Plan B: Investing in Knowledge Creation

I’m one of the few commentators left, apparently, who thinks that Virginia’s political leadership should return some of the state’s mounting budget surplus to the taxpayers. But that’s not going to happen. So, it’s time to revert to Plan B. The next best use of surplus funds is to invest in programs and initiatives that either (a) expand the tax base through economic growth, or (b) achieve efficiencies that reduce future outlays.

Gov. Warner has announced two new initiatives: creating a $250 university research fund and spending $460 million to restructure state and local mental health services. The research fund, I believe, is a good idea. I don’t know enough yet about the mental health initiative to comment thoughtfully.

Under Warner’s proposal, according to Michael Hardy’s story in today’s Times-Dispatch, state colleges and universities could tap the research fund by matching grants with money they raised on their own. The funds could be used to recruit top researchers, build specialty laboratories or purchase cutting-edge equipment.

A top economic development goal of the Warner administration has been to improve the rankings of the state’s major research universities. To date, no significant gains have been made, mainly because competing research universities are all trying to raise money to improve their rankings, too. The best that can be said is that Virginia research institutions have held their own. This research fund represents the Warner administration’s effort to make good on its promise to higher education.

An investment in university research is an investment in economic growth. When universities succeed in recruiting top research scientists, they usually bring multi-millions in federal research grants along with them. Additionally, intellectual property created by these scientists often can be spun off in entrepreneurial start-ups (although Virginia’s track record in this regard has been mixed).

Virginia universities presidents will have no trouble putting the research funds to use. Instructive is a recent press release from George Mason University:

President Alan Merten called upon [Northern Virginia] legislators to provide the additional funding needed to propel George Mason into a world-class research university that is able to compete for the high-tech and biotech industries that are the foundation of the economic future.

In a plan that asks the state to add $5 million a year for the next five years to George Mason’s current budget, the university would specifically recruit research faculty with national and international reputations to focus on cancer biology and bioengineering; neurosciences and bioengineering; and global biosphere.

According to Merten, the university predicts their research dollars will grow to $150 million in five years with the goal of placing George Mason within the top 100 research universities in the nation.

Endowing a research fund with a one-time shot of $250 million, only a fraction of which would go to to GMU, isn’t the same as increasing GMU’s annual budget by $25 million a year over five years. But Merten is a smart fellow — I’m confident that he, like his counterparts at Virginia Tech, UVa, VCU and elsewhere, can figure out a way to restructure their plans to take advantage of Warner’s idea.

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5 responses to “Plan B: Investing in Knowledge Creation”

  1. Terry M. Avatar

    Keep in mind, Goal 8 of the Restructuring Act requires research institutions to increase their funded research expenditures. They will be doing this anyway.

    However, the truth is, as SCEHV reported a couple of years ago, is that getting started in research, or expanding research capabilities in order to win these grants requires money. The Governor’s proposal can certainly help.

    We are long ways now from the 1990s when the institutions were discouraged from doing funded research – it was seen by many in the Assembly as a dilution of their primary task of undergraduate education.

  2. Avatar

    These kinds of investments are exactly what Virginia’s universities need to keep their competitive advantage. Virginia’s model of decentralized higher ed. administration – SCHEV is not nearly as powerful as the UNC or UC system central administrations – has produced a level of competition among colleges and universities that position them well for a research fund of this sort. And, human capital will be THE key to economic growth for every sector of the state going forward. It will be interesting to see how smaller public colleges such as Longwood, Radford, VA State, respond to this initiative.

    Now that VA has shored up its undergraduate product, it’s time to vault them into the top-tier of research universities. That lack of hardcore research has been one of the lag spots for UVA’s otherwise sterling academic reputation – outside of law and business, it’s graduate programs as a group are not as competitive as their “public Ivy” counterparts such as UMich, Berkeley or even UNC. Nonetheless, the Commonwealth’s system has produced a more balanced distribution of power and innovation among all of its public institutions, something that most other states don’t have. Our 3 flagship schools are always looking over their shoulder at what the lower-tier regional universities have concocted.

    (Shameless alma mater plug warning) Kudos to Alan Merten for being this strategic about GMU.

    — Conaway

  3. Anonymous Avatar

    Jim: Why are you convinced that there will be no “return” to the taxpayers? Discussion continues on several venues, including:

    The sales tax holiday. Repeal of the Virginia inheritance tax. Final elimination of the accelerated sales tax gimmick, still a thorn in the side of retailers. Additional car tax relief (still high on the House agenda, I hear). Changes in the corporate income tax to make Virginia a more attractive location. Tax breaks for the purchase of long term care plans. And probably about a dozen more proposals. If you want it back exactly as collected, you’re right, but if you want to take that money to provide other forms of tax relief, I wouldn’t give in just yet.

  4. Jim Bacon Avatar

    Anonymous 1:57. I hope you’re right — I hope that we do get some tax relief. I’m captive to what I read in the newspapers, so if none of those initiatives are being discussed, I assume (perhaps wrongly) that they’re not even taking place.

    I would add also that the tax-cutting sentiment seems to be located mainly in the House. The House can’t do it alone.

    But I shall take your advice and remain hopeful!

  5. James Atticus Bowden Avatar
    James Atticus Bowden

    Jim, I too wish the $1.4b would be returned to Virginians to create jobs and produce more than $1.4b in tax revenue. Yet, it seems ill gotten gains, like a tax surplus, must be passed like a hot potato – and spent.

    If so, the two initiatives for mental health and higher ed research are excellent places to put the hot money.

    In R&D I’d offer a few areas for consideration:
    -Nano-technology. A big thing in our future which could lead to nano-tech product manufacturing in the Commonwealth. Very important for jobs and capitol creation.
    – Bio-Med. An umbrella word for many, many technologies. Also, an opporutunity for spin off manufacturing, marketing, etc jobs.
    -Environment. Prevention, abation and clean up technologies for Virginia’s finitudes of land, air and water.
    – Nuclear Fusion. (I can hear the scoffing out there). When it happens as a commercially viable energy source life changes.

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