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20-Year Investment in Ben Franklin Technology Partners (Investment Fund) Pays Off Big for Pennsylvania- New Mexico moving forward with long term programs- Mississippi gaining ground

Convincing politicians to make a multi-year investment in a state’s economic future is challenging, particularly when commitments made in one budget cycle or administration can be forgotten or ignored so easily in the next legislative session.

The FY 2003-04 funding struggle for Michigan’s $50 million-per-year-for-20-years life science initiative provides ample evidence: $50 million dropped to $45 million and eroded to $32.5 million because of budget problems. For FY04, the governor has requested only $20 million for the line item and added several other demands on the shrinking pot of funds.

Getting a state’s General Assembly to stick to it for 20 years, as Pennsylvania’s Ben Franklin Technology Partners (BFTP) has seen since 1982, takes strong gubernatorial and legislative leadership across terms, administrations and parties — and results worthy of the increased public funds.

And BFTP has delivered, according to an independent impact analysis. The analysis reported that $311 million in public investments, resulted in 23 to 1 return on the public investment, or a $7.9 billion impact on the Pennsylvania economy (in constant 1996 dollars).

The BFTP analysis addresses one of the most common complaints about impact studies on public TBED programs: the perceived or real bias inherent to client self-reporting. Skeptics argue that, in concern for any political fallout or repercussions, TBED clients are likely to inflate positive results, attribute too much to the program services, or not report negative results in response to surveys. Using a quasi-experimental design that incorporates a "control group" of similar companies that had not received BFTP assistance, the study was able to isolate program impacts from other factors that influence a company’s performance and use case studies to assess BFTP’s specific role in a firm’s success.

Results from the BFTP clients and control group were then compared to estimate the direct impact BFTP had on the state economy through several measures.

BFTP has invested in more than 2,500 companies since its first direct equity placement in 1989; 76 percent of the deals were with companies employing less than 50 people at the time of the initial BFTP investment. The results of these investments, according to the study are impressive:

* Every public dollar invested through BFTP returned almost $23 in additional income in the state.

* The state has collected more than $400 million in additional tax revenue as a direct result of BFTP, at least $91 million more than the state invested. The study estimated the present value of additional state tax receipts per dollar of state investment in BFTP to be $1.15.

* Average annual salaries at BFTP clients is 28 percent more than the average annual salary for all private, nonfarm industries in Pennsylvania.

* BFTP investments, in aggregate, generated 35,579 additional job-years in client firms between 1989 and 2001. "On average, BFTP clients employed three more people in each year following funding than they would have in the absence of the BFTP investment."

* Through multipliers to assess the indirect effect of the direct benefits of the program, BFTP can be said to have indirectly resulted in the creation and sustenance of 57,526 additional job-years. The net total result of 93,105 job years generated yields an average cost per job of $3,342 for state taxpayers, the study argues. [Although it could be argued that since the program directly results in a net growth in tax revenues, the true cost to the taxpayers is zero.]

A Continuing Record of Achievement: The Economic Impact of the Ben Franklin Technology Partners was prepared as part of BFTP’s 20th anniversary celebration this year. More information on the program is available at http://www.benfranklin.org/. Requests for copies of the BFTP study should be directed to Terry Singer at [email protected].

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New Mexico Gains Technology Based Economic Development Tools

Increased funding for equity investments and a new university-industry R&D partnership program are among the pieces of legislation New Mexico Governor Bill Richardson signed this week, greatly expanding New Mexico’s portfolio of programs to grow a tech-based economy. Most of the initiatives were included in the economic development agenda Gov. Richardson outlined during his first State of the State address in January. They are:

* As much as $300 million from the state Severance Tax Permanent Fund may be invested as equity in New Mexico venture capital funds and New Mexico business. HB 916 raises the maximum cap to 6 percent of the Fund’s market value that is available for equity financing.

* A Technology Enhancement Fund is created in House Bill 391 to provide matching funds to state research universities to support collaborative applied research done in partnership with corporations or non-profit organizations. Supported research must lead toward the creation of new products and production processes in the fields of agriculture, biotechnology, biomedicine energy, materials science, microelectronics, water resources, aerospace, telecommunications, manufacturing science and similar research areas. The program will be administered by the New Mexico Commission on Higher Education.

* HB 394 establishes a Work Force Skills Development Fund in the Commission on Higher Education to provide matching funds to community colleges for the development, expansion and support of broad-based entry-level high-skills training programs. An appropriation of $300,000 was made for FY04.

* Nine million dollars is appropriated for a new Faculty Endowment Fund to support the creation of endowed chairs, professorships and faculty development programs at the University of New Mexico, New Mexico State University, and the New Mexico Institute of Mining and Technology. Each school will receive $3 million for the first of three chairs after it has secured matching commitments from nonstate sources of $2 million. Each chair must be in a field that is directly related to encouraging economic development in the state.

* HB 172 appropriated $80,000 for a fuel cell demonstration project for a grid-interconnected, real-time, net-metered, solar photovoltaic system and an ultra-high-efficiency co-generation fuel cell system powered by natural gas, propane, methanol or hydrogen to generate on-site electricity for government or public use.

In addition, Senate Bill 932 authorizes a variety of economic development financing tools such as bonds, loans and loan guarantees that can be used statewide by the New Mexico Finance Authority.

More information on each bill is available at: http://legis.state.nm.us/

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Mississippi Technology Alliance Releases Second Annual Innovation Index

The Mississippi Technology Alliance has released a second annual index focusing on the process of innovation, the links between innovation and technology-based economic development, and activities that government, academia and the private sector provide to support innovation and economic development.

First published in January 2002, the Mississippi Innovation Index presents technology goals, targets and annual performance levels for Mississippi, using data from the Institutions of Higher Learning, the Mississippi Development Authority, the Mississippi Employment Security Commission, the Mississippi Tax Commission and other national databases. The 2003 index updates data for the most current years published by the agencies and the previous 3-5 years.

Eight innovation goals, or areas of focus, are the subject of the Index. Using a standardized scoring system, the index shows Mississippi’s overall index value among the areas is 325, up slightly from the baseline index value of 300 — an improvement of 8 percent. The 10-year goals include:

* wealth creation – increase high tech employment to 7.9 percent of total employment;

* statewide research capacity – increase total R&D expenditures to $17 for every $1,000 of gross state product (GSP);

* university research capacity – increase university royalties from patents and licenses to $2.50 for every $1,000 University R&D expenditures;

* business research and development – increase Small Business Innovation Research (SBIR) awards to $.10 for every $1,000 GSP;

* technology business development – increase net growth in the number of technology intensive firms to 33 percent;

* industrial productivity – increase value added in manufacturing to $84,000 per manufacturing employee;

* technology workforce development – increase the percentage of scientists and engineers in the workforce to 0.3 percent; and,

* investment capital – increase venture capital invested in Mississippi companies to $2 for every $1,000 GSP.

Mississippi performs above the baseline in two areas, state research capacity and industrial productivity, but falls below it in four others. The Index concludes, "Although performance is high in some areas and low in others, the combined scores reflect the joint influence of this family of innovation measures."

The nonprofit Mississippi Technology Alliance promotes science and technology-based economic development in Mississippi. Its Index is available at http://www.innovationindex.ms.

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Copyright State Science & Technology Institute 2003. Information in this issue of SSTI Weekly Digest was prepared under a cooperative agreement with the U.S. Department of Commerce, Economic Development Administration. Redistribution to all others interested in tech-based economic development is strongly encouraged — please cite the State Science & Technology Institute whenever portions are reproduced or redirected. Any opinions expressed in the Digest do not necessarily reflect the official position of the U.S. Department of Commerce.

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