Technology funding could benefit the University

Lawmakers and U officials are working to increase tech business in Minnesota.
March 10, 2011

A group of lawmakers, businesses and University of Minnesota officials aren’t focused on the state’s current budget mess. They’re preparing for decades to come.
Despite a looming $5 billion budget deficit, Rep. Tim Mahoney, DFL-St. Paul,  is pushing a bill that would add funding to a science and technology program he hopes will spur long-term innovation in Minnesota.
Currently, Minnesota ranks 42nd nationally in entrepreneurial activity and 39th in non-industry research investment, according to an Information Technology and Innovation Foundation report.
Mahoney and others involved realize it’s tough to focus on the future when the present is so dire, but they say investment now is crucial. Today, they’ll have 15 minutes to convince the House Taxes Committee that re-appropriating state taxes to fund the venture is the right thing to do.
“The great Wayne Gretzky … says, ‘you don’t look where the puck is, you look where the puck’s going to be,’ and I think that this is the bill that fits the Gretsky description,” said Rep. Greg Davids,  R-Preston, a co-author. “Yeah, we have a tough time today, but what this bill could do for tomorrow is well worth the effort.”
Last session, Mahoney sponsored legislation that created the Minnesota Science and Technology Authority. The organization is designed to help secure federal funding, promote collaboration across the public and private sectors, and grant funding to fledgling entrepreneurs.
 “I have to get people to look beyond the immediate,” Mahoney said. “I have to do that. That’s what my job is.”
Last week, University Vice President for Research Tim Mulcahy  testified before the Legislature in support of the Authority. He and Medical Devices Center Director Arthur Erdman  are two University representatives that sit on the organization’s 18-member advisory committee.
Along with extensive planning and research, making the organization effective requires state funding.
This year’s legislation requests an annual maximum of $25 million from the state via a redirected tax currently imposed on the yearly profit gains made by high- tech companies.
Mahoney estimated that the tax would capture about $7 million in 2012 and roughly $18 million the following year for the Authority.
 If funding is available, the group plans to plow about $10 million annually into technology commercialization, securing federal grants, helping entrepreneurs and funding internships for students over the next decade.
“If we can get some funding, those are the type of activities that would start strengthening the awareness of how many little diamonds in the rough the state of Minnesota has,” said Deb Newberry, an advisory committee member.  “They’re laying all over; we’ve just got to find them and polish them up a little bit.”
The authority’s work would also translate into direct benefits for the University, especially the struggling Office of Technology Commercialization.
Technology disclosures at the OTC have remained flat since fiscal year 2005, and royalties from a novel AIDS treatment called Ziagen  will expire in 2013.
In fiscal year 2010, money from the drug made up roughly 90 percent of the OTC’s $95 million in gross revenue.
Although OTC Executive Director Jay Schrankler  called his domain “one of the more talented offices in the country,” he and other officials, including those involved with the Authority, say collaboration is the key to success.
To Newberry, a nanotechnology professor at Dakota County Technical College, the next step for the Authority is all about “communication and collaboration.”
By partnering with other businesses, academia and the state, entrepreneurs have access to a full range of services.
“We can’t be the Einstein of states or anything, but there are clearly areas that the University of Minnesota … and MnSCU and companies within the state are very strong in,” Newberry said.
Coupled with the angel investor tax credit passed last session, Mahoney hopes this legislation will stop companies from leaving the state for more favorable economic climates.
But Minnesota is “late to the game,” Authority Executive Director Betsy Lulfs  said.
More than 30 states have similar programs and some have been in place for more than 50 years, she said.
Erdman pointed to countless examples of technology invented in Minnesota crossing state lines because attractive incentives drew companies away.
“We’ve had at least six visits from Japan to the Medical Devices Center,” he said. “They’re not here to shake our hands, they’re here to learn what we’re doing and take those lessons away and try to beat us.”
 Mahoney has brought a similar sense of urgency to Gov. Mark Dayton’s staff and his compatriots in the Legislature.
It’s been difficult for some lawmakers to look beyond the cuts that would have to be made if tax revenue is redirected to fund the proposal, Mahoney said, adding that in the current legislative climate, any tax increase to fund the program would be a non-starter.
Regardless of the short-term struggles with passing the bill, Minnesota’s problems –– like the legislation’s focus –– are long term.
Structural budget shortfalls will plague the state long into the future unless major adjustments are made, state economist Tom Stinson  said.
According to the state’s February economic forecast, once the Legislature solves Minnesota’s $5 billion deficit, they’ll be grappling with a $4.4 billion shortfall for the following biennium.
“The budget shortfall problem isn’t going to go away automatically,” Stinson said. “We’re not going to wake up some morning and find that we’ve grown our way out.”

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