Dr. Marty Pagel of the University of Arizona Cancer Center. Photo provided by University of Arizona Cancer Center.

What will $1 billion in research buy us?

1BILLION


It’s quite a return on investment. Put a dollar in the pot. Five years later, take home double the money and improve the quality of life for Arizonans in the process. The investment strategy worked in 2003, so why not try it again, especially after those who were part of the last deal have taken home $5 for every $1 invested?

That’s exactly what some Arizona officials are trying to do. The Jobs 2020 Proposal, or Senate Bill 1378, hopes to pump $1 billion into research. It is modeled after the successful 2003 plan that became a catalyst which helped Arizona earn a reputation as one of the nation’s fastest-growing bioscience regions.

In 2003, the Arizona State Legislature authorized $34.6 million per year for 23 years to fund new research facilities at all three universities. A total of $500 million was invested into research and development infrastructure at Arizona State University, Northern Arizona University and University of Arizona. In five years, the Arizona Board of Regents (ABOR) reports that $2.5 billion in direct economic benefit was pumped into the state’s economy. During that time, high-paying bioscience jobs grew substantially faster in Arizona than the rest of the nation.

Nationally recognized bioscience research institutes, facilities, companies, incubators and education programs cropped up throughout the state. Star scientists relocated to Arizona, bringing their labs and research grants with them. The result: A sector of Arizona’s economy has developed that is producing high-wage jobs and helping the state weather economic storms, while making the latest healthcare therapies and products available to Arizonans.

Now, ABOR wants to try to duplicate its success on a larger scale — double the scale. ABOR wants the Legislature to approve $1 billion in bond money to pay for new facilities in hopes of doubling the research grant funding pulled in by the three universities and attracting top researchers who are working to discover cures for diseases. It was high on the Regents’ wish list for the 2014 legislative session.

“Research at Arizona’s universities pumps $1 billion per year into our state’s economy,” said ABOR President Eileen Klein. “We believe that this is one of our greatest opportunities to broaden our economy, which is why the Arizona Board of Regents has set goal to grow the research output to $2 billion annually to make it one of Arizona’s largest economic segments.”


$1 BILLION INVESTMENT
With charts and numbers, smiles and plans, the Regents, university presidents, business groups and entrepreneurs went to the Legislature with a blueprint. State economy and business leaders want ABOR to invest the $1 billion into 10 new buildings, a half dozen major additions and renovations, and laboratory and research facility upgrades. With its proven track record, ABOR projects at least a $5 billion direct economic return. Some economic development officials project the indirect return could be greater than $7 billion in five years. “Top-flight research facilities attract talent, grants and equipment,” Klein said. Marking her first year leading the board, Klein said the enterprise plan is the key to the future of the $4 billion public enterprise that is the state university system. The three colleges have risen dramatically in the national stature as a result of the 2003 initiative. “The research and development program is needed to create new partnerships and ensure that we are turning out graduates to meet the needs of Arizona’s businesses,” said Klein. Out of the 2003 program, she said ASU research and development spun off more than 100 companies — many of which are major players in Arizona today.

SHOPPING FOR FUTURE
The three schools are not monument building or slapping lipstick on old facilities. The enterprise program directs the dollars to carry out a strategic research plan. “(University of Arizona) plans to double research expenditures and needs the space to house the researchers and facilities,” said Jennifer Barton, interim vice president for research. “Our strategic research areas are space sciences, water and the arid environment, defense and security, and biomedical research.” Barton said that UA’s proposed share — $450 million for five new buildings, four in Tucson and one in Phoenix — are tied to measured returns. The university’s share of the previous program generated $1.2 billion in economic impact, she said. Construction at ASU is projected at $400 million for biodesign, engineering and technology facilities. NAU plans a new biological sciences building and laboratory upgrades for $150 million.

REAPING THE REWARDS
“For businesses in Arizona, first there is the immediate multiplier from the $1 billion in new construction,” Klein pointed out. “Then there’s the expanded staff, the equipment and supplies, support services and the value of the research and development product.” There are real results, too, she said. “An undergraduate student working in an NAU public health program discovered the source of the cholera epidemic in Haiti following the earthquake. The result saved thousands of lives.” The direct economic value of construction alone, reported Ken Simonson, chief economist for the Associated General Contractors of America, will be $2.3 billion pumped back into the economy and 21,000 new and retained jobs. Barton said UA’s program will also generate spin-offs. “We saw a number of high-technology companies grow from the previous program.” Barton said that Arizona expects the new program to at least match the return on investment from the 2003 program. The Wildcats’ return to the state was $1.2 billion from its share of the $500 million program.

BUSINESS GETS THE RETURN
ABOR wants to finance the construction with state-backed bonds. Repaid from general tax revenues, the bond money will not impact tuition, operating budgets or dedicated revenue streams to the schools. The state will repay the bonds with the revenue generated by new tax revenues generated by the successful research partnerships, patent commercialization and technology transfers. Arizona’s universities are already heavily committed to state economic contribution. The three schools are involved with cutting-edge programs designed to connect entrepreneurs with patents ready for commercialization. The three universities have cut a process that normally takes years in other states to a matter of months. NAU and ASU run the AZ Furnace program, incubating businesses from concept to angel financing in 12 months — a previously unheard schedule for development. “The investment we’re making in research and development facilities is not just for researchers,” she said. “We work with companies to help businesses grow, expand and develop products using our technology and talent.” Officials now need to keep the conversation going to ensure that the $1 billion baby is a high priority on the Legislature’s 2015 agenda. With a new governor and shift in state leadership, the door is open for Arizona economic opportunity.

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