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Mass. Lawmakers Must Now Consolidate the Two $1B Life-Sci Bills They Have Passed

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Massachusetts lawmakers are days from starting conference committee talks aimed at hashing out a single Life Sciences Initiative bill from separate versions of the $1 billion, 10-year measure that have passed the state Senate and House of Representatives.
 
The Senate has followed the House in approving life-sciences legislation designed to keep the state’s biocluster in the nation’s top tier. By a margin of 32 to 4, the Senate on March 20 approved Senate Bill 2556, available here, which is intended to reverse years of what industry and academic leaders have called erosion in the state’s competitive position for life science businesses and their jobs.
 
The Senate margin was even more lopsided than the 134 to 13 edge by which the House approved its version of the life science measure. House Bill 4554 included earmarks to benefit several pending life science projects, most of which were retained by the state Senate.
Aides to two key proponents of the bill said they expected a House-Senate conference committee to be convened on the biotech bill within days. The committee will hash out a compromise measure for Gov. Deval Patrick, a proponent of increased state funding for life sciences, to sign.
 
“This is not a comparison of an apple to an orange. Each [chamber] is moving within the parameters set by the governor’s bill,” said Monica Garlick, research director for the Joint Committee on Economic Development and Emerging Technologies, chaired by Rep. Daniel Bosley (D-North Adams)
 
One key difference in the Senate bill concerns eligibility for benefits: The Senate version lowers to 10 percent the increase of additional jobs that life-sciences companies must generate over five years to qualify for state subsidies. The House Bill requires a 25-percent increase.
 
“Our bill reduces the requirement in order to be more friendly to existing companies,” said Nicholas Martinelli, an associate counsel to the state Senate Ways and Means Committee, chaired by Steven Panagiotakos (D-Lowell).
 
Both the House and Senate, however, limit to $25 million the amount in tax incentives that can be awarded each year to “certified” life-sciences companies. Both allow tax credits to be carried forward for up to 10 years, though the House also allows net operating losses to be carried forward for 15 years. Both exempt life-science projects from the state’s “throwback” sales provision so that all sales by life-sciences companies will be considered to have been made outside the state, even if they weren’t.
 
Also, both the House and Senate would create a 100-percent-refundable credit against the US Food and Drug Administration fees paid for a human drug application or supplement that was primarily researched and developed in Massachusetts — though the Senate would cap the credit at 90 percent if it exceeds tax liability in a given year.
 
Another key difference is the elimination of the five regional life science centers approved by the House. The “Technology and Innovation Centers” are outposts to be staffed by a total dozen employees, with a total $30 million available toward lab space build-out projects they identify. The centers are intended to help scientists commercialize their technologies, link startups with angel and venture capital, as well as coordinate state and regional programs in business management, public-private financing, and workforce training.
 
“We took that language out because we felt the Massachusetts Life Science Center has that capacity as it stands now,” said another associate counsel for Senate Ways and Means, Nell Coogan.
 
The Senate bill also offers a different “certification” process for qualifying life sciences companies for the bill’s tax exemptions and capital funds: Applicant companies must be recommended by the state agency formed in 2006 to oversee industry activity, the Massachusetts Life Sciences Center, but the final word on their eligibility rests with the state’s Executive Office of Housing and Economic Development, headed by Commissioner Daniel O’Connell. The House measure calls for a single decision by the life sciences center.
 

“This is not a comparison of an apple to an orange. Each [chamber] is moving within the parameters set by the governor’s bill.”

“The more public money, the more public accountability,” Martinelli said, explaining the Senate’s approach. He made this comment as Massachusetts’s budget shortfall continues to grow, though a former official said such shortcomings are not likely to cause officials to scale back on the life-science program [see sidebar below].
 
The life sciences center also figures in two other Senate changes to the House bill. The Senate added language requiring the center to give “favorable treatment” to life sciences projects seeking certification for economic benefits if they relocate to or expand within economically distressed areas as designated by the state.
 
“We’d give discretion to the life sciences center and the secretary of housing and economic development to determine what the term ‘favorable treatment’ means,” Coogan said.
 
And the center’s board as envisioned by the Senate would be smaller than the House’s board, with several differences on who would constitute it. The Senate envisions six members — O’Connell; Leslie Kirwan, the state’s secretary of Administration and Finance; University of Massachusetts President Jack Wilson; a physician, a CEO of an organization that belongs to the Massachusetts Biotechnology Council, the state’s life sciences industry group; and a researcher.
 
The House envisions a nine-person board that would combine O’Connell, Kirwan, Wilson, and the physician, with a CEO whose organization belongs to the Massachusetts Life Sciences Collaborative, formed in 2006 to develop a cluster-building strategy for and promote greater collaboration between the sector’s business, academic, and government leaders. The nine-person board would also include another member of the collaboration; a board member of the biotech council, a venture capitalist, and another CEO.
 
The House envisions a 10-member Capital Advisory Board assisting the center, while the Senate would create a 23-member Advisory Committee. Both boards would include business, academic, and government leaders, according to comparisons of the bills prepared by the Massachusetts Biotechnology Council and the Joint Committee on Economic Development and Emerging Technologies.
 
Also different in the Senate version is the “clawback” provision allowing the state to take back benefits from life-sciences companies that fail to deliver their promised number of new or retained jobs.
 
Both Patrick’s bill and the House’s measure allow EOHED to clawback benefits from companies that received aid despite generating less than 70 percent of their promised jobs. The Senate goes further, requiring the economic development office to give the legislature a formal explanation if it opts against using the clawback power on underperforming companies.
 
The Senate bill also retained many of the specific project earmarks tacked on by the House to the original legislation introduced by Patrick last summer. Two of those earmarks were added with corporate giants in mind: 
  • Genzyme — $12.9 million toward water and sewer system improvements for the town of Framingham, Mass. The work would enable the biotech giant to carry out a $250 million, two-year expansion of its town facilities, at One Mountain Road. Genzyme would add 300 workers to its Framingham workforce of 1,600 employees as a result of the expansion, which will include new office space and a new cell culture manufacturing facility and purification plant; and
  • Wyeth BioPharma – $12.6 million toward construction of a new exit off Interstate 93 at Lowell Junction, which straddles portions of Andover, Tewksbury, Mass., and Wilmington, Mass. The project is intended to facilitate a long-discussed expansion of the company’s manufacturing plant in Andover, Mass., some 20 miles north of Boston, projected to add at least 100 jobs — as well as the development of some 700 nearby acres of unbuilt land.
The I-93 interchange and Framingham projects would be included within $125 million set aside for infrastructure improvement projects, with a stipulation that the projects create at least 100 jobs within 2 years of the money being spent.
 
Other earmarks surviving in both versions of the bill:
  • $9.5 million for construction and capital improvements at the New England Regional Biosafety Laboratory under construction for Tufts University’s Cummings School of Veterinary Medicine. The biosafety lab “topped out” at its maximum height on Dec. 14, and is slated for completion in 2009; and
  • $6.5 million toward a life science incubator building at William Stanley Business Park in Pittsfield, Mass.
Patrick, a Democrat, developed the legislation following talks with life sciences industry and academic leaders that began shortly after succeeding Mitt Romney, a Republican, in January 2007. Patrick announced his plan for a billion-dollar bill from the floor of the Biotechnology Industry Organization’s 2007 International Convention, held at the Boston Convention and Exhibition Center.
 
Also surviving in the Senate version of the bill was a $90 million set-aside toward a new $265 million “Advanced Therapeutics Cluster” to rise on the campus of UMass Medical School in Worcester. The cluster would be named for Albert (Albie) Sherman, the med school’s vice chancellor, and house a center for research in RNA interference intended to continue the work of Craig Mello, winner of the 2006 Nobel Prize in medicine, as well as a Stem Cell Bank and Registry.
 
Both the House and Senate would set aside $11.4 million toward acquisition by the University of Massachusetts of the Advanced Technology Manufacturing Center in Fall River. Both would approve additional funding for the Massachusetts Medical Device Development Center at UMass Lowell — though the House would spend $10 million, the Senate, $5 million with the expectation of a match from private funding sources. Also at Lowell, a nano- and biomanufacturing facility would receive $10 million from the House, versus half that total from the Senate.
 
Differences between the chambers also surfaced on a planned lease with Bay State Medical Center for the Pioneer Valley Life Sciences Institute in Springfield, Mass. The Senate approved $6 million in funding; the House, $5 million.
 
A $95 million earmark for UMass contained in the House bill was not specifically included by the Senate. However, money equivalent to that earmark — which would fund a life sciences center planned for the UMass campus in Amherst — is included within $250 million set aside for various UMass programs. Among programs appearing only in the Senate bill:
  • $10 million for UMass Boston for a planned Center for Personalized Cancer Therapy, a collaboration of UMass Boston and the Dana Farber Harvard Cancer Center. Kirwan and UMass would choose a location from three options: New Bedford, Taunton, or Falmouth;
  • $10 million toward a marine stem cell collaboration between UMass Dartmouth, the Marine Biology Laboratory at Woods Hole, and the Regional Technology Development Corp;
  • $10 million for a regional incubation center in New Bedford, a collaboration of UMass Dartmouth and Bristol Community College;
  • $10 million for a new life science center at the former Paul A. Dever State School in Taunton, to be run by a new 13-member board; and
  • A requirement that construction contractors on the above projects must pay their workers “prevailing” wages in return for a no-strike pledge.
Another $125 million would be set aside for “capital” projects, with astipulation that no funds be transferred to the life sciences center. They include:
  • $1.1 million to buy and convert three vehicles into “mobile science laboratories” to support biotech education initiatives of the Massachusetts Academy for Life Sciences; and
  • $10 million for projects placed on a priority list by the National Institutes of Health, but for which no federal money is available.

 
Budget Shortfall Won’t Doom Bio Bill, Ex-Official Says
 
Massachusetts’ growing state budget shortfall is not likely to cause officials to scale back, let alone hold off on, spending $1 billion over 10 years in subsidies for the state’s life sciences industry, a former state official and longtime observer of state fiscal policies told BRN last week.
 
Michael Widmer, president of the Massachusetts Taxpayers Foundation, said the $50 million the state would spend from its operating budget each year under the measure is too small a portion of state spending for officials to achieve significant savings by cutting. (Another $50 million would be spent annually in capital projects, covered by a separate spending plan).
 
That, plus the popularity of the proposed Life Sciences Initiative, makes any cutback in the bill unlikely, Widmer said. The Life Sciences Initiative is headed for a conference committee following approval by the state Senate on a version of the measure that differed from those of the House of Representatives and Gov. Deval Patrick.
 
“Despite the state’s fiscal difficulties, there’s unanimity among the leaders on life sciences,” said Widmer, a state official under former governors Francis Sargent and his successor, Michael Dukakis.
 
State lawmakers and Patrick are scrambling to plug a $1.3 billion shortfall in the state’s budget for the year that begins July 1. The scramble has intensified in recent weeks as the economy has deteriorated — and as Patrick lost $124 million in licensing revenues projected for next year when the state House of Representatives voted down by 108-46 the governor’s plan to allow construction of three resort-style casinos statewide. Patrick had estimated that when fully operational, the casinos would generate $400 million to $450 million a year.
 
The casino defeat, Widmer said, makes more it likely that Patrick and lawmakers will agree to about $300 million in corporate tax hikes recommended last year by a commission whose members were appointed by the governor, House Speaker Salvatore DiMasi (D-South Boston) and state Senate President Therese Murray (D-Plymouth). Widmer was a member of the commission, but voted against the proposed tax increases, set to generate $475 million when fully implemented, arguing they would discourage new business activity in the state.
 
“Advancing a corporate tax increase — the fourth one in six years — in the middle of a recession is hardly a sound economic development policy. I think it’s ironic that the governor and the legislature are committed to job growth, and this is their lead item,” Widmer said.
 
Another new revenue-raising option being considered by officials is a $1 hike in cigarette taxes proposed by DiMasi, projected to raise $152 million.
 
Ironically, Massachusetts officials are also considering two plans to cut the state’s corporate income-tax rate. Patrick wants to lower the rate from 9.5 percent to 8.3 percent over four years; DiMasi, from 9.5 percent to 7 percent over three years.

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