PHILADELPHIA — Pennsylvania Gov. Edward Rendell last week vowed to try, for the fourth time in as many years, to convince the state legislature next year to approve his plan to spend $500 million on new facilities for the state’s research institutions — a program lawmakers already spurned well before the current economic upheaval.
“The institutions and universities are in favor of it. But the legislature has yet to act, so I’m hopeful that this coming budget year we will ask again,” Rendell said during his keynote address at the “Best and Brightest Forum on Medical Innovation,” an afternoon-long conference held at the Franklin Institute Science Museum here last week.
Rendell, a Democrat, said he would pursue the program, known as the Jonas Salk Legacy Fund, despite a budget shortfall this fiscal year that the state has projected will reach $1.6 billion, but that at least one government watchdog group said could be twice as large.
Addressing conferees last week, the governor, who will be term-limited out of office after 2010, said the current financial squeeze isn’t enough of a reason to scuttle Salk or other programs aimed at growing the state’s life-sciences sector.
“Every business that has ever grown has invested in itself. And we’re in too seminal a moment: You either borrow money, or put in support money, or [you tap] into [your] own capital reserves” to invest in growth, Rendell, told conferees. “This is not the time for America to circle the wagons. This is the time for us to invest in the things crucial to our ability to continue to innovate, to continue to lead, to continue to discover. If we don’t do that, I’m afraid that we won’t be competitive.
“We’ve got to get over this idea in this country that all spending is bad,” he added, before departing without taking questions.
Three Years of Trying
Rendell first submitted his Salk fund proposal in 2006. The measure would have created a fund to help build new biotech labs and incubator facilities statewide for institutions and their affiliated medical centers that are currently eligible for health research grants under Pennsylvania’s Commonwealth Universal Research Enhancement program, or CURE. Under Salk, institutions receiving funds would be required to match them.
“We are making an historic investment that will lead to healthier lives in Pennsylvania and all over the world for decades to come, just as Dr. Jonas Salk did when he discovered a vaccine against polio in 1955,” Rendell said at when he debuted the plan Feb. 1, 2006.
A year later, he reintroduced the bill with a change stressing that the state will pay for the fund from a portion of its share of the 1998 tobacco settlement. Since then Rendell has promoted Salk as a measure needed to catapult Pennsylvania into the nation’s top life-sci tier, support groundbreaking medical and scientific research, and foster dramatic growth by state-based biotech, pharma and medical device companies.
“I don’t know where the money would come from. We’re broke. There is no money.”
Today CURE, created in 2001, awards about $70 million a year in non-competitive “formula” grants toward biomedical and health-services research by hospitals, universities, and nonprofits — a figure that Rendell acknowledged would drop by half if Salk were launched. Recipients receive funding based on their proportion of the state’s National Institutes of Health grant funding. In addition, competitive grants are awarded to applicants who file a request that CURE issues annually.
Under Salk, CURE grant recipients could use portions of the measure’s $500 million fund to buy specialized equipment for use by newly recruited faculty throughout Pennsylvania. Like CURE recipients, institutions receiving Salk funds would have to get matching funds..
“One of the biggest problems of our research institutions is they’re out of space. They don’t have research space. They don’t have sheer buildings to expand into. They can’t add medical researchers,” Rendell told conferees. “Tough financial times have made it difficult for even the best of the institutions to get capital to support their programs.”
He cited Thomas Jefferson Health Systems’ $68 million sale in 2006 of a Thomas Eakins painting (The Gross Clinic, 1875) to help pay for an expansion program.
According to a Salk fund “talking points” memorandum posted on the state Department of Commerce and Economic Development’s web site, Salk would:
- Create about 12,000 research-related and support jobs at an average annual salary of $65,000;
- Create 1,750 additional jobs by leveraging $7 to $15 in private capital expected for every dollar to be spent by the state over five years; and
- Construct or renovate some 2.2 million square feet of mixed-use lab space;
Last year, the bill passed the Democratic-controlled state House of Representatives by a 103-98 vote that fell largely along party lines [BRN, July 16, 2007]. But Rendell has been unable to convince the Republican-controlled state Senate, where leaders and several senators have rejected the Salk program as too costly and less attractive than the current CURE grant system [BRN, Nov. 19, 2007].
Rendell and DCED have often said that supporting Salk are several of the state’s top academic and research institutions, all of which stand to gain if it passes. Among them are the Alleghany-Singer Research Institute, Carnegie Mellon University, the Children’s Hospital of Philadelphia, Drexel University, Penn State University, Temple University, Thomas Jefferson University Hospital, the University of Pennsylvania, the University of Pittsburgh Medical Center, and the Wistar Institute.
But the heads of the technology councils for the Philadelphia and Pittsburgh regions told BRN last year that the state’s system for subsidizing life sciences was functioning well enough not to need the boost that the Salk fund represents [BRN, May 7, 2007].
Last year, as his proposal died in the legislature for the third year in a row, the governor had to settle for some crumbs when the legislature approved two one-time, $6 million awards from the state’s Machinery and Equipment Loan Fund to the state’s three regional biotechnology centers, called Life Science Greenhouses, in Philadelphia, Pittsburgh, and Harrisburg, the state’s capital. One award went toward a new Biotechnology Commercialization Account while the other helped create a new Health Venture Investment Account.
“We, the members that I represent, believe we’ve checked that box to a large degree. Whether we do [the Machinery and Equipment Loan Fund awards] again in ’09, that’s a different story,” Drew Crompton, counsel to Pennsylvania Senate President Pro Tempore Joseph Scarnati III (R-Jefferson), told BRN last week. “It could possibly be extended. But it wasn’t written as an ongoing amount.”
The commercialization account was one of two pieces of Salk favored by legislative Republicans, who originally proposed spending 2 percent, or $6.7 million, of the state’s tobacco settlement for that purpose. The other piece would have directed the state to set aside another $6.7 million into a new Health Venture Investment Account intended to encourage venture-capital investments in early-stage life-science companies — a provision still being reviewed by state legislators.
Speaking with BRN last month, Dennis (Mickey) Flynn, president of Pennsylvania Bio, said he would press in 2009 for additional funds for the greenhouses among other funding priorities for the industry that he acknowledged may take several years to be approved.
In an interview at Biotech 2008, the two-day conference it co-presented in Philadelphia last month with New Jersey’s biotech industry group BioNJ, Flynn said his group viewed Salk’s prospects of passage as uncertain at best: “With the new budget cycle, who’s to know?”
Crompton was likewise lukewarm. “I’m not sure the lack of interest has anything to do with the deficit,” he told BRN. Even in years of surplus, our members were reluctant to embrace the program. I don’t see that in any way changing over the course of the next months or even the remainder of the governor’s term.
“The core rationale for most of our members for not supporting it is because they believe the disbursement of the tobacco funds is working quite well without being changed,” Crompton added.
Flynn, who was among conference attendees at last week’s “Best and Brightest” forum, told BRN minutes after Rendell spoke that the governor’s comments came as a surprise to his group.
“We have no idea right now, in terms of [Salk]. Obviously he’s going to bring it back up. We’ll just have to wait and see. We have no clue one way or the other,” Flynn said, saying his group would have a better idea once Rendell delivers a proposed budget to lawmakers next month.
Rendell said Salk is one tool Pennsylvania should wield to expand its life-sciences industry beyond the current 1,751 businesses employing some 73,000 employees.
Another tool would be to nurture more young people with knowledge and skills in science, technology, engineering and mathematics — the so-called STEM disciplines. During his keynote last week, Rendell quipped that teachers of such courses should be paid “at least 20 percent of what the minimum salary is for major league baseball players” — which would be at least $80,000, according to the Major League Baseball Players Association.
No Political Will
As in many other states struggling with red ink this year, Pennsylvania’s government spending is coming under increasing public attention. From the start of the current fiscal year in July, through the end of November, the state is $658 million behind its revenue forecast for the period. Rendell has proposed filling that gap with a mix of spending freezes, using half the state’s Rainy Day fund, or $375 million, and $450 million he expects the state will receive from Washington as part of a bailout of state governments by the incoming Obama administration.
Rock the Capital, a Pennsylvania state government watchdog group formed after state lawmakers enraged voters by approving a midnight pay raise in 2005, said the state is on track to record a $2 billion-$3 billion budget deficit, based on the month-by-month increases in the state shortfall since the start of the fiscal year.
“We need to sort that out first before we go creating new programs and try to find how we’re going to finance them,” Eric Epstein, a coordinator for Rock the Capital, told BRN last week. “I just don’t think there’s the money or political will to create a new program. The [state] Senate Republicans just will not endorse any new program.”
Because of the budget, Epstein said, state lawmakers are less likely to pass the facility-funding bond measure than at any time since Salk was unveiled in 2006.
Epstein said another sign of the economic upheaval is a decision by the Penn State Milton S. Hershey Medical Center not to build a planned $235 million children’s hospital. The center blamed the reversal on its inability to secure financing as a result of the credit-market freeze.
But in a Dec. 11 statement, the medical center insisted that the delay won’t be extended to its other construction projects — including its 175,000-square-foot Penn State Hershey Cancer Institute, which it said was “more than 70 percent” complete, and still set to open this coming spring.
“The Salk initiative has merit; it’s far-reaching and visionary. But we’re having problems just paying bills right now,” Epstein said. “I don’t know where the money would come from. We’re broke. There is no money. And I don’t think there’s the stomach right now for increasing taxes to finance the program.”