State technology interests don't want economy to stifle progress

December 1, 2008
With a national recession deepening, Indiana high-tech leaders' top priority in 2009 is simple: Play strong defense.

"It's going to be a year of maybe not pushing hard, but not losing what you gained," said TechPoint President Jim Jay. "And really setting the table for maybe five to 10 years down the road."

Legislators are signaling that everyone who receives funding from state government must tighten their belts as tax collections fall short of projections. That could cause pressure for cuts to key technology incentives, such as Indiana's Venture Capital Tax Credit or its tax exemption for patent-based income. And it means an uphill battle for renewal of the 21st Century Research and Technology Fund, the state's primary investment program for the commercialization of new innovations.

Tech leaders acknowledge the economy's reality. But they say it makes investments for the future even more critical.

"Frugality is critical," said Ron Brumbarger, CEO of Carmel-based BitWise Solutions. "But shortsightedness is foolish."

On Dec. 1, high-tech initiative TechPoint released its public policy agenda for next year. Brumbarger is a member of TechPoint's executive committee, which developed it.

The agenda begins by noting the $1 billion in technology business investments Indiana has enjoyed over the last decade.

TechPoint isn't seeking many new incentives to maintain that momentum. It just hopes to keep the ax away from what's already on the books.

"I think we will be focused on some defense, preventing repeals of past economic incentives," said Ice Miller LLP partner Mark Shublak, who helped Tech-Point write its 2009 public policy agenda. "I think there's a willingness from the General Assembly. They realize we need to keep investing in our economic development tools, the education of our citizens, and in workforce development so that we can be one of the first states to emerge from the recession."

Seeking $73M

Indiana Secretary of Commerce Nathan Feltman also expects a receptive audience at the Capitol. He said legislators have, in recent years, begun to understand how critical it is to support Indiana's New Economy. Feltman said Gov. Mitch Daniels is including a $73 million 21st Century Fund appropriation in the 2009-2010 budget he'll submit to the Legislature. That's just shy of the $75 million the fund received at its peak.

"I think there's a better understanding today than four years ago or when the [21st Century] Fund was first created [in 1999] that, as a state, we can't take for granted that our best ideas will necessarily get the early-stage, early-seed capital that is needed to germinate into companies," Feltman said. "But now more than ever, this fund is critical to ensure that innovative companies can grow and succeed in our state."

Every other year, tech leaders must battle to protect the 21st Century Fund from cuts. But they have a new idea on the table that could end their continual skirmishes. In its public policy agenda, TechPoint suggests securitizing the 21st Century Fund's biannual appropriation to underwrite a $1 billion bond issue.

Much like the Indiana Toll Road lease has done for Indiana's road projects, tech leaders argue a major bond deal could give the Indiana Economic Development Corp. an enormous boost.

With plenty of cash on hand, IEDC wouldn't have to pick and choose among projects, leaving many unfunded. The cash would generate interest until IEDC put it to work. And the public relations impact, when other states are retracting their hightech investments, could be significant.

Bold request

Despite the potential upside of a major bond issue, even TechPoint admits it's a long-shot request in a tough budget year.

"This is a bold idea that could go nowhere," Jay said. "But how do we bring the best and brightest minds to Indiana to launch businesses? If we have a large pool of money available today ... it would be headline striking. 'Indiana is ready to do business in technology and the funds are available.'"

Rather than securitize the 21st Century Fund, it's much likelier that Indiana will pursue a major bond issue backed by some of the Hoosier Lottery's future proceeds to underwrite college scholarships. Daniels campaigned on the concept, and Feltman said he still hopes to raise the cash to pay for low- and moderate-income student scholarships.

"It all has to be considered in what we can afford," he said. "The bottom line is, you can't do everything, and you can't do everything in one year when you have revenues falling."

Education key

Moving ahead on Daniels' "Hoosier Hope Scholarships" would square well with TechPoint's main priority for new spending in 2009: education. The hightech initiative's 2009 agenda calls for a stepped-up focus on science, technology, engineering and math in Indiana's schools and universities.

Brumbarger argued that Indiana will not sustain its New Economy momentum without better preparation for tomorrow's work force. TechPoint is pushing for a one-to-one computer-to-student ratio. And it wants educators to think outside the box to get there. For example, Brumbarger suggested, why not shorten the school year one week in order to pay for ubiquitous laptops?

"Is one week going to make a difference versus every student having a laptop? We have to look at things like that and get creative about our budget. The brick-to-pupil ratio is a 200-year-old ratio that is just outdated," Brumbarger said. "Today, you can be in your office or in Starbucks. You can check your e-mail outside the office. To think you can only work at your desk is a 1920s mentality. You don't go to work; you do work. You don't go to school. You do schoolwork."

Ironically, recession belt-tightening could actually advance part of TechPoint's agenda. Jay pointed out that educators will need to be creative, with less cash available. He expects them to increasingly rely on electronic tools that extend the classroom's reach by making more of the curriculum virtual, particularly at the adult educational level.

"Technology can help reduce the cost of delivering a quality education," Jay said. "The challenge is whether we're willing to move away from status quo."
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