Before we get too far into the new fiscal year, we thought we’d go back and look at how the IBED world fared in the last round of state budgets. Tax credits continue to be a favored tool to spur growth and investment in the IBED world. Even though budgets are tight, many states have maintained or increased funding for IBED-related tax credits, and a few, such as Nebraska and Virginia have introduced new ones. Supporting commercialization efforts was also high on the list this legislative season. Ohio’s Third Frontier, for instance, has a new Commercial Acceleration Loan Fund worth $25 million. With waning investment from traditional venture capital firms, several states are stepping in to fill the gap. Maryland’s new InvestMaryland program allocates $70 million for venture capital in the innovation economy sector. And though it was developed back in 1989, Economic Gardening has only recently started to catch hold on the regional and state level. Nebraska, Virginia, Pennsylvania, and Michigan have all introduced new initiatives this year. The trend of the year, though, seems to be the restructuring of state-level economic development efforts, with a particular emphasis on engaging the private sector. Many of these efforts are currently facing some controversy, but we wouldn’t be surprised if once the wrinkles get ironed out, this is a trend that’s here to stay.

1. PERSPECTIVES
Innovation-Based Economic
Development vs. State Budgets
A Thought Paper by
Fourth Economy Consulting
November 2011

2. 2
FOREWARD
Fourth Economy experts, collaborators and pioneers
represent diverse backgrounds and skill sets. Together,
we endeavor to share with clients and colleagues our
thinking on a variety of topics.
Fourth Economy “Perspectives” is designed to advance
dialogue and thought leadership on economic
development, urban design, innovation strategies and
new market development.
About Fourth Economy
Fourth Economy Consulting is a national economic
development solutions provider specializing in market
analytics, strategic planning, community assessments
and organization building. Our team of experienced
practitioners helps businesses, communities and non-
profit organizations achieve their market potential.
The Fourth Economy Consulting team is committed to
investing in the communities where we live, work
and play.

3. 3
OVERVIEW Before we get too far into the new fiscal year, we
thought we’d go back and look at how the IBED world
fared in the last round of state budgets. Tax credits
continue to be a favored tool to spur growth and
investment in the IBED world. Even though budgets
are tight, many states have maintained or increased
funding for IBED-related tax credits, and a few, such
as Nebraska and Virginia have introduced new ones.
Supporting commercialization efforts was also high on
the list this legislative season. Ohio’s Third Frontier,
for instance, has a new Commercial Acceleration
Loan Fund worth $25 million. With waning investment
from traditional venture capital firms, several states
are stepping in to fill the gap. Maryland’s new
InvestMaryland program allocates $70 million for
venture capital in the innovation economy sector.
And though it was developed back in 1989, Economic
Gardening has only recently started to catch hold
on the regional and state level. Nebraska, Virginia,
Pennsylvania, and Michigan have all introduced new
initiatives this year. The trend of the year, though,
seems to be the restructuring of state-level economic
development efforts, with a particular emphasis on
engaging the private sector. Many of these efforts are
currently facing some controversy, but we wouldn’t be
surprised if once the wrinkles get ironed out, this is a
trend that’s here to stay.
Use the links (k) throughout the interactive, electronic
version of this whitepaper to view supporting
documentation.
Think we missed something? We’d love to hear from
you. Please click this link k to share a comment.

4. 4
In an effort to create a one-stop-shop for businesses
NEW ENTITIES MANAGING IBED
looking to locate in Florida, their new Department of
Economic Opportunity k combines the Agency for
Workforce Innovation, the governor’s Office of Tourism,
Trade, and Economic Development, and some divisions
of the Florida Department of Community Affairs.
In Georgia, they are integrating the Centers of
Innovation and the Georgia Research Alliance k. The
goal for integrating the programs is twofold: to develop
strategies and tactics to maximize the potential for
high-tech companies generated from university R&D
to thrive in the state; and, to leverage the resources
of Georgia’s research universities to retain and recruit
companies in industries considered crucial to the state’s
growth.
Innovate Washington k is the successor to the
Washington Technology Center and the Spokane
Intercollegiate Research and Technology Institute.
Innovate Washington will serve as the state’s primary
agency responding to tech transfer needs and
strengthening university-industry partnerships. They will
also coordinate the state’s clean energy initiatives.
JobsOhio k is a new nonprofit corporation that
will assume the business-incentive and job-creating
functions of the Ohio Department of Development.
The governor has appointed a board of business
leaders, though the Governor himself will not head
the organization as originally planned, due to pending
legislation alleging unconstitutionality.

5. 5
JobsOhio will start out with $1 million from General
Assembly to cover start up costs, not including salaries.
Further funding is expected from leasing of state-
controlled liquor operation for 25 years for about $1.5
billion, to be complete by January. Also, the Third
Frontier Commission is collaborating with JobsOhio
to form the Jobs Ohio Network. They are giving $14.8
million to six regional economic development groups,
which will spend the money to help carry out the
JobsOhio agenda, including negotiating deals to retain
companies or attract new ones.
Iowa is also turning to its business leaders to run
the new Partnership for Economic Progress k, which
replaces the Department of Economic Development.
The IPEP is actually comprised of the Iowa Economic
Development Authority and the Iowa Innovation
Corporation to promote and market the state to
attract new investments and jobs. The Economic
Development Authority will be run by a board of
directors, appointed by the governor, comprised
of private sector individuals and ex-officio public
representatives. The Iowa Innovation Corporation, a
nonprofit organization, will focus its efforts on spurring
innovation in the state, using both public and private
funds.

6. 6
In Kansas, Governor Brownback will chair the new
Governor’s Council of Economic Advisors k. The
council will have up to 20 members from various
industries and business sectors. The council will have
three main responsibilities: coordinate strategic planning
and economic development resources; evaluate state
policies and agencies performances; and conduct
research on topics such as Kansas’ basic industries, tax
competitiveness, and regulatory structure. The Council
replaces Kansas, Inc., whose members were chosen
by public leaders, the board of regents, and labor and
business owners.
Arizona is refocusing on business attraction, retention
and expansion in three key industries: aerospace and
defense, renewable energy and science-technology. A
new public-private organization, the Arizona Commerce
Authority k, replaces the Department of Commerce
and will have a board comprised of both business
leaders and state officials. It is funded through existing
payroll withholdings under an annual operating budget
of $10 million, plus a deal-closing fund of $25 million.
The Authority is currently planning to open offices in
Los Angeles and San Jose.
The Wisconsin Economic Development Corporation k
replaces the Wisconsin Department of Commerce. The
new public-private partnership will focus exclusively
on job creation. Other Commerce Department
responsibilities will be redistributed among other state
agencies. The WEDC board, appointed by the governor,
will develop and implement economic programs to
provide business support, expertise and financial
assistance to companies. The new agency will start
with $83 million budget, twice what was allocated
to the Department of Commerce for economic
development.

7. 7
The Illinois Innovation Network, which includes
business and educational leaders, is the first initiative
created by the Governor’s Illinois Innovation
Council k, a public-private partnership launched
in February to accelerate innovative economic
development and job creation efforts in the state’s
startup sector. The IlN will be connected with Startup
Illinois, which will let Illinois-based affiliates and
entrepreneurs leverage technology, content and tools
to access national resources. The Illinois Innovation
Council is chaired by Groupon Co-Founder and Director
Brad Keywell and is made up of key business executives
across a variety of sectors, along with science,
technology and university leaders. The council’s
mission is to promote, develop and attract innovation-
driven enterprises and individuals to Illinois and to also
develop policies to cultivate and retain entrepreneurs,
innovative researchers and other enterprises.
And finally, New York has taken a unique approach in
creating 10 Regional Economic Development
Councils k. The goal is to create a community-based
approach to economic development, which emphasizes
the regions’ unique assets and allows for a single point
of contact. Each Regional Council will develop a plan
for the development of their region and will be able to
apply for state funding to support projects using a new
Consolidated Funding Application, which pools up to $1
billion from dozens of existing programs.

8. 8
Louisiana is restarting one and extending two tax credit
TAX CREDITS
programs. Their Angel Investor Tax Credit k expired
in 2009, but now lives again; it provides a transferable
tax credit set at 35%, which is projected to raise more
than $14 million annually from investors. And both
the Technology Commercialization Tax Credit k (40%
on up to $250,000 in LA higher ed R&D) and the R&D
Tax Credit k (8 – 40% depending on firm size) were
extended for six more years.
As part of their Talent and Innovation Initiative k,
Nebraska is offering $3 million per year in refundable
state income tax credits (35 – 40%) for investment in
certified Nebraska start-up companies.
Pennsylvania increased their R&D Tax Credit k from
$40 - $55 million, 20% of which is set aside for small
businesses.
Maryland has maintained their Biotechnology
Investment Incentive Tax Credit k at $8 million for
the second consecutive year. A company that invests
$25,000 to $500,000 in a Maryland biotech receives
a tax credit worth half that amount. The program drew
more than 180 applications within three minutes of the
window opening.

9. 9
As part of his “Opportunity at Work” k campaign,
Virginia governor Bob McDonnell has signed a slew
of legislation, including a bill to create an R&D Tax
Credit for start-ups and stage firms, especially those
companies accessing R&D services through Virginia’s
colleges and universities. The credit is available for up
to 15% of the first $167,000 spent on R&D expenses,
or 20% of the first $175,000 if done with a Virginia
college or university. The cap is set at $5 million per
year.
New Jersey has increased their Technology Business
Tax Certificate Transfer Program k from $30 to $60
million and their R&D Tax Credit from 50 to 100% of
corporate liability taxes.
And finally, Utah’s legislature has a set side of $1.3
million for tax credits under their new Technology
and Life Science Economic Development Act k. The
Act provides tax credits for investors and businesses
working in the life science and technology sectors; the
credits can apply to new state revenues, investments,
or capital gains.

10. 10
COMMERCIALIZATION FUNDING
Colorado’s Innovation Reinvestment Act takes the net
increase in state corporate income tax withholdings
within the bioscience and cleantech industry sectors,
providing 50% to the general fund, 25% to bioscience
and 25% to cleantech. The bioscience’s portion,
estimated up to $2 million annually, will go to the
existing Bioscience Discovery Evaluation Grant
Program k (which was also extended to 2018). This
program distributes proof-of-concept grants and
provides support for early stage bioscience companies
and infrastructure. The Act will also provide $2 million
per year for the Clean Technology Discovery Evaluation
Grant Program k, which provides matching grants to
Colorado’s universities for market assessments of clean
technologies, to companies commercializing university
clean technologies, and to initiatives that serve to build
the infrastructure that moves university technologies
into the marketplace. This program was created in
2009, but remained unfunded until this legislation.
Maryland continues to fund their Technology
Transfer and Commercialization Fund k. The focus
of the program is to support company technology
development projects that transfer technology to
the commercial sector from any university or federal
laboratory in Maryland or technology companies in the
incubator that have desire to move technology projects
forward and are taking advantage of incubator business
services. Funds up to $75,000 are available to defray
a company’s direct cost of developing early stage
technology. In 2011 they awarded $1,125,000 to 15
companies; to date, 145 companies have received over
$10 million.

11. 11
As part of their Talent and Innovation Initiative k,
Nebraska passed the Business Innovation Act, which
provides up to $7 million in funding to help businesses
develop new technologies that lead to quality job
opportunities across the state. Competitive grants will
provide funding and technical assistance for research
at Nebraska institutions, new product development
and testing, and help expand small business and
entrepreneur outreach efforts.
In addition to funding their existing Open Innovation
Incentive at $8 million, Ohio’s Third Frontier has a
new Commercial Acceleration Loan Fund k worth $25
million. This new program provides loans to companies
moving products and services into the market. Loan
amounts will range from $500,000 to $3 million
and the program will include forgiveness of principal,
deferred and/or balloon payments, and low interest
rates.
Utah has resuscitated its Technology Commercialization
and Innovation Act k, which provides $1.8 million
for the Governor’s Office of Economic Development
to issue as grants and loans to the various colleges,
universities, and licensees in Utah for the purpose of
commercializing technology.
Virginia’s Commonwealth Research Commercialization
Fund k has been fluctuating between $1 and $10
million over the past few years, but this year came
out with $6 million. The Fund provides grants to
technology firms, loans to construct wet-labs and for
the SBIR matching program. Of this amount, $2 million
is earmarked for matching grants for winners of Phase I
SBIR awards from the National Institutes of Health.
For the second year in a row, the board of the
Arkansas Science and Technology Authority allocated
$1 million to support the Arkansas Research
Alliance k. The focus of the Alliance is to recruit
university scholars with a track record of incubating and
commercializing businesses.

12. 12
Illinois has a new law k that allows the state to
VENTURE CAPITAL INVESTMENTS
invest up to 2% of its portfolio in venture capital firms.
The state can now invest an estimated $150 million
in venture capital funds, and generate an estimated
$300 million of venture capital investment into Illinois
companies. Companies may use the funding for R&D,
marketing new products, and workforce expansion.
InvestMaryland, a program administered by the new
Maryland Venture Fund Authority k, allocates $70
million for venture capital in the innovation economy
sector. Two-thirds of the funds will be invested in 3-4
private venture firms, and the other third will go to the
state-managed Maryland Venture Fund for start up
and early stage tech and life sciences companies. The
program is being funded through the auctioning of tax
credits to insurance companies.
Three New Jersey programs will benefit early stage,
emerging technology and life sciences companies by
providing growth capital to directly fund uses such as
hiring key staff, product marketing and sales. The Edison
Innovation Angel Growth Fund k provides matching
funds of up to $250,000, and the VC Growth Fund k
and Growth Stars Fund k provide matching funds of up
to $500,000.
In addition to funding their existing Pre-Seed Fund at
$25 million, Ohio’s Third Frontier has two new
funds k. The $1 million Micro Fund will provide
between $5,000 and $25,000 for new community-
based non-profit investment funds. And the $10 million
Growth Fund will make two investments of $5 million
each into investment funds. Matching requirements
mean that the state’s $10 million investment will
make $120 million of new capital available to Ohio
companies.

13. 13
Utah’s Fund of Funds k is an economic development
program designed to foster entrepreneurship by
increasing the amount and diversity of capital available
to Utah’s established, growth and emerging companies.
With $300 million of contingent tax credits, the funds
invest in strong-performing venture capital and private
equity firms, which in turn explore investments in
promising Utah companies.
Virginia’s FY2012 budget includes $4 million in
additional new funding for the Center for Innovative
Technology’s “GAP” Fund k that makes seed-stage
equity investments in Virginia-based technology and
life science firms.

14. 14
Authorized by the Small Business Innovation Act, the
ECONOMIC GARDENING
Nebraska Economic Gardening Program k will provide
grants of up to $10,000 each year to eligible Nebraska
service providers and nonprofits. Preference will be
given to high growth, early stage businesses with 5 –
50 employees. These grants must be matched by the
business to at least 20% of the awarded amount.
Virginia’s Hampton Roads Partnership, a consortium
of colleges, universities, federal labs, and research
institutions has just unveiled its Economic Gardening
Network k. The program provides a suite of high-end,
high-speed business growth resources to growth-
oriented companies identified and selected by local
economic developers or entrepreneur support
organizations.

15. 15
The new Discovered in PA k program will invest $10
million in helping small, medium-sized and high-growth
businesses identify and access appropriate services and
financing to help them be more competitive and grow
their operations in Pennsylvania.
Pure Michigan Business Connect k brings several state
agencies, the MEDC, and several private industries
and organizations to offer economic development
incentives, startup capital, and support services valued
around $3 billion to help grow Michigan-based small
businesses in emerging industry sectors. Incentives
offered by some of the participating organizations
include $2 billion in lending over four years from
Huntington National Bank and $100 million for
second stage funding for Michigan businesses with
innovative technologies to accelerate large-scale
commercialization.

16. 16
The Colorado Blueprint k brings together input
PLANNING
from every county to identify six areas of focus for
promoting economic development, including increasing
access to capital, workforce educating and training, and
cultivating innovation and technology.
As part of the larger Georgia Competitiveness Initiative
k, a statewide economic development strategy, the
Science and Technology Strategic Initiative Joint Study
Commission will determine how best to encourage and
facilitate the growth and development of the science
and technology sector in the state.
Missouri just released their five-year Strategic Initiative
for Economic Growth k plan to boost Missouri’s
competitiveness in a variety of key industries, including
advanced manufacturing, energy, bioscience, health
science, and information technology. It outlines
two-dozen specific strategic and tactical approaches
to growing these industries, everything from tuition
forgiveness program to help boost Missouri’s
workforce, to integrating entrepreneurship programs
into K-12 education.
New Jersey is investing $2.3 million into their Talent
Networks Initiative k to determine how best to create
jobs and train workers in key industries including life
sciences, advanced manufacturing, health care, and
technology and entrepreneurship. The Networks will
connect businesses with educational institutions,
workforce development agencies, government and
community groups to identify the skills and training
employers require in prospective employees to remain
competitive in the global market.

17. 17
OTHER NOTEWORTHY EFFORTS
Connecticut is investing $864 million in a project to
renovate and expand the University of Connecticut
Health Center k. Its goal also is to double federal
industry research grants to drive discovery, innovation
and commercialization. The initiative includes incubator
space to foster new startups and a loan forgiveness
program to attract more graduates in medicine and
dentistry. New bonding totaling $254 million combined
with previously approved bonding of $338 million, $203
million in private financing, and $69 million from the
Health Center will pay for the project.
Connecticut and New Jersey are both investing in clean
and green energy. The Connecticut Clean Energy Fund
allocates $32 million per year to several programs
design to make clean technology more affordable and
bolster the energy industry in the state. The Fund is
administered by the new quasi-public Clean Energy
Finance and Investment Authority k. New Jersey’s
Edison Innovation Green Growth Fund k is a new loan
program with a performance grant component to grow
the state’s energy efficiency and renewable energy
technology companies. The fund offers five-year fixed
term loans of up to $1 million to eligible companies
that have begun generating commercial revenues and
are seeking matching funds.
New Jersey is also working on a new technology
accelerator program k. The NJ Economic Development
Authority allocated $450,000 over the next
three years and is soliciting input from the state’s
technology community on how best to advance the
program. North Carolina is also working on a new
accelerator k tailored towards life science companies.
Implemented by the $232 million N.C. Innovation Fund,
the accelerator will focus on promoting tech transfer.

18. 18
Virginia and Kansas are both focusing on education as
a key to economic development, as well. The Virginia
Higher Education Opportunity Act of 2011 k aims to
increase the number of undergraduates by 100,000
over the next 15 years. It also provides a new higher
education funding policy, targeted economic and
innovation incentives, and the creation of a STEM
public-private partnership. Kansas lawmakers approved
$15 million in research grant money for three Kansas
universities to expand programs in emerging industry
sectors and allocates $10.5 million annually for an
initiative to enhance engineering education and increase
the number of qualified engineers in the state.
Ohio’s Third Frontier has created the Ohio’s New
Entrepreneurs Fund k to retain and attract young
talent. In collaboration with Ohio State University, the
program will recruit entrepreneurs to work under the
guidance of seasoned entrepreneurs, industry experts,
and investors before pitching their ideas to investors.
In Tennesse, Gov. Bill Haslam’s job creation plan seeks
to seed startups by pouring $50 million in federal and
state dollars into an effort to get them off the ground.
Called INCITE k, the initiative depends heavily on $30
million in U.S. Treasury funds allocated to Tennessee
last October as part of the State Small Business Credit
Initiative. In addition, $10 million will be given to the
Memphis Research Consortium to aid its effort to
transfer research and development to private-sector
enterprises. Another $10 million will be distributed
by the state to regional business incubators that will
provide support services or startups.

19. 19
ABOUT
Chelsea Burket
Chelsea Burket serves as Community Development
Strategist at Fourth Economy.
She specializes in sustainable design, workforce
development, and organizational planning. Chelsea
works to align technology-based economic
development with community development strategies.
Email: chelsea.burket@fourtheconomy.com
Rich Overmoyer
Rich Overmoyer serves as CEO at Fourth Economy.
Rich is a nationally known thought leader in the
emerging economic development opportunities field.
He has been responsible for devising innovative market
strategies for dozens of public and private sector
entities across the country.
Email: rovermoyer@fourtheconomy.com

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