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Md.'s Stem-Cell Program Faces Cuts in FY'10; Other Life-Sci Initiatives Will Freeze or Fall

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Funding for Maryland's stem-cell program will be cut for the second time in as many years, one of several state-backed life-science initiatives whose funding will either freeze or decrease under the $31.6 billion budget for fiscal 2010 proposed by Gov. Martin O'Malley.

However, a state official said several factors may enable Maryland to spend more cash on life-sci projects than are currently planned for the year beginning July 1.

"The cuts to the stem-cell program have really been modest compared to other programs, and they are getting substantial funding relative to the original goal," Karen Glenn Hood, a spokeswoman for Maryland's Department of Business and Economic Development, told BioRegion News last week. "We feel they're getting good funding."

Maryland's stem-cell program is currently allocated $18.4 million, $400,000 more than it received during the current year, according to Gov. Martin O'Malley's proposed fiscal 2010 budget.

However, the program was originally to receive $19 million, but O'Malley and state lawmakers last October snipped $1 million from the final number after hammering out the current $31 billion fiscal 2009 budget last April [BRN, Oct. 20, 2008].

And the funding the stem-cell program received in fiscal 2009, which will end on June 30, was a compromise between a desire among some state lawmakers to slash the program's budget from the $24 million it received in fiscal 2008, to between $5 million and $15 million [BRN, March 31, 2008].

Since the fiscal 2009 budget was approved last April, the ongoing global financial turmoil has also created a $1 billion shortfall in state tax revenue, and state officials have said they expect that gap to reach $2.4 billion by fiscal 2010.

O'Malley and the legislators responded to the fiscal 2009 shortfall last October by issuing a supplemental spending plan that included cuts to state programs — including the stem-cell funding effort — as well as a controversial furlough program requiring 67,000 of the state's 80,000 employees to take between two and five days off a month without pay, with higher-salaried workers kept out for additional days.

Richard Clinch, director of economic development at the Jacob France Institute of the University of Baltimore, said that while the state economy has slowed less dramatically than the nation's, Maryland nevertheless is struggling with a structural deficit because of a requirement that the it funds its school districts equally in order to minimize disparities between richer and poorer districts. But the requirement, recommended by the Thornton Commission on Education Finance, Equity and Excellence, has never been accompanied by a funding mechanism.

The state had hoped to pay for the additional funding through slot-machine gambling, though Maryland only recently began taking bids on the five licenses it was making available to run such facilities. The deadline to submit the bids was Feb. 2.

"We're looking at a pretty tight budget," Clinch said.

Maryland is facing cutting its stem-cell program in fiscal 2010 even as interest among researchers in the program continues to grow. For instance, on Jan. 16 the Maryland Stem Cell Research Commission, which oversees state-funded stem cell projects, announced it had received 147 applications for grants totaling more than $85 million for stem-cell research. A year ago, the program saw 122 applications for a total $62 million in funding — a 20-percent one-year rise in applications and a 37-percent surge in funding dollars.

Other changes are more stark. In fiscal 2008, the state's stem-cell program was able to use $1.6 million in unspent funds carried over from fiscal 2007, in addition to the $24 million budgeted for FY 2008, in one-year grants, and $5.4 million in funds that had been set aside in fiscal '07 for multi-year research projects. By comparison, in fiscal 2009 the stem-cell program will have less than $500,000 from fiscal 2008 to add to its $18 million available for the grants.

The resulting $18.4 million will be awarded in three categories:

• Investigator-Initiated Research Grants for researchers with preliminary data supporting their requests. Thirty-eight applications have been filed for these grants, which award $300,000 of direct costs per year for up to five years;
• Exploratory Research Grants for investigators new to the stem-cell field. Seventy applications have been filed seeking up to $100,000 of direct costs per year, for up to two years; and
• Post-Doctoral Fellowship Grants for up to $55,000 of direct, indirect, and fringe benefits costs per year, for up to two years. The commission is currently evaluating 39 such applications.

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A key legislative supporter of the state's life-science industry said he is satisfied that the state has maintained its commitment to funding key programs in light of the weak economy.

"Given the global, national, state, and local economic issues, many programs are being cut," Delegate Dan Morhaim, a Democrat from Baltimore County and a medical doctor, told BRN last week. "Everything should be on the table, and [life-sci funding] should be too. And hopefully, people will see that this is still a real sound investment in the long-term picture for Maryland, and for the nation.

"Having many programs running in place is pretty good given the budget cutting that is taking place in Maryland and many other states," said Morhaim, a co-founder and key member of the General Assembly's Biotechnology and Life Sciences Caucus.

He said President Obama's support for federal funding for embryonic stem-cell research may yield a new source of federal funding that could allow Maryland and other states to rely less on internal sources for budget increases.

In addition to the stem-cell funding, other life-science highlights of O'Malley's budget proposal include:

Montgomery College (Germantown) Bioscience Center: $32.2 million in capital for the planned $85 million, 127,000-square-foot laboratory and classroom facility set to break ground later this year or early in 2010;

Maryland Biotech Investment Tax Credit: $6 million, same as the current fiscal year;

Science+Technology Park: $5 million in capital to continue development by a Forest City Enterprises' Science+Technology Group-led partnership of the 31-acre East Baltimore biocampus, whose first building was completed last year [BRN, April 14, 2008];

Maryland Biotechnology Center: $5 million to launch a "one-stop shop" linking life-science employers to economic incentives, business assistance, and other state services; and

Nano/Biotechnology Initiative: The nascent $3 million program, designed to provide research grants and faculty attraction resources to the University System of Maryland, would be eliminated from the state budget.

"The hits to biotechnology [in Maryland], a million here and a million there, I don't think hurt biotech that much," said Jacob France Institute's Clinch. "There are not a lot of companies that depend on large sums of money, so I don't think it hurts the prospects for biotechnology here."

In all, O'Malley's proposed fiscal 2010 budget includes $70.9 million for various life-science initiatives, including $2 million for the Maryland Venture Fund and $2.1 million for the technology transfer fund, both of which would receive funding similar to fiscal 2009.

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O'Malley's budget draft has also been criticized by the Tech Council of Maryland for proposing to cut life-sci funding beyond levels recommended for two programs. In its 2009 Policy Platform released last month, the tech council, which has more than 500 members representing life sciences and other tech employers, recommended restoring state stem-cell funding to $19 million and retaining the nano/bio initiative, albeit at a reduced $2.4 million. The council also recommended including longer-term funding for a Coordinating Emerging Nanobiotechnology Research, known as CENTR.

The tech council did, however, prevail on another policy platform recommendation: maintaining biotech tax credits at $6 million.

"That's one program that we feel very, very strongly about," Glenn Hood, from Maryland's Department of Business and Economic Development, told BRN. "It really is more of an investment stimulus. It helps them maintain their pipeline. It gives them the ability to raise capital. It really is important to keep that funding level."

"Our goal is to continue to attract bioscience companies, and also grow the companies that are here," said Glenn Hood. "Reducing that funding would really hurt the ability of bio and life-science companies to raise capital, especially in this economic climate."

Another reason for maintaining the tax-credit program, she said, is support from state elected officials: "A lot of the [fiscal 2010] budget decisions were made where we had to pick and choose which items we think are going to have the best shot of maintaining the funding and going through," she said. "That's one where we've had a lot of support from our legislature on, and the governor feels very strongly about maintaining that funding."

According to a statement O'Malley released accompanying his Jan. 21 budget proposal, despite the freezes and cutbacks Maryland remains committed to "strengthening [its] infrastructure for economic development, particularly for biotechnology."

O'Malley, a Democrat who took office in 2007 after unseating incumbent Republican Robert Ehrlich — in part on a pledge to step up support for the life-science industry — has committed the state to a $1.3 billion package of programs designed to expand its life-sci sector over the next decade.

The cost for that initiative, known as BIO 2020, has risen from the original $1.1 billion [BRN, June 23, 2008] and includes $222 million for the biotech tax credit, $219 million for the stem-cell program, and $118 million for expanded nanotech investments.

Under BIO 2020, the tax credit had been projected to increase to $12 million in fiscal 2010, then to $16 million in fiscal 2011, $20 million in fiscal 2012, and $24 million in each of the next seven fiscal years through 2019.

That spending would leverage a total $444 million in private funding, according to BIO 2020, of which $12 million was supposed to take place this fiscal year, and $24 million in FY 2010.

The stem-cell program, as envisioned under BIO 2020, was to rise to $20 million in FY 2010 and remain there each of the following nine years.

The nano/bio initiative was part of a package of nanotech spending set to rise to $5 million in fiscal 2010, climb to $7.5 million in fiscal 2011, to $10 million in fiscal 2011, and to $12 million in fiscal 2013, where it would remain till fiscal 2017, at which point it would increase to $15 million.

The state venture fund, a $152 million slice of BIO 2020, was supposed to triple to $6 million in fiscal 2010, then increase by $2 million each of the next 10 years, to $24 million in fiscal 2019.

And tech-transfer funding, accounting for another $107 million of BIO 2020, was to rise to $5 million each of the next three fiscal years, from fiscal 2010 through 2012, then double to $10 million from fiscal 2013 through fiscal 2016; then jump to $15 million from fiscal 2017 through fiscal 2019.

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Glenn Hood said Maryland is still committed to the nano/bio initiative, which was formally launched last October, but has yet to start awarding grants. DBED is working with the Maryland Technology Development Corp., known as TEDCO, to get the program operating, she said, but it is not yet know when it will be ready to award its first grants.

"It will probably be a little while before we get the program up and running," Glenn Hood said.

TEDCO is a state-created board designed to assist tech startups and promote tech transfer from universities and government agencies. O'Malley's budget would increase funding for TEDCO in fiscal 2010 by 3.1 percent, or $686,000, to $23.02 million, most of that including the stem cell money.

The nano/bio initiative was cut from DBED's fiscal 2010 budget as part of a $10.7 million series of cuts that included the permanent elimination of 14 vacant positions and budget cuts to art councils, the tourism-development board, the film-production rebate, and the Military Reservist and Service-Related No Interest Loan program. The latter program awards loans of up to $50,000 to businesses owned by or employ military reservists or National Guard members called to active duty.

Morhaim and Glenn Hood said they were hopeful the state may boost life-science spending in FY 2010, notwithstanding O'Malley's budget proposal. How much higher, they said, will depend in part on two factors.

One is how much money the state and its life-science employers obtain for projects under the American Recovery and Reinvestment Act championed by President Obama. A $900 billion version of the measure is pending in the US Senate, a week after an $819 billion version passed the House of Representatives on a largely party-line vote. Maryland will be among states competing for a share of funding for several life-sci efforts included in the bill:

• $2.5 billion in National Science Foundation-funded research and related activities, of which $300 million will pay solely for "major" research instruments, and $200 million for academic research facilities modernization.
• $1.5 billion for grants or contracts to renovate or repair existing non-federal research facilities.
• $750 million toward grants for worker training and placement in life sciences and other "high growth" and emerging industry sectors.
• $500 million for "high priority" repair and improvement projects for National Institutes of Health facilities on the Bethesda, Md., campus and other agency locations.
• $462 million for equipment, construction, and renovation of Centers for Disease Control and Prevention facilities.
• $300 million for construction grants for research science buildings, to be awarded competitively.

"The federal stimulus plan is really a moving target right now and could significantly change a lot of things that are on the table, budget-wise," Glenn Hood said. "So we're sort of holding our breath right now, waiting to see what happens. We do anticipate there will be some significant funding, we hope, coming our way. And that's going to change the budget picture here in Maryland."

Glenn Hood and Morhaim said the second factor? that could affect Maryland's fiscal 2010 spending for life-science programs will reflect the recommendations to be made by a 15-member O'Malley-appointed panel that is close to completing a strategic plan aimed at drawing more life-science employers and their jobs to the state.

"This report is going to be our roadmap. We're going to be looking for that to come in and help us decide what to do, and where to spend the resources that we do have," Morhaim said. "We really like the idea of pulling together a group of experts and have them give us their best thinking. We don't often have the time to do that on the legislative front."

But Morhaim cautioned that the recommendations in the plan "could result in the shifting of money from one section to another," he said. "I don't think it will result in increasing, just because of the broader economic picture."

Glenn Hood said the Maryland Life Sciences Advisory Board is about 30 days away from releasing the strategic plan. That gibes with the board's Annual Status Report, submitted by DBED in December, which projected an announcement of the plan "in conjunction with the governor in early 2009."

The anchor initiative of the strategic plan is expected to be the Maryland Biotechnology Center, which has been projected to cost $91.5 million with funds to be spent over several years through BIO 2020.

The strategic plan will be released at the same time Maryland announces several locations from where the biotech center will operate, "which are still being determined," Glenn Hood said.

"Essentially, they will be geographically located to make the best amount of sense, to have the best outreach for the various bio- and life sciences industries in Maryland," Glenn Hood added.

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