New economic development program advances

Senators advanced a measure March 16 that would eliminate three existing economic development programs and replace them with the Business Innovation Act.

LB387, introduced by Kearney Sen. Galen Hadley at the request of the governor, would require the Department of Economic Development (DED) to establish five programs to provide financial assistance to:

• microenterprise entities;
• companies or individuals creating prototypes;
• programs to identify commercial products and processes;
• companies receiving federal Small Business Innovation Research (SBIR) grants; and
• companies using Nebraska public college and university researchers and facilities for applied research projects.

The bill also would repeal the Agriculture and Value-Added Partnerships Act, the Microenterprise Development Act and the Building Entrepreneurial Communities Act.

Hadley said the bill resulted from a consulting firm’s examination of economic development in Nebraska that found weaknesses in the state’s current approach. He said Nebraska needs a state-level program to help local companies create winning projects in order to leverage federal SBIR dollars.

“We have a low application rate compared to other states,” Hadley said.

Lincoln Sen. Danielle Conrad supported the bill, saying research indicated that approximately 60 percent of Nebraska entrepreneurs and business owners were not familiar with SBIR programs.

“Nebraska has a real opportunity for improvement and growth in this policy area,” she said. “We need to make sure that the end result is good, quality jobs.”

An amendment offered by Hadley and adopted 35-1 would require DED to establish an innovation in value-added agriculture program to support small enterprise formation in Nebraska’s agricultural sector.

An entity receiving financial assistance under the agriculture program would be required to provide a 25 percent match and assistance would be capped at $1 million per year.

The amendment also would place caps of between $1 million and $3 million on each of the programs created by the bill and would appropriate $7 million per year in general funds to operate the Business Innovation Act.

The Hadley amendment’s definition of a distressed area was the focus of general file debate that spanned two days. Under the bill, 40 percent of financial assistance funds are reserved for economically distressed areas of the state.

Under the amendment, a distressed area is defined as a municipality, a county with a population of fewer than 100,000 according to the most recent census, an unincorporated area within a county or a census tract that:

• has an unemployment rate that exceeds the statewide average;
• has a per capita income below the statewide average; or
• had a population decrease between the two most recent federal censuses.

Omaha Sen. Burke Harr said the inclusion of counties with a population under 100,000 in the definition means that no area in Douglas County could qualify for the 40 percent of funds set aside for distressed areas.

“We’ve created a definition that de facto picks on one county,” he said. “We need rural support – there’s no doubt about that – but we have to do it in a fair and equitable way.”

Harr offered an amendment to Hadley’s amendment that would have removed counties from the definition of a distressed area.

Hadley opposed the amendment, saying economic development funds historically have gone to urban areas and that lawmakers should focus on statewide solutions to Nebraska’s economic challenges.

“We’re looking for a formula that does the best for the most people in the state,” he said. “The problems, generally speaking, for distressed areas are in rural Nebraska.”

Hadley added that 60 percent of funds remain available to any area of the state under the bill as amended.

Conrad also opposed the Harr amendment, saying development in any area of the state benefits all Nebraskans.

“We have a shared interest in Nebraska’s economic success,” she said. We have a shared tax base.”

The Harr amendment was defeated by a vote of 11-29.

Hastings Sen. Dennis Utter offered an amendment, adopted 38-0 that would sunset the bill’s provisions in 2016. He said the Legislature has a duty to evaluate the programs it funds.

Hadley supported the Utter amendment, saying it would encourage DED to make the programs successful.

“I think in five years we will have indicators of whether this is a success or not,” he said.

LB387 advanced to select file on a 33-0 vote.