Washington, a new initiative also will seek to improve the state’s business climate by creating a one-stop portal for businesses and taxpayers. The state’s chief information officer, in collaboration with the Departments of Revenue, Labor and Industries, the secretary of state, Employment Security Department, Department of Commerce and Center for Regulatory Innovation and Assistance are responsible for instituting a one-stop portal for business and taxpayers by November 2013. Pennsylvania will be leveraging partnerships with the private sector to supply state-based venture development organizations with capital, auctioning off $100 million in insurance tax credits in a scheme developed from a successful program enacted in Maryland.

STEM at the Forefront of States’ Education Policy
States across the U.S. are directing their attention to science, technology, education and technology (STEM) education, and already have passed a plethora of new initiatives in the current legislative session. These programs are directed at various levels of education including primary education and higher education, with one program specifically designated for the state’s community colleges. A number of states have created STEM advisory councils under the governors’ offices, following the lead of Iowa and Massachusetts. Such measures suggest that STEM is no fleeting policy issue and that states are beginning to recognize the economic value of making long-term investments in students.

Both Connecticut and Massachusetts included funding for STEM initiatives within their most recent budgets. The Massachusetts budget included a line item of $4.75 million for a new STEM Starter Academy that will work with one or more community colleges in the state to train students interested in STEM career fields. Connecticut allocated $1.5 billion to University of Connecticut campuses over the next 10 years to expand STEM facilities and enrollment. See SSTI’s coverage of the Connecticut measure for more details.

In Washington and Oregon, a pair of new initiatives target younger students and primary school curriculum. Under HB 1472, Washington became the 10th state to allow students enrolled in AP Computer Science to apply their credit to their high school diploma as a math and science credit. The state legislature also strengthened its emphasis on STEM in its education policy under HB 1872 by providing a formal definition of STEM literacy, and outlining actions to implement STEM assessments, interdisciplinary instruction, and project-based learning. Meanwhile, Oregon dedicated $8 million over the next two years to establish the STEM Investment Grant Program under HB 2636. The program will provide grants to create and improve in-school programs, regional hubs, and after-school programs. Iowa approved $5.2 million in funding for the second year of the Iowa Math and Science Education Partnership under Gov. Terry Branstad’s STEM Advisory Council to continue coordinating STEM programs through schools, clubs, and nonprofits.

Washington followed Iowa’s suit and created the STEM Education Innovation Alliance as an advisory body under the governor’s office that will bring together representatives from industry, higher education, the public education system, and other critical stakeholders to advise the governor on future STEM measures. Utah also dedicated $10 million in one-time and ongoing funds to establish a STEM Action Center to promote best practices, coordinate grant opportunities, provide resources, and serve as a general hub for the state’s STEM policy.

R&D Tax Credits in Many States Seek to Help Business Development, Innovation
A number of states recently have taken action to expand R&D tax credits and other legislation that would support innovation, commercialization and manufacturing. Hawaii, California, Maryland, Texas, and Florida have signed into law tax incentives and R&D tax credits and an R&D tax credit in New Hampshire went into effect. The Maine legislature also passed a capital tax credit that will begin in 2014.

In late June, the Maine Senate and House passed LD 743, which will extend the Maine Seed Capital Tax Credit. The original tax credit program was created in 1989 with a $30 million cap. This extension will provide an annual cap of $5 million in tax credits to qualifying investors, beginning in 2014. “A tax credit certificate may be issued to an investor other than a private venture fund in an amount not more than 50 percent of the amount of cash actually invested in an eligible Maine business in any calendar year,” according to the bill. The business invested in must be “a manufacturer or a producer of a value-added natural resource product.”

The New Hampshire tax credit in SB 1 took effect in late May. SB 1 increases the limit of research and development tax credit from $1 million per fiscal year to $2 million per fiscal year. The tax credit is applied to business profit tax.

Last week in Hawaii, SB 1349, which extends through 2019 an income tax credit for qualified research activities, was signed into law. The Department of Business, Economic Development, and Tourism will monitor the tax credits and report on their use and effectiveness.

Two California bills pertaining to tax exemptions and credits have been signed by Gov. Jerry Brown. AB93 introduces a sales and use tax exemption for manufacturing and bio-technology equipment, which includes R&D equipment. There is no cap on the total amount of the credit. SB90 further extends the sales and tax use exemption established in AB93 to July 2022. The bills also include a hiring tax credit for employees who have been unemployed for at least six months, for a veteran, or those who use the federal earned income tax credit.

Other states that recently have passed tax credits include Maryland, Texas, and Florida. Maryland HB 803 (as reported in the April 24, 2013 Digest) established the Maryland Cybersecurity Investment Tax Credit Reserve Fund and a $3 million tax credit program that would create a 33 percent tax credit for qualified investors in cybersecurity companies. Maryland also expanded the R&D tax credit from $3 million to $8 million and the Biotechnology Tax credit from $8 million to $10 million. HB 803 was signed by Gov. Martin O’Malley in early May.

The Texas legislature, as part of a series of bills to support research and commercialization activities, reinstated the state’s R&D tax incentive through HB 800. This incentive was in effect from 2001 to 2006, when it was repealed. (see the May 29, 2013 Digest). Gov. Rick Perry signed the legislation into law in mid-June.

As part of the Florida FY14 budget agreement, which was signed in late May, Gov. Rick Scott won inclusion of his proposal to eliminate sales tax on manufacturing equipment (see the May 8, 2013 issue of the Digest. This exemption will run from May 2014 until May 2017.


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