Maine R&D spending: Mid-course correction

By all accounts, for the past ten years Maine has been on a research and development spending binge. The start of the spending spree can be traced back to Joel Russ when he headed the now defunct Maine Science and Technology Foundation. In 1998, Russ talked the legislature into floating a $20 million R&D bond that, when passed by voters, funneled research money into the University of Maine and the MSTF. Russ’s argument: R&D spending boosts incomes.
Two years later, Evan Richert, Governor Angus King’s choice to head the Maine State Planning Office, upped the ante with his “30 and 1,000″ plan. Richert’s vision was that by the year 2010, 30 percent of Maine’s adults would have college degrees and R&D spending would reach $1,000 for every working person in the state. The legislative spigot opened further and a succession of R&D bonds followed.

But something happened on the way to the party: the way those R&D funds were allocated changed. The 1998 bond earmarked $3 million for the private, industrial sector and $1.5 million for Maine’s nonprofit research sector: two-thirds industry; one-third nonprofits.
Following the 1998 bond, the next legislature escalated R&D spending spree with a $10 million appropriation, but it dedicated the money to a newly created Maine Biomedical Research Fund. To get money out of the fund you had to be a “Maine-based private nonprofit biomedical research institution or academic medical center or medical school.” With that, Maine’s nonprofit R&D institutions had a lock on the funds. In 2003, Maine voters plowed $20 million into the fund and in 2005 added another $8 million. Since its inception, $52.5 has passed through the Maine Biomedical Research Fund.

Meanwhile, the private sector was receiving far less. For example, from the $60 million R&D bond that added $20 to the Biomedical Research Fund, the private sector got $2 million through grants to various “technology sectors.”

Shortly after the spending spree began, the legislature commissioned a study to look at R&D spending to see if the state was getting a proper bang for its buck. The first study was encouraging, though not enough time had passed to draw meaningful conclusions. The law required the study be repeated in five years. The first five-year analysis was published on February 6, 2007. And it was an eye-opener.

Not surprisingly, the study found that the $297 million Maine has spent on R&D since 1996 has “contributed to consistent growth in Mane’s economy and has increased competitiveness relative to other states.” The study also found R&D spending has created jobs and boosted incomes. Maine’s median income has been creeping up relative to the rest of the U.S., due in part to better paying R&D jobs.

But four paragraphs into the report the tone turns sour. “There is, however, a serious mismatch between the investment in R&D and the resulting performance,” the report states. R&D spending on the nonprofit sector caused it to grow by 211 percent, while nationally the nonprofit sector grew only 89 percent. Meanwhile, despite investing 22.5 percent of the R&D funds in private industry, the sector shrunk by 30 percent.

“The question is, do we care about these allocations? The answer is we do. While increased R&D is in and of itself a good thing, its real impact on the economy is when the knowledge produced is commercialized. The overwhelming finding from this report is that the academic and nonprofit sectors are not commercializing much of the new knowledge acquired through the state-funded R&D, while industry is commercializing at a high rate. Therefore, the state’s investment is not creating the maximum possible impact.”

Ouch!

The good news is that legislators apparently read the report. This November voters will decide on a $55 million R&D bond issue. If it passes, $50 million will go to the Maine Technology Institute to be parcelled out to private industry and nonprofits on a competitive basis, with no earmarks! This means the private sector and the nonprofits will be on an equal footing when they line up for state R&D funds.

Under the new system, the winners will be the researchers with the best ideas . . . and the people of Maine.

(Originally posted 10/26/2007)