Jun 21, 2023 - News

A N.C. nonprofit is angling for $1.4 billion in the state budget

Illustration of a dollar sign etched into the tip of a fountain pen.

Illustration: Maura Losch/Axios

Tucked into one version of a nearly 400-page North Carolina budget proposal is a massive allocation that some legislators, lobbyists and staffers have whispered concerns about in recent weeks: $1.4 billion for a new nonprofit led by business and higher education heavyweights in the state.

Why it matters: It's the biggest one-time allocation to a non-state entity in the state's history, the state budget and management office told Axios, and a major chunk of this year's budget for an organization without much of a track record.

Driving the news: The nonprofit, NCInnovation, originally asked state lawmakers for $2.5 billion — or $250 million for 10 years — and hired nine people to lobby on its behalf.

  • It plans to use that funding to bolster innovation in North Carolina by commercializing homegrown ideas and research, especially those that help the state's rural areas, its CEO Bennet Waters told Axios last month.
  • The organization's leaders say it could create tens of thousands of jobs.

How it works: Waters claims that the state is lagging behind in innovation because it's not supporting the valuable research being created at its universities — specifically those outside of the Triangle and Charlotte.

  • NCInnovation, he said, would identify university research that could be used commercially and then use grants to help researchers bring the ideas to market.
  • "We would kind of cover this 'valley of death' from the end of federal funding to the beginning of commercial investment," he said.

Some universities, like UNC and N.C. State, already have internal offices that do this, but many others do not, and Waters believes that creating a connected ecosystem throughout the state would be more effective than each school going alone.

  • UNC, for example, invested heavily in its commercialization office over the past decade under the leadership of Michelle Bolas, which led to dozens of new startups, like the gene therapy company AskBio in Research Triangle Park.
  • Bolas is now the chief innovation office for NC Innovation.

Zoom in: NCInnovation's hope is that, by working with universities in eastern and western North Carolina, it can bolster economic development in more rural parts of the state that have seen population declines as major cities' populations balloon and better compete with other states that the organization believes have a leg up in commercializing research.

The other side: Several lawmakers have quietly floated pilot funding for the nonprofit in its initial stages, to ensure the state's investment is worthwhile. Others have openly raised questions about the allocation.

  • “We are talking about 1.4 billion tax dollars.  It’s not only appropriate to have questions, it’s in the best interest of our state to ask them,” Republican state Sen. Jim Perry told Axios.
  • “After reading the legislation and their pitch book, I have even more. That is part of the job, right?”

Yes, but: NCInnovation argues those at the helm of the organization have impressive resumes that will ensure its success.

  • Its board is chaired by former Truist CEO Kelly King and has a slate of big-name members, like UNC System President Peter Hans, numerous state university chancellors and current and former business executives.
  • Senate leader Phil Berger also pointed to the UNC System's policy collaboratory, which funds and facilitates research and informs policymakers, as a sort of pilot for what NCInnovation plans to do.

Zoom out: NCInnovation has been quick to point toward other states that have distributed massive amounts of funding for similar programs.

Details: The state House and Senate structured allocations for the nonprofit slightly differently, with the House providing yearly appropriations of $50 million and the Senate's offering a one-time endowment.

  • "Our feeling was that we have a fairly robust amount of one-time money, and if we could go ahead and just get that funded on the front end," Berger told reporters Thursday, "it would not be something [that] would have to come back for additional appropriation."

What we're watching: The final amount lawmakers intend to grant NCInnovation will be unveiled when the budget is finalized in the coming weeks.

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