Gov. Paul LePage and Democratic lawmakers continued their salvo this week over the governor’s refusal to issue voter-approved bonds. Meanwhile, a legislative committee gave its approval to another borrowing proposal that could end up on the ballot later this year, this one aimed at small-business job creation.
The $73 million bond package cleared a 13-2 vote Monday in the Legislature’s Workforce and Economic Future Committee. Now, it’s up to members of the Legislature’s budget-writing Appropriations Committee to determine whether to send it to the full House and Senate.
The borrowing would benefit a handful of existing state programs that help small businesses gain access to capital and fund the development and commercialization of new products. The package would also fund new initiatives, such as a biometric analysis lab at The Jackson Laboratory in Bar Harbor, a biotechnology workforce training program at Mount Desert Island Biological Laboratory, and a lab for agriculture and forestry research at the University of Maine Cooperative Extension.
“Our focus was on jobs and private money and leverage coming into the state of Maine,” said Sen. Linda Valentino, D-Saco, who chairs the Workforce and Economic Future Committee. “It was extremely important to actually show people that this is going to help everybody in the state of Maine and not only a few targeted people.”
Spreading the investment
The bond package would restore funding for some state programs that haven’t recently received a state funds infusion.
The Finance Authority of Maine’s loan insurance program, for example, guarantees bank loans to small businesses, making it easier for small businesses to access bank financing. FAME’s Regional Economic Development Revolving Loan Program offers financing to help businesses with 50 or fewer employees or less than $5 million in sales expand. And the Maine Technology Asset Fund, administered by the Maine Technology Institute, offers competitive awards to businesses to pay product research, development and commercialization expenses.
“We need to recapitalize these programs, especially successful programs that have a track record,” said Valentino.
“What we’re hoping is there’s something for everybody” in the bond package, she said, “from the small company that needs a FAME loan, or an economic development loan to a company that is developing a patent, to larger companies that are well established.”
One of the larger organizations that would benefit is The Jackson Laboratory in Bar Harbor. The bond would set aside $15 million so the nonprofit research organization can build a biometric analysis lab, which would be the first of its kind in the world. The Jackson Laboratory would match the state funding with $16 million from other sources.
A specially outfitted biometric analysis lab would have equipment that allows researchers to identify changes in individual cells that signal the presence of disease. The Jackson Laboratory, and Maine by extension, has the chance to become an international center for this type of research, said Mike Hyde, The Jackson Laboratory’s vice president for external affairs and strategic partnerships.
“The ability to measure changes down at the cellular level is a fairly new technology,” he said. “It is driving the research community these days. The ability to make these measurements to deliver this kind of data to people is a very rare thing.”
The facility’s construction would generate 300 jobs, according to an analysis commissioned by The Jackson Laboratory. Once it’s open in 2016, Hyde said, The Jackson Laboratory would add 150-200 to its 1,300-member Maine staff, and the total effect statewide — from additional business with Maine vendors — would be the equivalent of 800 full-time jobs.
The Maine Small Business Development Centers assist about 2,000 entrepreneurs annually with starting new businesses or growing existing enterprises. Those entrepreneurs’ top needs, said Mark Delisle, the centers’ state director, are guidance and coaching — to refine business ideas and develop business plans — and access to capital.
“A lot of people have a great idea for a business, but they really don’t know how to run a business,” Delisle said.
According to the U.S. Small Business Administration, the overwhelming majority of Maine enterprises — more than three quarters (about the same ratio as the U.S. as a whole) — are so small they’re considered “nonemployers.” Of those firms with employees, 62.5 percent have fewer than five, compared with 62.1 percent nationally, according to the U.S. Census Bureau.
“A lot of the people in Maine who are running micro-businesses aren’t interested in growing,” Delisle said. “They’re not interested in running Facebook. They’re not interested in taking it to be 100 employees. They don’t want to spread themselves thin.”
Generally, resources and assistance are available to those just starting out with a business idea, according to Delisle. Then, there’s help for entrepreneurs when they’re ready to commercialize the products they’re developing. The stage in between is called “The Valley of Death.”
“It’s difficult to find angel investors,” Delisle said. “It’s high-risk. There’s been no proof of concept or commercialization.”
Some resources are emerging for that stage of business development. The Maine Legislature recently passed a measure that allows small businesses to raise capital by selling equity through crowdfunding platforms. Startup accelerator programs that allow small businesses access to office space, expert mentors and intensive business development support for short periods of time are also becoming more common. The Maine Center for Entrepreneurial Development’s Top Gun program is an example.
The small businesses at the next stage that are looking to expand, and have the capacity and willingness to take on additional debt to grow, can benefit from the programs in line to receive funding from the $73 million bond package. “Those are good programs,” Delisle said. “It’s important to recapitalize some of them that have run out of funds.”
Politics, finances, time lag
It’s been nearly four years since Maine voters considered a bond package aimed specifically at helping small businesses expand and boosting research and development.
The last time the Maine Legislature contemplated a bond package aimed specifically at helping small businesses, in 2012, it was a proposal to provide the Maine Technology Institute with $20 million to award to businesses on a competitive basis for research and development and commercialization of products.
LePage vetoed that bill, and the Legislature — then Republican-controlled — upheld the veto.
At that point, Maine lagged the nation in total spending on research and development. According to the Maine Development Foundation, Maine ranked 45th in 2010, spending 1 percent of its gross domestic product on research and development. (The national average was 2.6 percent; the New England average was 4.1 percent.) Maine also lags New England and the nation in research and development spending by industry, as opposed to spending by colleges, universities and nonprofit organizations.
If the full Legislature and LePage agree to send the bond package to voters in November, and voters approve it, it will take some time for that money to become available to businesses, said Valentino, the state senator.
“This bond is needed now because of the time period when the money becomes available,” she said. “We can’t just wait until next year to see what the economy does or to see what administration is in place. Knowing how long this takes, we need to be ready.”
Matthew Stone is BDN opinion page editor.