On Nov. 4, voters will be asked whether they approve of $50 million in state borrowing divided over six questions. Much of this borrowing is worthwhile, but such a small bond package, without a coherent strategy for economic development or a plan to grow research and development activity in Maine, is not enough to spur needed growth in the state.
With a governor who is mostly hostile to borrowing and a Legislature that is only lukewarm, it is not surprising that this paltry set of bond questions is what voters will be asked to approve. Instead, much of this funding could have been filtered through the Maine Technology Institute, the state entity set up to spur such investments without limiting the potential outcomes.
In 2007, voters approved a $50 million investment in the Maine Technology Asset Fund managed by the Maine Technology Institute, the state-funded, nonprofit organization.
The organization awarded the funds on a competitive basis to businesses, nonprofit groups and university labs with research and commercialization plans approved by the American Association for the Advancement of Science. As a condition of receiving a grant, each applicant had to secure significant matching funds.
The rigorous, merit-based process — in contrast to a process similar to this year’s, in which research and development funds are awarded according to political pull — paid off.
The entities that received the fund’s $53 million in grants secured more than $80 million in matching funds from other sources, according to the Maine Technology Institute. A 2011 evaluation of Maine’s research and development investments found the 29 projects that had received funding by mid-2011 had directly created 289.5 jobs and preserved 303 more in traditionally higher-paying sectors. Nineteen of those projects had led to the creation of a new product or service.
But the Maine Technology Asset Fund hasn’t received a new infusion of funds since 2010, when voters approved a tiny $3 million bond allocation. A legislative committee formed in 2006 to outline an R&D strategy for the state recommended a $50 million annual bond investment in the Maine Technology Institute.
In 2012, Gov. Paul LePage vetoed a $20 million bond to replenish the fund. In his veto message, the governor said that if lawmakers thought R&D was so important, they should have supported it directly through the state’s general fund by displacing other spending.
“Second, the majority of the funds from these bonds in the past have gone to government programs and not-for-profits,” he said. “Taxpayer dollars should go towards R&D only when we can demonstrate a specific return on that investment. That return must be measured in taxes and jobs. Both of those rightly come in the private sector.”
As evidenced by the 2011 evaluation, R&D bonds have had significant returns on investment. One small example comes from the MDI Biological Laboratory (which seeks $3 million through Question 5 this year). Between 2001 and 2007, the lab in Hancock County received $5.7 million in bond funding. The lab has brought in $106 million in federal grants, which is a 19-to-1 return on investment, much better than what the state has gotten on business loans and tax credits to the private sector.
That money has enabled MDI Biological Laboratory to grow from a seasonal facility with nine employees to a year-round research and training center with 65 employees. This is the type of return on investment the governor says he is looking for. It also is why R&D deserves stronger, more consistent support from state policymakers.
Research and development spending isn’t — and shouldn’t be — entirely dependent on the state, but state spending is critical in Maine, where R&D investments have typically lagged and where the level of R&D activity by private industry is low.
Total spending on R&D in Maine amounts to about 1 percent of the state’s gross domestic product. Maine ranked 45th nationally for R&D spending in 2010, according to the Maine Development Foundation.
Throughout the U.S., about 2.9 percent of states’ gross domestic product is spent on R&D. In New England, the level is higher: 4.4 percent. Maine is even lagging a group of peer states that don’t typically attract large R&D investments. Those 28 states spend 1.7 percent of their GDP on R&D.
Parceling our small amount of money through individual bonds is not the way to get there. The bond questions on next month’s ballot are worthy of support, but sadly, they don’t represent enough investment to make much of a difference in the Maine economy.