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Boost Biotech by Boosting
Des Moines Register
January 22, 2006
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If anything, the state should be spending more to encourage growth in industries that are based on the life sciences. They're a natural fit for Iowa and have the potential to transform the state's economy.
But the investments should be keyed more toward establishing the underlying environment for growth, and less toward trying to pick winners and losers by subsidizing individual companies.
That should be one of the lessons from the experience of the state with Phytodyne Inc., reported in last Sunday's Register by agribusiness writer Anne Fitzgerald. The startup genetic engineering company, housed at an Iowa State University research park, was talked up by state officials as a prime example of how the state can nurture biotech companies. Unfortunately, the company was unable to secure rights to a patented process it needed, and the state has nothing to show for the nearly $500,000 in tax money granted to the company.
So it goes with startup companies. Nine out of 10 biotech startups fail. The state must expect a relatively high loss rate if it's going to make grants to experimental companies. That's a risk the state took when it created the Grow Iowa Values Fund, which is expected to allocate $350 million for business assistance over the next 10 years. With luck, one or two huge successes might offset the losses that can be expected.
Then again, by plunging into making grants to new businesses, the state might be getting a little ahead of itself. Sure, any self-respecting economic-development effort has to have things like business incubators and venture capital, but their success depends on something more basic — having great research universities.
This is true whether it's California's Silicon Valley, North Carolina's Research Triangle or the high-tech hotbeds around Boston or Austin, Texas. These regions didn't boom because of their giveaways to companies. They boomed because of their proximity to great universities.
Iowa seems to have forgotten that fundamental part of the equation. It's difficult to conceive of anything that would undercut the state's economic development more than diminishing support for state universities, yet that is precisely what the state has done.
By 2005, the universities were receiving $100 million less per year in state support than they received in 2001. If the appropriations had merely kept up with inflation, support would have grown by more than $90 million during the same period. So the real amount denied the universities amounts to $190 million per year.
The Legislature did grant a small increase to the universities for 2006, about $16 million — the slightest of steps toward regaining former funding levels.
Yes, times are tough, and, yes, the universities have raised tuition and made internal reallocations to try to offset the cuts, but the inescapable reality remains: You don't push universities to new levels of greatness by cutting support for them.
Consultants from the Battelle Memorial Institute, hired by the state to develop a strategy for growing bioscience industries, noted that "outstanding research universities are an absolute prerequisite for a state to become a serious contender in most areas of the biosciences."
The consultants said diminished support for the universities threatens the state's hopes for growth. It has resulted in "program cuts, faculty salary freezes, an inability to invest in new technologies and infrastructure, and a general fear for the future among the Iowa education and scientific community," the consultants said.
This has "reduced the ability of Iowa's research universities to position themselves as globally competitive in the biosciences."
The bottom line: All of the economic-development gimmicks — the grants, the loans, the incubators, the push for commercialization of research — must rest on a foundation of solid support for the universities.
The most urgent economic-development priority for the governor and Legislature should be to begin restoring the traditional level of support for the universities — and then go beyond that.