SFAz leaders strive to preserve, advance state’s research-driven economy (Part III)

November 6, 2009

By hammersmith

Part III: SFAz’s report card

(Back to: Part I | Part II)

In February and then again in July of this year, Battelle released independent reports assessing SFAz’s performance and return on investment over the first two years of its grantmaking. The studies suggest that SFAz’s approach for strengthening the high-technology industry base in Arizona is working.

In terms of technology development, SFAz has shown impressive efficiency. Patents were generated at a pace of one for every $2.6 million in total university research funding generated, compared with the university-wide average of one patent per $27 million in funding. The rate for license generation also surpassed the university-wide average.

The July report showed that on the economic-development side, SFAz’s grants had spurred nearly $110 million in outside investment, 757 new jobs had been created, and 11 new companies had been launched. And on the education front, 54,000 K-12 students had been served through STEM (science, technology, engineering, and mathematics) education enrichment programs, and SFAz’s program of graduate fellowships had already grown to the largest of its kind in the United States.

But the reports have been received with a grim sort of satisfaction, despite their positive findings. SFAz, like the rest of Arizona, has experienced enormous challenges in 2009.

At the end of January, the Legislature closed a $1.6 billion current-year deficit by passing a package of bills including $580 million in budget cuts. Those cuts hit bioscience interests hard and especially devastated SFAz–$22.5 million appropriated to the 21st Century Fund, which is administered by the Department of Commerce and supplies funding for SFAz’s grants, was stripped.

Though it was unquestionably a major setback, Budinger interprets the Legislature’s action less as a repudiation of SFAz than as a collision of circumstances.

“Between 2005 and 2008, you had a majority of people in the Legislature and the governor’s office who fully understood the benefit that Science Foundation Arizona was already bringing to our state,” he explains. “Then in November of 2008, you had fully a third of the House and Senate turn over–much more than is typical in an election. And you had a new governor take over in the middle of a term. And you had a true budgetary crisis.

“In normal times, most of the members of the Legislature would have been strong proponents,” Budinger says. “Because of the crisis, it was hard, especially for the new officeholders, to get up to speed and fully understand what we do and what the state’s commitments are.”

Those commitments have become the subject of legal debate. The great majority of the funds stripped by the Legislature had already been awarded to grantees; SFAz backers have asserted that seizing the funds and not allowing SFAz to issue payments on the grants constitutes a breach of contract.

Continuing to meet commitments

In May, SFAz sued the state to recover $18.5 million of the lost funding, and in June, a Maricopa County Superior Court judge ruled against the state, but acknowledged that a mechanism did not exist to enforce the ruling. On Oct. 27, the Arizona Supreme Court heard SFAz’s argument that the $18.5 million should be restored.

It would be reasonable to assume that until the Supreme Court issues its ruling, SFAz, with its funding for grantmaking gone and its future uncertain, would essentially be paralyzed.But Budinger and Dr. Harris hardly sound like leaders in limbo.

“What we’ll do is continue to exercise responsibility for the investments Science Foundation Arizona has made,” Dr. Harris says. “And we’ll continue to work with the State of Arizona to understand its commitment. We have a great story to tell.”

In early October, to help sustain SFAz grantees until the funding question is resolved, they secured a vital stopgap in the form of a $12.1 million loan from Bisgrove, the philanthropist whose initial pledge had helped kick start SFAz’s creation.

“At the beginning,” Budinger recalls, “the concern was about the private sector [for operational funding and matches for grants]. We see today that they’ve met every one of their commitments.”

Meanwhile, conversations continue with members of the Legislature and representatives from Gov. Jan Brewer’s office.

“The state has a bill to pay, and the governor intends to work with legislators to pay it,” confirmed Paul Senseman, director of communications for Gov. Brewer, in the Arizona Republic.

“The state is our partner,” Budinger says. “We are committed to helping our partner meet its obligations.”

(Back to: Part I | Part II)

For more information:

The struggle to save Arizona’s science push,” Arizona Republic, 10/02/2009

SFAZ Return on Investment,” Battelle Performance Report, 07/08/2009

Winning in the Global Knowledge-Based Economy,” Battelle Performance Report, 02/2009

Science Foundation Arizona chief works to create an innovative future,” Phoenix Business Journal, 01/04/2008

Science Foundation Arizona is born,” Arizona Republic, 02/26/2006

$85 million funds set up for schools,” Arizona Republic, 12/12/2002

Irish Betting on Biotech,” Wired, 12/05/2001

Ready, Aim, Focus,” Inc., 03/01/1997