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NY Gov.’s FY’10 Budget Cuts Would Cleave $5.2B from Life-Science-Related Programs

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A series of budget cuts totaling $5.2 billion proposed last week by New York Gov. David Paterson would slash technology-transfer and faculty-recruitment loans by more than half; eliminate a program designed to spawn startup tech companies; and slice spending earmarked to encourage large life-sci and other employers to create or retain jobs.
 
Blaming the ongoing economic upheaval, Paterson last week announced his two-year plan for cutting costs. The proposal would cut $1 million each from the state’s tech-transfer and faculty-grant programs for fiscal 2010, which begins April 1, 2009; slice $1.5 million from the Jobs NOW program, which targets economic incentives to life-sci and other large employers; and eliminate the $900,000 state Centers for Applied Research and Technology program, or CART, which was budgeted to expand into the life sciences.
 
Not announced by the governor were two additional, significant fiscal blows for the state’s life-sci industry. Paterson has ordered the state Department of Health to defer until April 1 $9 million of the $17 million in research funding approved earlier this year by the state’s stem-cell board.
 
In addition, the state’s economic-development agency may eliminate a $160,000 subsidy it had planned to award a private, nonprofit partner this year to help support the state’s life-sci-industry attraction campaign, New York Loves Bio, BioRegion News learned last week.
 
Under his two-year plan, which includes the remainder of fiscal 2009 and fiscal 2010, Paterson proposes to to cut the tech-transfer, faculty grant and CART programs despite all three being designated as “high priority” by the New York State Foundation for Science, Technology, and Innovation, or NYSTAR.
 
Nearly three weeks ago, in a report to Paterson detailing its programs and budget priorities, NYSTAR reported that it expected state funding for CART to shrink from $708,000 in the fiscal year that ended in March, to $249,000 for both the current fiscal year and FY 2010 [BRN, Nov. 10].
 
NYSTAR’s report, titled Agency Programs and Activities: Inventory and Key Data, trimmed spending for faculty research grants 2 percent, from $1.8 million in the current fiscal year to $1.76 million in FY 2010. But the agency had envisioned receiving 24 percent, or $340,000, more for tech-transfer grants in 2009-2010, with that budget line rising from $1.4 million to $1.74 million.
 
Paterson’s plan would chop tech-transfer spending by more than two thirds from this fiscal year, and nearly 43 percent from NYSTAR’s projected FY 2009-10 budget.
 
In July, NYSTAR told BRN it had cut its maximum size of Faculty Development grants this fiscal year from $750,000 to $500,000, after Paterson ordered a 10-percent across-the-board cut in spending by all state agencies [BRN, July 7].
 
Jannette Rondo, a NYSTAR spokeswoman, told BRN last week her agency was retaining the $500,000 first-year faculty-grant limit for now, but could not discuss whether the cuts may force a further decrease. “That’s a discussion that we have to have with our board, so I can’t really make a comment without talking to our board.”
 
Meantime, CART, designed to foster greater collaboration between industry and non-doctoral-level academia, was created by the state Assembly in 2002 and envisioned as a $5 million-a-year program. But the state only designated two such centers: the Center for Applied Research in Collaborative and On-Demand Computing at Marist College in Poughkeepsie, and the Center for Engineered Polymeric Materials at the College of Staten Island.
 
Jobs NOW provides multi-million-dollar incentive awards to larger employers that agree in return to create or retain 300 or more jobs in the state. The program was conceived a decade ago by Skelos’ predecessor as state Senate Majority Leader, Joseph Bruno. Funding has dropped in recent years from $35.9 million in Bruno’s last full fiscal year in office, 2008, to $12 million budgeted this fiscal year, to $8.6 million projected to be spent in fiscal 2010, according to Empire State Development’s report detailing key programs and priorities, available here.
 
For its part, New York Loves Bio was slated to collect between $500,000 and $750,000 from the Empire State Development Corp. and several private partners, led by the private, nonprofit New York State Economic Development Corp.
 
“They contacted us on [Nov. 7] and indicated that [elimination of the subsidy] would probably be the case,” Brian McMahon, the NYSEDC’s executive director, told BRN last week.
 
McMahon said that his group has begun working to recoup the lost state money by seeking donations from other private sources. NYSEDC represents more than 900 economic-development professionals in the state and local governments.
 
Asked if the loss of state funding effectively kills New York Loves Bio, McMahon replied: “That is the $100,000 question.”
 
“We feel very strongly that now, more than ever, the state has to be in the marketplace, particularly in life sciences. Unless you tell it, nobody is going to know about it,” McMahon said in an interview.
 

“The well has run dry.”

McMahon said one undisclosed life-sci company pursuing “a pretty significant project” was among the “several large active projects that are considering New York locations” that he cited in testimony to the state Assembly Ways and Means Committee on Nov. 13. “We have a chance to win these projects, but only if we stay in the game.”
 
A stronger state presence in the life sciences, he said, dovetails with the state’s status as the top North American location for investment by international companies based on job creation. The Empire State created some 8,000 jobs last year, according to Global Location Trends: Annual Report, an IBM Global Business Services study released last week. New York held the top spot in 2006 as well, according to the report.
 
“New York has the ability to attract foreign investment in technology industries, and we believe we have as great of an opportunity to attract businesses in the life-sciences sector as any other sector,” McMahon told BRN. “In order to do that, we have to be able to market our strengths and our assets.
 
“If we’re not going to be able to go forward with New York Loves Bio, then I think it’s a major setback for our efforts to market the industry,” he added. “I think we lose the credibility with businesses that participate with us in the initiative, and I think we lose all the momentum that we’ve gained over the last 18 months, which is considerable.”
 
McMahon’s group launched New York Loves Bio last year as a public-private effort with the goal of jumpstarting the state’s life-sci effort in part by using trade shows to raise the state’s relatively low profile in the industry. The marketing effort raised $750,000 in fiscal 2008 from public and private sources, including $125,000 from NYSEDC, which is investing a similar amount into the bio-marketing program this year.
 
Part of the $750,000 funded a 3,500-square-foot pavilion erected in June at the Biotechnology Industry Organization’s 2008 Global Convention in San Diego.
 
More recently, McMahon said, New York Loves Bio has been busy converting its electronic database of state life-sci assets, promoted via an interactive kiosk, into a desktop application allowing employers to download information about the state’s life-sci sector. That application is expected to be completed early in the new year.
 
Another key feature planned for the site is an application that can download data from the state Department of Labor pinpointing the number of available life-sci workers in the state’s various regions. The tool is designed to persuade life-sci employers that New York has the quantity and quality of workers needed to fill industry positions, McMahon said.
 
“What we’re trying to do is identify people that are currently working within those industry sectors. But we’re also trying to identify people that may be out of work, that have worked in that sector, because they’re part of the available workforce,” he added.
 
He said he is “pretty sure” that the site will be online “by the first of the year.”
 
McMahon and Nathan Tinker, executive director of the New York Biotechnology Association, agreed that Paterson’s cuts risk negating the state’s longtime effort to grow its life-sci industry — an effort that has met with occasional public criticism by industry professionals at NYBA conferences held in recent years [BRN, May 27; Oct. 15, 2007].
 
“We will continue to advocate for the fact that biotech is a significant and growing industry in the state of New York. If you start to drastically hit it at the academic and early R&D level, that’s going to significantly impact the ability to build companies and spin them out into the state, and thereby build both economic and workforce opportunities,” Tinker told BRN. “It’s a longer-term issue than one year’s worth of financing.”
 
A spokeswoman for the state Department of Health insisted to BRN that the state will live up to its commitment to spend all of the more than $16.5 million approved for stem-cell research earlier this year by the Empire State Stem Cell Board, also known as NYSTEM, including the $9 million that Gov. Paterson has delayed to the start of fiscal 2010 and the $600 million in state funds committed over 11 years for the purpose that began in fiscal 2008.
 
“We are not cutting stem-cell funding. However, the realities of making awards, and entering into contracts that have to be approved by the [state] Comptroller’s Office, and approved by the Division of the Budget and the Governor’s Office, just meant that we knew there was $9 million in cash that would not move out the door before the end of March,” health department spokeswoman Claudia Hutton told BRN last week. “Nobody’s intending to never have [the $9 million] move. It’s not a lack of commitment to the program.”
 
NYSTEM approved $14.5 million in awards to 25 institutions early this year [BRN, Jan. 14], then announced in September it had awarded more than $2 million in planning grants..
 
Tinker said the $9 million delay poses problems for the institutions that counted on Albany to fund research they have long planned. “For the universities that are trying to plan their research dollars and already have [the state award] in place, it will impact their ability to do their work, to attract faculty and go forward on the research that they already have planned. It’s not quite as simple as saying, ‘We’re going to pay you in 2010 versus 2009.’”
 
Hutton said she couldn’t say which stem-cell award winners can expect their funding to be delayed as a result. “That’s really not the way that we’re viewing it,” she said. “We’re proceeding to go ahead with getting contracts in place. It’s just taking more time to get contracts in place than what we had envisioned when the budget was put together back in March and April.”
 
Also unknown, she said, is whether Paterson will propose any cut to the stem cell program when he submits his FY’10 budget to the state Legislature in December, one month earlier than any year in recent memory.
 
For now, Hutton added, the health department is proceeding as planned with awarding $109 million announced as available in May to institutions answering formal requests for applications for grants in four categories related to stem-cell research: consortia planning, facilities and equipment, targeted investigation of pluripotent stem cells, and Investigator-Initiated Research Projects and Innovative, Developmental or Exploratory Activities, known as IDEAs [BRN, May 12].
 
A funding committee of NYSTEM is evaluating responses and making recommendations on awardees for the four categories, Hutton said. The committee is set to recommend decisions on its first set of applications in December to the full stem cell board, which will make its own decision at an as-yet-undecided later date.
 
“We’re beginning to make decisions on those,” Hutton said.
 
The cuts proposed by Paterson, a Democrat, are subject to approval by both houses of the state Legislature. Assembly Speaker Sheldon Silver (D-New York City) responded with a statement declaring that his chamber was prepared to act on the spending-cut package, which he praised as “bold.”
 
Majority Leader Dean Skelos (R-Rockville Centre), however, issued a statement saying he would not move Paterson’s cuts to a vote in his chamber until the governor first submits a budget for the fiscal year starting April 1, 2009 — something Paterson said he was prepared to submit in December.
 
Skelos faulted parts of Paterson’s plan that would raise fees — such as a planned $600-a-year tuition hike for students at both the State University of New York program and the City University of New York. “We must avoid any job-killing taxes and fee increases, which the governor is proposing.”
 
In the end, however, Skelos may only be able to delay Paterson’s cuts until January, when he will lose his leadership post, when Democrats take control of the state Senate for the first time since 1965, cementing the party’s hold on Albany.
 
Paterson shot back with a statement declaring that the state cannot wait until January: “It would be fiscally irresponsible to delay addressing the current-year $1.5 billion deficit by tying it into next year's budget. The longer we wait to reduce spending the more difficult and costly it will be to confront these serious budget gaps later.”
 
During a press conference last week, Paterson sought to justify the spending cuts by emphasizing the state’s bleak finances — a theme he has repeated since taking office in March, succeeding Eliot Spitzer, who resigned following his involvement in a prostitution ring.
 
“We’re not going to get out of this quagmire we’ve built until we reduce our spending,” Paterson told reporters at a Nov. 12 press conference. “The well has run dry.”

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