R&D on the rise at Milwaukee-area universities

A recent Public Policy Forum report looked at the impacts university research can have on local economic development and presented several models that could help to expand technology transfer in southeast Wisconsin. We found that while coordinated infrastructure is needed to convert research into new businesses and jobs in the local economy, the impact on local economic development is also related to the level of investment in research.

New data from the National Science Foundation on total university research and development spending reveals positive trends for Milwaukee. Four Milwaukee-area universities combined to invest $281 million in research and development in 2010, up from just over $100 million in 2000. In addition, while the collective research investments at Milwaukee institutions are still far lower than the over $1 billion spent by UW-Madison, which ranks third in the nation in research spending, Milwaukee-area universities collectively increased research spending at a significantly faster rate than UW-Madison over that time period.

The table below shows the growth in R&D expenditures at Milwaukee, Madison, and Chicago universities over the past 20 years, as well as the national rank for each institution on that measure in both 2000 and 2010. The Medical College of Wisconsin has more than doubled its R&D expenditures since 2000 and now is poised to become one of the top 100 research institutions in the U.S. UWM has made large gains as well, more than tripling its R&D expenditures since 2000.

Source: National Science Foundation – National Center for Science and Engineering Statistics

The following table shows the total R&D spending at Milwaukee, Madison, and Chicago universities since 1990. The collective investments of Milwaukee’s universities have grown from 18% of that of UW-Madison in 2000 to 27% in 2010. As a group, Milwaukee’s universities have expanded research spending at a faster rate than Chicago’s universities as well.

It will be interesting to track these investments over the next 10 years, especially in light of UWM’s major research and development push, which includes expanding the Great Lakes Water Institute, developing the new Innovation Park in Wauwatosa, participating in the water research and business accelerator at Reed Street Yards, and planning a new interdisciplinary research center for UWM’s main campus.

Due to the highly collaborative nature of many research efforts, a rising profile for Milwaukee universities could have compounding affects, as Milwaukee researchers become more attractive partners for research efforts taking place at UW-Madison, at universities in Chicago, and beyond.

Of course, new research facilities and more research dollars will not automatically provide substantial benefits to the local economy. As we found in our report, Technology Transfer in Southeast Wisconsin, the ability of entrepreneurs to develop new businesses from university research, and the channels by which to do so, are the other crucial elements.

Maxmizing the local economic benefits of academic research

This afternoon the Public Policy Forum takes up the topic of the economic impact of academic research at our Viewpoint luncheon. One specific way in which research leads to job creation and business development is via technology transfer – the legal process in which new discoveries are patented, marketed, and licensed to commercial manufacturers. Southeast Wisconsin is home to several academic research institutions, each of which goes about technology transfer independently, for the most part. A new Forum report to be presented at the luncheon today examines whether greater collaboration among the region’s research institutions is needed to maximize the local economic impacts of technology transfer.

Our analysis finds that there are three models that might be considered by academic leaders to enhance collaboration in technology transfer and potentially augment the effectiveness of existing efforts:

• Joint Office of Technology Transfer
  A joint office of technology transfer could potentially result in greater expertise in economic development practice for the participating institutions, as well as economies of scale. However, a joint office may stretch the resources of technology transfer officers to the point that some institutions may experience reduced levels of service. Equitably funding a joint office to serve public and private institutions also would be challenging.
• Joint Infrastructure for Informal Technology Transfer Activities
  Currently, much of the technology transfer work performed by academic institutions is of the informal variety - building awareness of academic research projects by industrial researchers and investors through networking and partnering. At the federal level, this work is performed by a permanent consortium of the federal research labs. A similar consortium of local institutions could be created and charged with raising the profile of translational research for local industry. Each participating institution would have to trust, however, that its financial contributions to the consortium would eventually result in benefits for its researchers.
  
• Joint Economic Development Entity
  We found four different types of collaborative economic development agency models aimed at increasing the local economic impact of academic research. All are aimed at encouraging and supporting the transfer of technology to local industry and start-ups, but each does so a little differently. The biggest hurdle for this model is sustainability - a previous, state-funded, southeast Wisconsin economic development effort, TechStar, proved unsustainable.

In addition to considering the creation of a new full-fledged collaborative infrastructure based on one of the three models above, the region's research institutions could consider collaborating on more targeted strategies to ensure that their research positively impacts the local economy:

1. Expand the UWM-MCW First Look Forum to other research institutions—Offer more researchers the opportunity to participate in these events designed to connect academic researchers to investors and industry.
2. Jointly offer start-up support or an entrepreneur-in-residence program—Collaborate to ensure local researchers have the opportunity to be educated about commercializing technology through company formation, mentored through the technology development and venture formation process, and connected with outside resources that can provide services, advice, funding, and management expertise.
3. Jointly raise funds for pre-seed grants—Expand the UWM Catalyst Grant program to other research institutions by working together to raise additional funds from foundations and industry.
4. Utilize a joint tech transfer advisory committee—Maximize local resources by forming a joint advisory committee of investors and industry leaders to advise on patenting decisions, particularly those arising from research projects conducted collaboratively by two or more CTSI institutions.
5. Create a local industry database—Provide researchers at all local institutions with data about industry needs and interests, as well as contacts, by jointly creating and managing a local industry database.
6. Host clinician informant panels—Increase awareness among researchers who are not also clinicians by jointly hosting opportunities for discussion of clinical problems in need of solutions.

It is clear that the region’s academic research institutions have yet to capture the full economic development potential of their research. By collaborating more closely to identify local discoveries that fill gaps in the global market, and by working together to help create or grow local players in that market, academic leaders could take better advantage of their rapidly emerging research prowess.

Metrics for boosting educational attainment in Southeast Wisconsin

Recognizing that a prosperous metro Milwaukee depends on an educated workforce, a new Talent Dividend Initiative has emerged in Milwaukee to boost regional educational attainment. The initiative - which is comprised of workforce development, economic development, and educational organizations across southeast Wisconsin - has set its sights on increasing the percentage of adults in the region with four-year college degrees by a full percentage point by 2013.

The initiative grew from a campaign launched by CEOs for Cities (a national network of urban leaders) based on their research suggesting that a one percentage point increase in the number of bachelors degree holders in a metro region can produce a $763 increase in annual per capita income. In southeast Wisconsin’s seven counties, CEOs for Cities estimates that increasing bachelors degree attainment from the current level of 28.7% of the population to 29.7% would produce 13,146 new degree holders and a resulting “talent dividend” of about $1.5 billion annually.

With that goal firmly established, the local initiative is considering two questions:

1. Where should resources be targeted to most effectively attack regional educational attainment?
2. How can the success of these strategies be measured?

The Public Policy Forum was commissioned by the Regional Workforce Alliance's WIRED Initiative to help answer those questions. A report we released today, entitled "Educational Attainment in Southeast Wisconsin," provides an overview of the region's educational pipeline from preschool to college, noting that the majority of new degree holders will come from the 525,000 students already engaged in the pipeline. It contains a series of metrics that provide insights into how the various points of the pipeline are performing and how progress can be assessed. The report also cites several opportunity points for boosting student success and attainment, including:

• Developing college-going behaviors among high school students. Our report finds that while 55% of high school graduates plan to attend a four-year college and 19% of graduates plan to attend a technical college, 17% are undecided about their post-high school plans. Programs to increase the number of college-bound students might set their sights on these undecided students.

• Re-engaging adults who have earned some college credit, but have not completed a degree. More than 20% of the region’s non-degreed adults have attended college at some point and may be interested in continuing their education. Identifying those who are just a few credits short of earning a degree would be the logical starting point.

• Increasing student transfers between two-year and four-year colleges and universities. Completing the degree requirements at a two-year college before transferring to a four-year college can help students reduce the cost of earning a degree. More data are needed, however, to understand and track college transfer trends in the region.

Finally, at all points in the pipeline, strategies to assist minority students offer a substantial opportunity to increase regional degree holders. Currently, just 12% of African-American and 10% of Hispanic residents in the region hold a bachelors degree or higher, compared to 31% of white residents. This is a logical focus for retention strategies, as minority student enrollment in higher education is on the rise, especially in the region’s 2-year institutions.

The Talent Dividend Initiative plans to regularly update the metrics presented in the report to measure the effectiveness of specific strategies toward the overall goal. The full report can be accessed here.

MATC facing growing demands, shrinking resources

Today, the Forum released the third in its series of financial reports on local taxpayer-funded entities in Metro Milwaukee: a comprehensive fiscal assessment of the Milwaukee Area Technical College (MATC). This report uses the same fiscal monitoring methodology as 2009 reports on Milwaukee County and the City of Milwaukee, which were recognized with an award for "most effective education" earlier this year from the Governmental Research Association.

Like the city and county reports, the report on MATC paints a somewhat alarming picture. It finds a local institution that has taken on increased importance in light of the economic downturn and community-wide efforts to increase the number of college degree-holders, but one that has been hit hard by the recent decline in property values.

Key findings from the MATC fiscal assessment include:

• Property tax revenues comprise roughly 60% of MATC's budget, causing it to rely on the property tax more than most local governments and school districts. MATC's budget has mirrored the ups and downs of the real estate market, with revenues climbing much faster than the rate of inflation from 2005 to 2009, but falling in the next two years.


• MATC has seen a steady decline in revenue from the state. The college was able to weather this decline when overall revenue growth was strong, but faces difficulty doing so in today's revenue climate.


• Student charges have been the college's fastest-growing revenue source of late, with tuition and fees rising nearly 40% since 2005, raising questions about impacts on student access.


• Fringe benefit and salary increases were responsible for about three-quarters of the college's expenditure growth during the five years under review, with health care expenditures rising twice as fast as those at the City of Milwaukee and Milwaukee County.


• A newly developed imbalance between ongoing expenditure needs and revenue capacity will continue to grow without substantive budgetary corrections, reaching a projected $11 million to $62 million within the next five years.

This turbulent financial picture leaves MATC little choice but to examine current levels of employee staffing, pay and benefits, which are quite robust based on comparisons with state and national peers. For example, the report finds that MATC ranks first among a group of 85 national peers in operating expenses, salary expenditures and fringe benefits expenditures per full-time equivalent student.

The report cautions, however, that any significant expenditure reductions must weigh impacts on the college's academic quality and its capacity to meet recent double-digit increases in enrollment. It also suggests that college leaders step up efforts to establish clear performance goals and collect performance data as part of the effort to address difficult budget issues.

Finally, the report offers an opportunity to compare the fiscal practices and condition of MATC - which operates as a local authority and is governed by an unelected board - with local governments operating under traditional elected models. It notes both similarities and differences in the manner in which these entities have responded to common fiscal challenges, and offers insights into what this tells us about the debate over government structure in our region.

A full copy of the report can be accessed here, and our media release here.

Financing Milwaukee's innovation pipeline

The announcement that the University of Wisconsin-Milwaukee Research Foundation inked a potentially lucrative licensing deal with a local drug manufacturer is a prime example of the important role that public dollars play in spurring innovation and economic growth in the Milwaukee region. In this case, the initial public investment came in the form of a $1.2 million 5-year federal grant from the National Institutes of Health (NIH) to fund research by UWM Professor James Cook. The investment paid off in the discovery of a new drug compound to treat alcoholism.

This breakthrough is welcome news not only for its potential health benefit, but also for the economy of the Milwaukee region and the state of Wisconsin, which has historically done a poor job in translating NIH grants to economic gains. A national study released this week confirms an above-average level of NIH dollars flowing into Wisconsin but a below-average return on those dollars in the form of new business activity.

Universities aren't alone in their use of public dollars to spur innovation. Local governments are beginning to delve into the innovation investment game. One recent example is the City of Milwaukee's approval of a $225,000 forgivable loan to C&D Technologies to develop a new line of lightweight lithium-ion batteries. These city funds would mix with federal dollars to finance the development of this new product line for military use.

Other cities are also creating funds that directly invest in innovative private companies. New York City and its partners have created the $2 million NYC Seed fund which will invest up to $200,000 in nascent NYC-based tech companies to aid them in the development of new ideas and products. Click here for information on other cities that have created similar funds to boost innovation and entrepreneurship.

In the past, the public sector's role in economic development has largely been to set the stage for growth (solid infrastructure, educated workforce) and then get the heck out of the way (streamlined regulation). This mindset is slowly changing. Today, public dollars are used directly to fuel innovation and economic development.

As with any investment, there is risk. However, with adequate due diligence and strategic focus, the investment of public dollars into research and development projects can be a calculated risk with a potentially large payoff to metropolitan economies.

UWM a good fit for downtown?

A new advocacy group, UWM Downtown, has been formed to encourage the University of Wisconsin - Milwaukee to expand its proposed engineering campus in downtown Milwaukee instead of the university's favored suburban location on County grounds in neighboring Wauwatosa. The story was covered in last Wednesday's Milwaukee Journal Sentinel.

Downtown advocates cite student convenience, plenty of vacant commercial space to absorb spin-off companies, the development of a possible engineering cluster with Marquette and MSOE, and the idea that an "urban campus" would be more environmentally sustainable. UWM leadership proposes the Tosa option in large measure because of the potential research synergies that could be achieved with the nearby Medical College, Froedtert Hospital and GE Healthcare.

Both sides agree that university expansion equals economic expansion. However, new research from the W.E. Upjohn Institute for Employment Research is a bit less sanguine. The research does conclude that "if the costs of inducing an expansion in higher education or medical services is sufficiently low, an economic development strategy that targets these industrial sectors may offer net benefits." In other words, keep an eye on costs because the economic benefits of university development are real but the margins are tight.

The cost of developing the Tosa site vs. a site in downtown Milwaukee is a crucial factor that has yet to receive much scrutiny. The UWM Downtown group suggests that the following sites be considered for the new engineering campus:

• The Brewery near Marquette and I-43 – 750,000 SF of potential space.
  
• MacArthur Square in front of the County Courthouse – 750,000-1,000,000 SF of space could be made available.
• Park East – 14 acres west of the river and 12 acres east of the river to be developed.
  
• Haymarket area just north of the Park East corridor– 45 acres of vacant land or deteriorated/obsolete buildings for development.
  
• Schlitz Park on the river just north of downtown – Approximately 200,000 SF of space available.
• Central Business District – 2,200,000 SF of vacant space available.

Costing out specific redevelopment options is a critical next step in UWM Downtown's pursuit of an urban engineering campus. After all, urban redevelopment is notoriously difficult to do on the cheap, as land assembly, land clean-up and demolition costs eat into project returns and complicated deals. The burden of proof will be on UWM Downtown and its backers to prove otherwise.

This is not to say that the development of the Tosa site will be any less costly. UWM Downtown cites potential resident opposition to university expansion, tricky site development issues, infrastructure needs and access issues. On the issue of access, do we need to consider the potential cost of additional transit infrastructure (express buses, bus rapid transit, light rail) to efficiently move students between the east side and Wauwatosa?

The Tosa site does have one distinct advantage: it's already off the tax rolls. To the extent that university expansion downtown would happen on tax-rolled land is an importatnt issue for the City of Milwaukee to consider if it were to welcome any downtown university expansion. As Mayor Barrett himself points out, approximately one-third of the city's tax base is currently tax-exempt. This has, no doubt, limited the city's ability to raise revenue to pay for needed services. Any cost increases then get shifted on to homeowners and other taxable commercial and manufacturing property.

Researchers have not been shy about studying the relationship between cities and universities ("town and gown"). New research from the Lincoln Land Institute reviews the fiscal impact of large nonprofit landowners on the finances of the City of Pittsburgh - a peer city which also has tax exempt property as one-third of its tax base. Researchers note that "the concentration of tax-exempt properties in the urban core has had a measurable impact on the tax base and overall fiscal capacity of the City of Pittsburgh" and that "any conclusions here must focus on alternative sources of funds for city revenue." Other town and gown research from the non-partisan Pennsylvania Economy League (PEL) - a peer group of the Public Policy Forum - also warns of fiscal strain of educational facilities on their host community.

None of this is to say that the idea of an urban research campus isn't an intriguing idea. However, the suggestion here is that the UWM downtown advocates may need to start making their case based on real cost advantages. Additionally, the possible negative revenue effects of a downtown campus on local government finances (service costs exceeding revenue growth) need to be addressed. Annual cash payments to the City of Milwaukee could be an option but would also simultaneously increase the cost of any proposed downtown project.

With political and financial resources aligned for UWM expansion in Tosa, the new UWM Downtown group faces daunting odds in convincing leadership to change course away from Tosa and instead direct expansion efforts into Milwaukee's downtown core. But more important than the project's political odds, would the expansion of a large tax-exempt institution make financial sense for two of our regions largest institutions: UWM and the City of Milwaukee? Research would suggest that while a downtown research campus could spawn regional economic success, it could also create local fiscal distress.

Is the value of higher education diminishing?

A new study released by the Chicago Federal Reserve Bank attempts to find out why the economic value of an additional year of education flat lined over the past ten years. The explanation given is a robust increase in wages paid to low-income workers during the roaring 90s. The author speculates that this trend will continue if the recently proposed minimum wage increase becomes law.

Despite the flat line, having a college degree still nets you double the annual average income of a high school graduate.

Could this signal a softening of the divide between the rich and poor? Perhaps, but the author notes that low-wage earners could have been particularly burdened by a loss of health benefits compared to their high-wage counterparts over the past ten years. Accounting for benefits, this "flat line" effect might disappear entirely.