Gov. Gregoire’s Baby, $350M Life Sciences Discovery Fund, Faces Possible Shutdown

4/8/09Follow @xconomy

[[Updated at 11:10 am Pacific with comment from Governor's spokesman]] One of the centerpieces of Gov. Chris Gregoire’s economic development strategy, the state’s 10-year, $350 million Life Sciences Discovery Fund, would either be gutted or essentially shut down by dueling budget bills under consideration by state lawmakers, Xconomy has learned.

This pot of money, which comes from the state’s settlement with tobacco companies, was established in 2005 by lawmakers as a way to strengthen Washington’s competitive standing as a research and development hotspot for biotech and medical devices.

But instead of steering the expected $65 million over the coming two-year budget cycle into life sciences R&D, the Senate’s Ways and Means committee has chosen to set aside just $38 million, a 41 percent cut, says Lee Huntsman, executive director of the Life Sciences Discovery Fund. The House Appropriations committee has taken an even bigger whack, leaving the fund with just $5 million to spend over the coming two-year period, while using the remaining $60 million to fill other holes in the general fund, Huntsman says. The discrepancies between the Senate and House versions are now being ironed out in conference committee, he says.

The state’s biotech industry enjoys a privileged position as a provider of high-wage jobs in an industry with growth potential, but it shouldn’t be too surprised to hear about cuts of this order as lawmakers are staring at a $9 billion budget shortfall. Senate Democrats are talking about laying off 8,000 state employees and educators and eliminating 10,000 slots for students at state colleges and universities. The Life Sciences Discovery Fund, which really started ramping up just last year, has invested in a variety of promising research projects for vaccines, heart defibrillators to treat cardiac arrest, and improved ways to deliver biotech drugs into cells. But it can’t claim to have discovered the next penicillin, and even in the best of times it would take years to show payoffs in new products, jobs, and regional prestige that such a program might be able to use to defend itself.

Huntsman isn’t in a position to lobby for his own agency, and he was very careful to keep his comments neutral about the lawmakers’ proposals.

“The Senate’s budget is a pretty severe cut. It’s well below what we expected to receive, but it’s still a significant appropriation,” Huntsman says. The House proposal is another matter. “It isn’t clear to me what you can do with that. On the face of it, you can’t be in the grant-making business at that level,” he says.

Gov. Gregoire championed the idea of using the tobacco settlement money for life sciences back when she first ran for Governor in 2004. Last fall, in the late October heat of her re-election campaign against Republican Dino Rossi, while the economy was crumbling, she reminded biotech executives that she went to bat for them in her first term to create the Life Sciences Discovery Fund and that she wanted their support again.

“I fundamentally want and believe we can be the epicenter of life sciences and global health,” Gregoire told a room of about 700 people who had gathered Oct. 28 at the Seattle Sheraton for the Washington Biotechnology & Biomedical Association’s annual meeting. “It’s within our reach if we stay focused.”

Gregoire’s first budget proposal in December called for the usual full appropriation for the Life Sciences Discovery Fund, says Pearse Edwards, in an e-mailed statement. Then the state tax revenue forecasts got much worse. Now Gregoire apparently sees the need to cut the biotech fund, although not too deep from the sound of it. “While she recognizes there will be cuts to all programs including the Life Sciences Fund, the Governor wants to make sure that the program has sufficient funding to be positioned to bounce back after the recession and that our return on investments is there for our families, our businesses and our future,” Edwards says.

The WBBA is hoping to see the Senate version prevail, with its $38 million allowance to the Life Sciences Discovery Fund over the next two years, says president Chris Rivera. “In light of some of the other budget limitations, it would be hard to say we shouldn’t contribute” to the cuts, Rivera says. “We all have to contribute, given the state of the economy we’re in.”

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