SB1688 HD1

SECTION 1. The legislature finds that small business dual use technology companies in Hawaii are vital to a diversified, new economy for our state. These enterprises seek to advance innovative concepts and new approaches to technology while fully leveraging existing facilities and infrastructure in Hawaii. Small, innovative high technology companies are providing critical new technology for the United States Department of Defense and are creating sustainable job growth in living wage jobs in Hawaii. Poised at the earliest stages of product development, small business dual use companies need public financial support to move their concepts to the next level on the road to commercial success. Supplemental funding from the State would accelerate vital technology development and commercialization. In addition, this funding would sustain company infrastructure development and foster additional employment opportunities for talented Hawaii scientists and engineers, while reducing risk of failure or the need to move these promising companies to the mainland to seek other funding opportunities.

The Hawaii Technology Development Venture and the National Defense Center of Excellence for Research in Ocean Sciences are programs that use the capabilities of Hawaii-based small businesses in performing high technology research and development related to current and future United States Departments of the Navy and of Defense programs. Both of these programs solicit proposals through annual competitive solicitations and all proposals are evaluated by an expert panel for technical merit, innovation, and value according to criteria published in the solicitations.

The legislature further finds that since 1989, sixty-three Hawaii companies have won two hundred sixty-two small business innovation research grant program awards. These grant awards brought approximately $60,000,000 in federal small business innovation research grant program phase I and phase II funds to Hawaii. In addition, more than $58,000,000 in phase III small business innovation research grant program commercialization contracts has been awarded to Hawaii companies. For every state dollar invested in the program, Hawaii companies attracted nearly $15 in federal small business innovation research grant funds or nearly $30 for every state dollar invested when phase III funds are included.

The purpose of this Act is to build on these successes and establish a research and development follow-on funding program for Hawaii-based small businesses that received federal funding through the Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences.

SECTION 2. (a) Notwithstanding the requirements of chapter 42F, Hawaii Revised Statutes, there is established in the Hawaii strategic development corporation a research and development follow-on funding program for Hawaii-based small businesses that received federal funding through the Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences.

The purpose of these awards shall be to:

(1) Provide accelerated economic development in the fields of science and engineering of defense-related dual use technology by providing follow-on funding to successful research and development projects for technology development, transition, and commercialization;

(2) Provide capital to sustain high growth new venture company infrastructure development to assist the enterprise toward commercial success;

(3) Promote high quality, high-income job opportunities for Hawaii's residents and graduates of Hawaii's educational institutions;

(4) Reverse the "brain drain" by allowing talented scientists and engineers to return home to living wage jobs in Hawaii; and

(5) Keep the high technology companies in Hawaii by limiting the need to seek out-of-state venture capital, which dilutes local ownership.

(b) The corporation shall administer the research and development follow-on funding program. The Hawaii Technology Development Venture and the National Defense Center of Excellence for Research in Ocean Sciences shall subcontract with selected companies and provide program oversight.

(1) Show satisfactory performance in any projects funded through the Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences;

(2) Submit proposals to the Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences for follow-on funding in accordance with the respective program requirements; provided that a substantial portion of the work under the award shall be performed in the state;

(3) Submit a budget based on parameters set forth by the Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences;

(4) Execute agreements in accordance with existing Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences contracting requirements; and

(5) Submit reporting of project progress in accordance with existing Hawaii Technology Development Venture or National Defense Center of Excellence for Research in Ocean Sciences requirements.

(d) Moneys for the follow-on funding program shall be allocated as follows:

(1) Hawaii Technology Development Venture:

(A) For fiscal year 2007-2008, $ shall be expended for research and development follow‑on funding awards; and

(B) For fiscal year 2008-2009, $ shall be expended for research and development follow‑on funding awards;

provided that in each fiscal year, $500,000 shall be expended for project oversight of program awardees, and technical and business support services to awardees of both Hawaii Technology Development Venture and National Defense Center of Excellence for Research in Ocean Sciences; and

(2) National Defense Center of Excellence for Research in Ocean Sciences:

(A) For fiscal year 2007-2008, $ shall be expended for research and development follow‑on funding awards; and

(B) For fiscal year 2008-2009, $ shall be expended for research and development follow‑on funding awards;

provided that in each fiscal year, $200,000 shall be expended for project oversight of program awardees.

(e) The Hawaii Technology Development Venture and the National Defense Center of Excellence for Research in Ocean Sciences department shall submit reports to the corporation no later than sixty days prior to the regular session of 2008, and annually thereafter until all moneys have been expended, on the activities and expenditures of the follow-on funding program.

The corporation shall submit the reports of the Hawaii Technology Development Venture and the National Defense Center of Excellence for Research in Ocean Sciences to the legislature no later than twenty days prior to the regular session of 2008, and annually thereafter until all grant moneys have been expended on the activities and expenditures of the follow‑on funding program.

SECTION 3. There is appropriated out of the general revenues of the State of Hawaii the sum of $ , or so much thereof as may be necessary for fiscal year 2007-2008, and the sum of $ , or so much thereof as may be necessary for fiscal year 2008-2009, for a research and development follow-on funding program for Hawaii-based small businesses that received federal funding through the Hawaii Technology Development Venture or the National Defense Center of Excellence for Research in Ocean Sciences; provided that the moneys shall be allocated pursuant to subsection (d) of section 2 of this Act.

The sums appropriated shall be expended by the Hawaii strategic development corporation for the purposes of this Act.

SECTION 4. This Act shall take effect on July 1, 2034.

THE SENATE	S.B. NO.	1688
TWENTY-FOURTH LEGISLATURE, 2007		S.D. 1
STATE OF HAWAII		H.D. 1