Investment Issues

Science Foundation Arizona was off to a great start—until state lawmakers pulled the plug

As economic experiments go, Science Foundation Arizona was showing promising results.

Created by the Arizona Legislature in 2006, Science Foundation Arizona was designed to help the state create high-tech—and high-paying—jobs.

The nonprofit organization got off to a quick start. Public dollars were matched by private dollars. University researchers were finding new ways to bring their discoveries into the marketplace. New companies were being created. Arizona's science and math teachers were getting new training.

But as state lawmakers faced multibillion-dollar budget shortfalls, Science Foundation Arizona was a ripe target to some conservative lawmakers who saw it as little more than corporate welfare. Earlier this year, they yanked all funding for the program, leaving its future in jeopardy.

Science Foundation Arizona was the brainchild of Arizona business groups working with Gov. Jan Napolitano and the Legislature in an attempt to develop the state's fledgling science and technology economy.

"The 21st century is going to be powered by brains, so they wanted to invest in the biomedical and high-technology fields that create high-paying jobs," says Margaret Mullen, chief operating officer for Science Foundation Arizona. "They wanted Arizona to get in that game."

Three regional business organizations—the Southern Arizona Leadership Council, the Greater Phoenix Leadership and the Flagstaff 40—pooled their resources to raise $2.5 million a year to cover administrative costs. In turn, the state agreed to provide $135 million over five years, provided matching funds could be raised from the private sector. Science Foundation Arizona would then use those dollars to fund scientific research through grants, and support science and math education in schools.

Ron Shoopman, president of Southern Arizona Leadership Council, says that Science Foundation Arizona was a key step toward diversifying Arizona's economy and bringing more high-wage jobs to Tucson.

"We think it's a pretty important investment in the future of our state," Shoopman says. "It's created some interesting partnerships. Raytheon has teamed with the UA Cancer Center to come up with a better technology to identify and diagnose skin cancer. It's real technology that's going to move to the marketplace pretty quickly."

Science Foundation Arizona was modeled after Science Foundation Ireland, which has been credited with helping build Ireland's scientific economy. Then-Science Foundation Ireland CEO William Harris was recruited to set up a similar outfit in Arizona, with a promise of state backing.

Supporters of Science Foundation Arizona say it delivered quick results. With the state's investment of $60 million in fiscal years 2007 and 2008, it was able to raise nearly $110 million in matching funds and other contributions, according to a report prepared by Battelle, a nonprofit that also invests in scientific endeavors. The report credits Science Foundation Arizona for creating 757 jobs and 11 new companies in Arizona, including businesses that are improving medical procedures, lowering the costs of generating solar power, improving computer and communication circuits, and even developing jet fuel from algae. The funding has also led to the filing of 50 new patents and nine new technology licenses.

Nearly $43 million in Science Foundation Arizona grants came to Southern Arizona to support organizations such as the Critical Path Institute, according to Mullen.

On the educational side, Science Foundation Arizona helped train 681 K-12 science and math teachers and provided classroom instruction to 54,517 K-12 students.

Jim Gentile, president and CEO of the Research Corporation for Science Advancement, says Science Foundation Arizona was capturing the attention of science and technology companies around the country.

"You build a reputation as a state that can make things happen," Gentile says. "And that has a cascade effect that's going to touch the science and technology community in a very positive way."

That opens up the opportunity for manufacturing jobs alongside the research opportunities, says Gentile, who cites a partnership between the Research Corporation and Science Foundation Arizona on an $8 million solar-energy initiative.

But with the cuts in funding, manufacturing for the project may not happen in Arizona.

"We're interested in moving things along fast," Gentile says. "I hope it happens in Tucson, but damn it, it's going to happen somewhere."

When a newly elected Legislature began chopping the state budget earlier this year, Science Foundation Arizona fell victim to the ax. A group of five Republican lawmakers in the House of Representatives, including Frank Antenori and David Gowan of Southern Arizona, insisted that Science Foundation Arizona's funding be zeroed out before they would vote for a budget fix—even though some of that money had already been committed by Science Foundation Arizona. The leader of the group of lawmakers, Rep. Sam Crump of Anthem, dismissed the organization as "corporate welfare."

Science Foundation Arizona filed a breach-of-contract lawsuit, arguing that the state owed them at least $18.5 million. Maricopa County Superior Court Judge John Buttrick ruled in favor of Science Foundation Arizona—but added that he didn't have the authority to force the Legislature to appropriate the funds.

Mullen says lawyers for Science Foundation Arizona are prepared to continue legal action against the state, but Gov. Jan Brewer and legislative leaders have asked her to hold off to see if they can resolve the problem outside of the courtroom.

Antenori, a freshman Republican who represents District 30, says state funding for Science Foundation Arizona gives him "heartburn," because it doesn't provide any kind of royalties back to taxpayers if research that the state supports turns out to be lucrative.

"I've been trying to find a way to fund it so it's not just a $22 million-a-year giveaway," Antenori says.

Antenori tried to persuade his colleagues to support a program in which state funds invested on behalf of retirees would be used to fund Science Foundation Arizona, with a payback returning to those funds if the research turned out to be profitable. But the bill ran into opposition from the boards charged with overseeing the funds and never made it out of committee.

"It had great opposition from the retirement board," Mullen says. "I applaud him for looking for a permanent funding solution, but those sorts of concepts need to be reviewed and agreed to by the entity, and the retirement board did not agree to this."

Mullen cautions that Antenori's plan could run into other legal problems, given Science Foundation Arizona's nonprofit status.

State Sen. Jonathan Paton, a Republican who represents District 30, says the state should pay Science Foundation Arizona the $18.5 million that is owed.

"I think it's important to live up to our obligations, whether you like it or not," says Paton. "We gave them the impression that they should go ahead and proceed a while ago, and you can't just flip on that."

But given the state's precarious financial situation, Paton is skeptical that future funding would be available for Science Foundation Arizona.

Democratic Rep. Steve Farley of District 28 says Democrats have tried to restore funding for Science Foundation Arizona, but Republicans have largely ignored Democratic proposals in budget talks.

Shoopman holds out hope that the state will find a way to continue to fund Science Foundation Arizona.

Science Foundation Arizona can continue to build collaborations without state support, according to Mullen, but in a "diminished role."

"It's unfortunate that we're in the situation we're in," says Shoopman, "but I'm not going to give up on it."

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