Massachusetts Gov. Deval Patrick has offered an olive branch to business groups that hope to extend to their industries the new economic incentives at the heart of his 10-year, $1 billion Life Sciences Initiative.
Patrick is amenable to offering similar tax breaks included in his bill to at least some of the state’s other industries in future legislation, according to a spokeswoman for the governor’s economic development office.
“The commonwealth will not be ignoring other key industries,” Kofi Jones, a spokeswoman for Patrick’s Executive Office of Housing and Economic Development, told BioRegion News last week.
But Jones also defended Patrick’s decision to first single out the life-sciences industry for economic incentives. He supports that decision by echoing arguments made by biotech and pharmaceutical industry leaders that the bill will help the state maintain its top-tier cluster of biotech and pharma businesses, universities, and research institutions.
The administration made its opinion after three reports concluded the leading status of state’s life-science cluster had eroded due to increased competition for jobs, a rising cost of living, increased traffic, and a dip in science and math students in the state’s K-12 public schools.
“Due to the life sciences industry’s leadership position in the commonwealth, as well as the size of the growth potential, it makes strategic sense to prioritize this industry,” Jones said. “We’re very aware of other states positioning themselves in this industry, and in order to achieve the maximum economic growth and prosperity, it’s vital that we focus this piece of legislation on the life sciences.”
In his Oct. 30 testimony to the key legislative panel overseeing economic development — the 19-member Joint Committee on Economic Development and Emerging Technologies — Patrick noted the hundreds of millions of dollars in life sciences subsidies awarded to companies and research centers by California, Florida, New Jersey, and North Carolina.
The joint committee has yet to decide if it will include such aid in the bill. But the panel is also open to helping other tech sectors, chairman Daniel Bosley told BioRegion News last week.
“I don’t know if we’ll lump it all in one bill or if we’ll try to do something separately. There are some other sectors that need some TLC. I don’t think they’re at cross purposes with putting some money in to life sciences,” said Bosley, a Democrat of North Adams.
‘What About Us?’
Those concerns were also raised last week by leaders of two statewide business groups that differed on how broadly beyond life sciences the bill’s benefits should be extended.
“We believe that a broader focus on improving the overall business climate in the state would be a much more beneficial undertaking,” said John Regan, executive vice president of government affairs for Associated Industries of Massachusetts, the state’s largest business group with more than 7,000 members. “If we’ve got the right climate, and any business can thrive in that climate, then we don’t really have to worry about providing special incentives for one over the other.”
He cited the state’s manufacturing sector, which boasts more than 300,000 jobs — more than 10 times the number of life sciences jobs in Massachusetts.
“We also have telecommunications companies, we have printing companies, we have machine shops and plastic molders. I think a lot of them scratch their heads and wonder, ‘What about us?’” said Regan, who served in the 1990s administrations of former governors William Weld and Paul Cellucci. “Part of the concern is that government in general, and state government in particular, doesn’t have a necessarily good track record at picking winners and losers.”
Regan and Christopher Anderson, president of the Massachusetts High Technology Council — which represents more than 100 CEOs of top technology employers in the state — recalled that Massachusetts used subsidies to help information-technology companies grow in the late 1980s, and dot-com startups a decade later. Both efforts ultimately failed as the economy soured.
Anderson said the bio bill included many key planks of a broader tech-based economic strategy it proposed in 2002, such as closer state cooperation with public and private universities, but should be broadened beyond the life sciences to other tech sectors.
“There shouldn’t have to be a down-the-road parallel bill to encourage new jobs in nanotech, clean energy technology, defense technology, semiconductors,” Anderson said.
“There’s a political appeal to biotech, and states are aggressively competing specifically for this. That makes it special today. What we have to be careful about is the legislature thinking and the governor thinking that it’s the only interest in our technology economy,” Anderson said. “It isn’t.”
Alluding to California’s Proposition 71, which authorized state subsidies for embryonic stem-cell research, Anderson said, “there may not be a $3 billion initiative aimed at clean energy yet, but why wait?”
Anderson cited a report by the New England Clean Energy Council — on whose board he sits — projecting that Massachusetts will create 200,000 clean-energy jobs through 2015. The state now has 14,400 of these kinds of jobs, compared with more than 30,000 life-sciences jobs and about 80,000 defense-tech jobs.
Patrick has sought to encourage clean energy by proposing streamlined permitting for facilities; state financial incentives; investment in startups through the Massachusetts Technology Collaborative, a state agency; and a new public utility commission to encourage energy efficiency.
“We also have telecommunications companies, we have printing companies, we have machine shops and plastic molders. I think a lot of them scratch their heads and wonder, what about us?”
“You don’t need specially targeted bills to benefit our technology economy,” Anderson said. “If Massachusetts does this right, we’ll avoid the trap of picking winners and losers.”
The high-tech council and the Associated Industries of Massachusetts, known as AIM, would like to extend across the board two tax breaks included in the life sciences bill: One is an investment tax credit of up to 10 percent of property cost used exclusively in Massachusetts for a life-sciences project. Such property must be depreciable, with a useful life of at least four years. The other is a 5-year extension, to 15 years, the duration that companies can “carry-forward” their net operating losses. Anderson said his group prefers an even longer extension, to 20 years or longer.
“If the motivation is to encourage the expansion of new jobs based on this innovation economy, whether it is life sciences or something else, the definition should not be limited to one sector or another,” Anderson said.
Anderson and AIM President Richard Lord made similar arguments while testifying at the bill’s first hearing Oct. 30, held by the state General Assembly’s Joint Economic Development and Emerging Technologies Committee, consisting of lawmakers from the state House and Senate.
One business leader not at the hearing said the state should not limit new subsidies to biotech and pharma, or even to tech groups.
“We’re advocating for an even-handed economic policy that supports whatever economic engines we have in Massachusetts,” said Joyce Plotkin, president of the Massachusetts Technology Leadership Council. The council was formed in 2005 through the merger of the Massachusetts Software Council and the New England Business and Technology Association.
“Certainly life science is one of them,” said Plotkin, a member of the Mass Life Sciences Coalition and its human capital task force. “So is robotics, so is energy, and so is the wireless area. So are different models within the software industry. There are a lot of engines.”
Plotkin recalled how more than a decade ago, Weld asked Harvard Business School professor Michael Porter to study the state’s economic competitiveness. In his 1991 report “Competitive Advantage of Massachusetts,” Porter identified four independent clusters – financial services, life sciences, information technology, and “knowledge” employers such as universities and consulting firms.
More recently, the first three of those clusters were also recommended for more state support, such as a greater state role in cross-technology collaborations, by the policy group MassInsight. In a report issued last July called “Massachusetts Research & Development Agenda: How Can Massachusetts Leverage Resources to Maximize Economic Benefit,” MassInsight also urged the state to nearly triple the budget of its John Adams Innovation Initiative to $100 million from its current $35 million [BioRegion News, Aug. 6].
In the years since, Plotkin said, the sectors have become much more interconnected — bioinformatics draws on both biotech and IT, for example — raising the risk for states and regions that back one form of technology over another.
“We need an economic policy that recognizes that interconnectedness and the intersections of the clusters and verticals than we have. It’s a much more complex world than it once was,” Plotkin said.
“We should be seeding all the growing parts of our economy that have a chance to make a difference. I don’t think it makes sense to predict what technologies are going to be the next big ones. I don’t think any of us know.”