How Obama’s Budget Could Impact Entrepreneurs, Inventors, Manufacturers, and Researchers

On February 14th, President Obama sent Congress his 2012 federal budget proposal for consideration. With the 2011 federal deficit projected to be at least $1.5 trillion and the national unemployment rate lingering around nine percent, the White House’s top priorities are budget cuts and job creation.

Although not likely to pass exactly as outlined, the plan includes incentives and funding opportunities that support entrepreneurship, research and development, manufacturing, and clean energy. Here are some of the proposed opportunities that could have a direct, positive impact on entrepreneurs, researchers, inventors, and manufacturers in 2012. Entrepreneurship

• The new Innovation Fund would provide $200 million in guaranteed loans in 2012 and annually for the next four years. If passed, the fund will offer 1-to-1 capital matches to investors who work with companies trying to survive the gap between angel and later-stage financing.
• The new Impact Fund, also proposed at $200 million for 2012 and each of the next four years, would offer 2-to-1 capital matches to investors in high potential businesses in underserved markets.
• The New Market Tax Credits (NMTC) program attracts private sources of capital to underserved regions by providing tax credit incentives to investors in low-income communities. The 2012 budget proposes the expansion of the program from $3 billion to $5 billion.
• The 7(a) Loan Program assists small businesses with special requirements. For example, funds are currently available for loans to businesses that handle exports to foreign countries and businesses that operate in rural areas. The 2012 budget proposes $16.5 billion in loan guarantees for this 7(a) Loan Program, including $14.5 billion in term loans and $2 billion in revolving lines of credit.
• The Emerging Leaders initiative provides technical assistance to high growth, high potential companies located in distressed economic areas and connects them to regional business networks to accelerate their growth. Since 2008, the program has helped more than 600 promising small business owners across the country grow their businesses. More than half of the participating businesses have increased their revenue by more than $7 million, and nearly 60 percent have reported creating new jobs in their communities. The budget proposal includes $3 million of funding to continue this competitive grant program.
• Launched in 2010, the National Export Initiative educates small U.S. businesses about opportunities overseas and improves access to credit for those that want to export. The 2012 budget allocates $526 million to this program.
• The Regional Innovation Program supports cluster development and promotes innovation in distressed portions of the country by offering tax incentives for hiring and investments and by offering access to and preference in federal funding programs. The 2012 budget allocates $40 million to this new program.
• As currently proposed, the budget also incentivizes capital investment in small businesses by permanently eliminating capital gains taxes on investments in small business stock.

• In existence since 1981 the Research and Experimentation (R&E) tax credit, which is scheduled to expire at the end of 2011, incentivizes private firms to make investments in the research and development necessary to keep a pipeline of innovative products entering the marketplace. The credit is not permanent and has been extended on a temporary basis 14 times since its creation. The budget proposal includes a provision that makes the R&E tax credit permanent and expands the credit by about 20 percent.
• The National Science Foundation (NSF) is the primary source of support for academic research for most non-biomedical disciplines. The 2012 budget proposes an increase in NSF funding to $7.8 billion in 2012, or 13 percent more than the 2010 funding level. The 2012 budget proposal expands NSF’s efforts in clean energy research, advanced manufacturing, and other emerging technologies.
• The Department of Energy’s Office of Science focuses on discoveries and scientific tools that transform our understanding of energy and matter through research in areas such as nanotechnology, high-end computing, energy, and climate change. The 2012 budget proposal includes $5.4 billion in funding, 11 percent more than the 2010 funding level, for cutting-edge research and facilities.
• The Department of Commerce’s National Institute of Standards and Technology (NIST) invests in technological innovation through research, advanced measurement, and standards development. The 2012 budget proposes $764 million in funding, a 15 percent increase over the 2010 funding level to support laboratory research and facilities in areas such as advanced manufacturing, cybersecurity, interoperable Smart Grid devices, and nanotechnology.
• The budget proposal includes $32 billion for basic and applied biomedical research supported by the National Institutes of Health (NIH). Through the National Center for Advancing Translational Sciences and the Cures Acceleration Network, NIH will increase its focus on accelerating the development of treatments for diseases and disorders that affect millions of Americans.

• The Hollings Manufacturing Extension Partnership (MEP) provides small U.S. manufacturers with services, ranging from innovation strategies to process improvements, in order to help them create and retain jobs and increase profits. The 2012 budget proposes a 14 percent increase in funding for the MEP over the 2010 funding level to $143 million.
• The new Advanced Manufacturing Technology Consortia program is a public-private partnership that provides grants to form and fund industrial consortia to address industrial-driven technological challenges that no one company can address alone. The 2012 budget allocates $12 million to this new program.
• A new Workforce Innovation Fund could receive $380 million to award competitive grants for innovative workforce reform initiatives. The fund would be used to test and replicate innovative strategies that improve the skills and employment outcomes of individuals, particularly underserved populations.
• The Advanced Manufacturing initiative supports research related to sensor and model-based smart manufacturing, cyber-physical systems, smart buildings and bridges, and nano-manufacturing in order to generate discoveries that benefit advanced manufacturing. The 2012 budget proposes a 157 percent funding increase for this initiative over 2010, for a total of $190 million.

• Since 2009, the Advanced Research Projects Agency-Energy (ARPA-E) has funded projects designed to develop transformational technologies that reduce America’s dependence on foreign energy imports, reduce energy-related emissions, improve energy efficiency across all sectors of the economy, and ensure that the U.S. maintains its leadership in developing and deploying advanced energy technologies. The 2012 budget proposes $550 million for this program.
• The Agriculture and Food Research Initiative funds research on biofuels and renewable energy, as well as food and agricultural sciences. The budget proposes the expansion of the program to $325 million.
• The Bioenergy for Advanced Biofuels Program supports and ensures an expanding production of advanced biofuels by providing funding to eligible advanced biofuels producers. The 2012 budget proposes a 90 percent increase in funding for this program to $105 million.
• Through competitive grant opportunities, the Green Jobs Innovation Fund helps workers receive job training in green industry sectors and occupations and assists them in accessing green career pathways. The 2012 budget proposes doubling government contributions for this Fund.

Although the President’s proposed budget has yet to be passed by Congress, I remain hopeful that any final budget compromise, even during this tight fiscal environment, will result in increased investments in innovation and will include most, if not all, of the programs outlined above. I urge all of you to keep these proposed programs on your radar.

Leah’s primary focus as JumpStart’s Market Analyst is developing a deep understanding of the key challenges and opportunities facing entrepreneurs and early-stage companies. Using her experience leading research projects and framing problems to identify creative solutions, Leah works to build stakeholder relationships, ensure the growth and success of client and portfolio companies, and drive organizational strategies. Additionally, Leah brings her insights to life through communications and advocates for and connects entrepreneurs to additional capital and service resources beyond those provided by JumpStart.