Ben Franklin Program Deserves to be Spared the Budget Axe

As reported in the Central Penn Business Journal:   November 26, 2010
by BY TIM STUHLDREHER tims@journalpub.com

For nearly three decades, Pennsylvania’s Ben Franklin Technology Partners program has pumped billions into the state’s economy by nurturing creative startup companies until they are able to attract private funding.  Ben Franklin clients create jobs, increase demand for other companies’ services and lay the groundwork for future growth, agency officials said. But recently, the program has fallen victim to the state’s fiscal woes.Ben Franklin’s budget was reduced from $52 million to $28 million two years ago, then pared last year to $17 million, said Steve Brawley, president and CEO of Ben Franklin’s central and northern Pennsylvania division. The state partly offset those cuts by allocating $10 million a year for four years in supplementary funding for alternative energy development, said Terry Singer, director of statewide affairs. That program is scheduled to end in June 2013.  Ben Franklin has four divisions statewide. The allocation for the 32 central and northern division counties is down to $4 million, Brawley said. If funding drops too low, Ben Franklin can no longer carry out its mission, Singer said. 

The single biggest obstacle to startup companies is the funding gap between seed money and venture capital, said Laura Butcher, executive director of the Hershey Center for Applied Research, a research park and high-tech business incubator in Derry Township. It is so devastating that companies call it “the Valley of Death,” she said.  That’s the gap Ben Franklin fills, Singer said.  That’s why, notwithstanding incoming Gov. Tom Corbett’s promise to close Pennsylvania’s projected $4 billion 2011-12 budget deficit without raising taxes, the Ben Franklin program deserves to be spared the budget axe, he said. The cuts are having “a significant negative impact,” Butcher said. Even as funding shrinks, applications for assistance are up, said Pam Martin, Ben Franklin’s south central regional director. “It’s an interesting squeeze,” she said.

In 1983, the state legislature founded Ben Franklin Technology Partners “as a statewide initiative to foster innovation and stimulate economic growth,” as the program’s website puts it. Set up under Republican Gov. Dick Thornburgh, Ben Franklin has long enjoyed bipartisan support, Singer said. Ben Franklin more than pays its way, he said. Studies show that for every $1 in funding, the state gets back $3.50 in taxes from directly related economic growth, he said. A 2009 study by the Pennsylvania Economy League, an independent public policy research group, found Ben Franklin added $9.3 billion to the state’s economy from 2002 through 2006. Between 2002 and 2006, Ben Franklin generated nearly 33,000 jobs in high-paying sectors, jobs that otherwise would not have existed, the study said. “BFTP is among the most widely known and emulated state technology- based economic development programs, with a national and international reputation,” the Economy League wrote. “BFTP creates immediate economic gains while also building a foundation for continued economic growth.”

In the midstate, Ben Franklin clients include AllPure Technologies Inc. in Adams County, Apeliotus Vision Sciences Inc. at the Hershey Center for Applied Research, and PIA-K Enterprises and York Laboratories, both in York County. Ben Franklin occupies a vital and unique niche in the funding chain for startups, Singer and Butcher explained. Startups often begin with just a few thousand dollars that founders raise from family or friends — even a second mortgage. That money usually doesn’t last long, yet the prospect of attracting venture capital is still months or years away. Events such as the dot-com bubble and the 2008 financial crisis have made venture money providers much more risk-averse, Singer said. “We’re the first source of capital for many young companies in Pennsylvania, companies that will grow up and become large job generators,” he said. The alternative energy funding stream helped cushion Ben Franklin’s budget cuts. When it ends, “that is going to be the moment of truth for us,” he said. “We’re on the precipice, I guess you could say.”

Ben Franklin officials have met with the Corbett camp, and Singer said he thinks the incoming governor understands the value of the program. Corbett’s campaign calls for creating a program called “Discovered in PA-Developed in PA” to smooth the path from university research to commercial application. It appears the program would complement the Ben Franklin mission, Singer said. Spokesmen for Corbett did not return calls seeking comment. It would be immensely short-sighted for Pennsylvania to have created an asset like Ben Franklin Technology partners then not reap the benefits, Singer said. “If we’re out of the picture, the whole pipeline is disrupted,” he said. Homegrown technology is vital to Pennsylvania’s economic future, Butcher said. The state has world-class universities and an ecosystem of existing technology companies — the ingredients needed for Ben Franklin’s funding to be effective, she said. “It’s so important for our long-term sustainability,” she said.