NCInnovation won’t get $1.4 billion, but new nonprofit still sees plenty in budget plan

NCInnovation, a new nonprofit that seeks to boost North Carolina’s economic competitiveness, is poised to receive $500 million in public funds over the next two years according to a draft of the state budget obtained by The News & Observer.

The 3-year-old nonprofit aims to bridge what it perceives as a financial gap preventing UNC System research projects from growing into revenue-generating businesses.

Under the budget draft, NCInnovation is slated to receive $250 million in the current fiscal year and another $250 million in 2024-2025 so long as it meets certain requirements, including setting up four regional innovation hubs. NCInnovation plans these hubs to be located at UNC-Charlotte, North Carolina A&T University, East Carolina University and Western Carolina University.

Each year, the organization must provide outcome data to the General Assembly, including the grants it awards and the number of jobs these grants created.

“The next step is to get to work translating university research into jobs,” Pat Ryan, a spokesperson for the nonprofit, said Tuesday.

NCInnovation had initially asked for $2.5 billion over 10 years, and the budget proposal the state Senate released this spring included a one-time payment of $1.425 billion. In contrast, the House budget and that of Gov. Roy Cooper proposed giving the organization $50 million. The $250 million a year in the current proposal would put NCInnovation on pace to receive its original request.

A vote on the leaked budget draft is expected any day, with Republicans holding veto-proof supermajorities in both chambers.

“What’s within the leaked budget document reflects what NCInnovation understands to be the agreements that legislators worked out,” said Ryan, who formerly headed Senate leader Phil Berger’s communications team.

Big business backers

At $500 million, NCInnovation will award grants to researchers within the UNC System, which includes 16 public universities and 58 community colleges.

The budget caps the nonprofit’s spending at $50 million in its first year and $90 million the next. NCInnovation will select an investment firm to manage the remainder as an endowment. The General Assembly reserves the ability to dissolve the organization and transfer any assets acquired with taxpayer dollars into the state’s General Fund. NCInnocation will not take equity in any of the academic research it funds.

“We’re talking about intellectual property that the state has already invested in at some level,” NCInnovation CEO Bennet Waters told the N&O in June. “The research has been conducted by essentially state employees, faculty members and researchers at our universities. They’re developing this IP in state-owned buildings.”

North Carolina has 16 public universities and 58 community colleges.
North Carolina has 16 public universities and 58 community colleges.

NCInnovation leaders cite a December 2021 study by the North Carolina Office of Science, Technology & Innovation that ranked the state near the middle of the pack nationally by innovation metrics despite its top marks for research and development.

Under the budget draft, its board will have 13 voting members, eight of whom are to be appointed by the General Assembly — four by each chamber. The organization will choose the remaining five members. There is no role for the governor.

A controversial proposal

NCInnovation has had the backing of major businesses in the state, including Bank of America, Wells Fargo, Duke Energy, Blue Cross Blue Shield NC and Martin Marietta. Kelly King, the former CEO and chairman of Truist Bank in Charlotte, serves as board chair.

The budget will require NCInnovation to raise at least $25 million in private contributions within four years.

NCInnovation backers believed North Carolina lagged its rivals in commercializing public research. On its website, NCInnovation displays the public-private partnerships of five other states, including Ohio’s $2.3 billion “Ohio Third Frontier” program. Another is Georgia, which since 1991 has allocated $690 million to its Georgia Research Alliance.

The other states shown are Massachusetts, Texas and Kentucky. Underneath these state profiles, the organization asks, “At the speed of innovation — will NC be left behind?”

NCInnovation, and its lofty price tag, have split state conservatives. While the GOP-controlled House and Senate appear to have settled on funding, the right-leaning think tank John Locke Foundation remains opposed to the project.

“If I was a legislator, I would not support this,” John Locke President Donald Bryson said Tuesday.

Compared to the earlier Senate budget proposal, Bryson believes the state is guaranteeing a clearer direction for the nonprofit, including greater public transparency rules.

The proposed Senate budget permitted NCInnovation to more broadly sidestep public records requests, but the current budget requires the organization to release information within 25 business days so long as doing so would not jeopardize the confidentiality of intellectual property.

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