Budget Cutbacks and Neglect Could Turn State’s High-Tech Industry Into an Also-Ran
Is California eating its seed corn?
Although folks tend to look at the yawning state budget gap in immediate terms -- what the crisis will mean for, say, fees on college campuses next year or health programs for the poor -- there are longer-term consequences as well.
Among the most important -- and alarming -- is that California’s preeminence as a high-tech power may be slipping away.
Cutbacks in state funding for top-level research, coupled with a failure by Sacramento to nurture our leading-edge industries, could make California a high-tech also-ran if we’re not careful.
This is not just a Schwarzenegger administration phenomenon. Budget cuts last year by the Davis administration ended a program called CalTIP that channeled financing to smaller high-tech companies.
All the while, competition from other states is heating up -- and that, in turn, is attracting notice in Washington.
The federal government “doesn’t see California putting up seed money to back research” nearly as much as it used to, says Victor Hwang of the Los Angeles Regional Technology Alliance, a state-sponsored organization charged with spurring employment.
The result: Rivals are starting to win Uncle Sam’s backing instead.
New York, for example, has committed $625 million to create a nanotechnology center at the State University of New York at Albany. That effort, plus lobbying by Gov. George E. Pataki, impressed the federal government enough that New York’s Cornell University recently won the leadership of a major new shared laboratory project called the National Nanotechnology Infrastructure Network.
California, which was first in pursuing research in that molecular science area, is represented in the consortium by UC Santa Barbara. UCSB, in partnership with UCLA, created the California Nanotechnology Institute three years ago, when a state grant of $100 million attracted comparable investment from the feds and private industry.
But such largess is not available today. And its absence is beginning to show.
In several key measures of research-and-development investment, according to the Milken Institute in Santa Monica, California now trails Massachusetts and Virginia.
Worse, reports institute economist Ross DeVol, California has slipped to 21st in the country in per-capita spending on R&D; by university engineering programs “just as every other governor is pushing academic engineering as key to developing high-tech industry.” California ranked 12th in 1997.
Ultimately, warns UCLA Vice Chancellor Roberto Peccei, “the budget cuts will affect our ability to be competitive with other national centers of research.”
California’s brain power has long been one of the state’s big draws. It has been strong enough to counteract soaring workers’ compensation costs, relatively high taxes and what many regard as an anti-business climate in Sacramento.
But increasingly, high-tech firms seem to be discovering that plenty of gray matter exists outside the Golden State.
For instance, Hybrid Plastics Inc. of Fountain Valley, a pioneer in nanotech materials used for everything from space-vehicle coatings to earthbound packaging, is moving to Mississippi.
Yes, that’s right, Mississippi.
To attract Hybrid, the state handed the company free use of its laboratories, plus money for building new facilities.
Beyond that, “the University of Southern Mississippi at Hattiesburg has one of the best polymer chemistry departments in the country,” notes Carl Hagstrom, Hybrid’s chief operating officer.
The move by the company, which employs half a dozen PhD scientists, is a loss for California.
Its technology was developed and the firm launched from the research lab at Edwards Air Force Base. In 2002, Hybrid was a recipient of a $250,000 grant from CalTIP, the program killed when the state’s Technology, Trade and Commerce Agency was abolished in a cost-cutting move last year.
Hybrid was coaxed to move to Mississippi by another California firm, Maxdem Inc. of San Dimas, which set up a subsidiary there after getting handouts from that state.
What to do?
California’s budget crisis is not going to go away soon. So, the regional technology alliance is organizing a consortium to commercialize the research being undertaken at 14 universities and three medical institutions in Southern California. The idea is not only to give birth to public companies, Hwang says, but “to get exposure for our efforts in Washington,” where California’s delegation needs to fight for federal grants.
Other state delegations are fighting harder than ever these days, including New York’s. The Empire State is trying to make a comeback after decades of industrial decline.
One hopes California can somehow shake off its troubles before it, too, is forced to play catch-up.
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James Flanigan can be reached at jim.flanigan@ latimes.com. To read previous
columns, go to latimes.com
/flanigan.
