Program That Helped Transform Lehigh Valley Economy Faces Challenges
A Look Ahead to the New Year
December 31, 2009
Copyright © 2009, The Morning Call
by Frederick J. Beste III
In the 25 years that I”ve lived in the Lehigh Valley, there has been a massive transformation of the local economy from a reliance on Fortune 500-based companies to entrepreneur-based firms. Gone today are Bethlehem Steel, Mack Trucks (production) and Union Pacific. In their place stand Computer Aid, Fisher Clinical Services, International Quantum Epitaxy, Digestive Care, Innovative Control Systems, OraSure Technologies, Infinera, and CICLON/Texas Instruments-Lehigh Valley, among many others. And coming off the launching pad are Viddler, Saladax, International Battery, GrantAdler, XiGo Nanotools and many more.
Without this transformation, the Lehigh Valley would have been economic toast. (President Obama reminded us all just last month that small businesses create 65 percent of new jobs).
How did this transformation happen? A huge part of the answer to that question is the Ben Franklin Technology Partners of Northeastern Pennsylvania, one of four Ben Franklin centers spread across the state.
BFTP funding is not an expenditure — it is an investment in both a literal and figurative sense.
Established in 1982 under Gov. Dick Thornburgh, the centers were tasked with funding and otherwise assisting early-stage technology firms throughout the Commonwealth. Their goal was, and still is, to create highly paid, sustainable, technology-based jobs in Pennsylvania.
And that they have done. Over the course of its life, the investment activities of the northeastern center, which invests in 21 counties, have created 13,931 jobs!
Until this difficult year, the BFTP program has been meaningfully and steadily state-funded by Pennsylvania tax dollars under a succession of both Republican and Democratic governors and legislatures. It is an extraordinarily rare example of a long-term, bipartisan-supported program.
And what a payback the state has received for its investment! As a result of BFTP’s historical investments, from 2002 through 2006 alone, Pennsylvania has received more than $517 million in additional state tax revenues, which represents a 3-to-1 payback on its investment. Further, the jobs created pay 33 percent higher than the state average. As importantly, the four centers have been polishing their respective apples (skills) for more than a quarter century, and today, they are lean, mean, job-creating machines. The program is literally the envy of the other 49 states’ economic development arms.
And what of the future? Unfortunately, this jewel of a program is currently facing the gravest challenge of its life, because this year, the state budget’s theme was, essentially, everyone’s ox gets gored. In a decision that could damage Pennsylvania’s economy for years to come, the state agency (on whose board I sit) that funds the program was obliged to slash BFTP’s funding by 42 percent.
The practical implication of this move is to virtually eliminate fresh investment funds from the program. And so, for the first time in more than a quarter of a century, if you are a bio-tech, information technology, nanotechnology, or virtually any other flavor of technology entrepreneur, you may be shut out of launch funding by your local BFTP center. Moreover, to a very large extent, this will also prevent the centers from providing follow-on financing to promising portfolio companies first funded a year or two ago. In one fell swoop, the program is up a creek without a paddle, as are a large number of its most promising portfolio companies.
The looming failure to restore program funds to historic levels in next year’s budget would do massive damage to the value of this program. It has taken almost three decades to build that value — cutting off its ”oxygen” for a couple of years would be incredibly shortsighted and tremendously painful from an economic development standpoint.
Let us all hope that the governor and the legislature come to this conclusion before next summer. BFTP funding is not an expenditure — it is an investment in both a literal and figurative sense.
And a singularly exquisite one at that.
Frederick J. Beste III is the CEO of the general partner of Mid-Atlantic Venture Funds and sits on the board of directors of the Ben Franklin Technology Partners of Northeastern Pennsylvania.
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