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Editorial: R&D credit helps state attract, grow businesses

The Legislature, among its many underachievements, did nothing to sustain the state’s efforts to encourage growth of the biomedical or high-tech industries in Washington.

In fact, lawmakers left Olympia without renewing the research and development credit against the business and occupation and sales taxes, and they sucked away the last sustenance for the Life Sciences Discovery Fund.

The R&D credit expires at the end of the year. More than 2,000 companies have used the credit against the B&O tax since it was instituted in 1994, and about 400 have used the sales tax credit. The lost revenues through 2012 totaled about $950 million, but the investment the credits generated came to about $8 billion, and repaid the state several times over in overall tax collections.

Yes, Boeing Co. is a beneficiary, but so are hundreds of startup companies for whom the credit is critical.

Most other states offer similar credits. Letting Washington’s expire will send a bad signal to companies considering new plant locations. Its renewal should be one of the next Legislature’s priorities.

The fate of the Life Sciences Discovery Fund is discouraging, but the program that sponsors groundbreaking biomedical technology and methodology has itself probably been living on borrowed time.

The visionary fund was created 10 years ago to distribute Washington’s share of the tobacco lawsuit settlement to health care. Fund officials solicit projects for funding, which are evaluated based on their science and potential economic payoff. About $96 million has been pledged to 79 individuals and companies, more than half of it very early in the development process.

Fund officials say the state awards primed the pump for $445 million in private and government funding, created 3,000 jobs directly or indirectly, and saved $67 million in health care costs. Lives have been saved because of widespread adoption of a surgical checklist that was one of the fund’s early success stories.

Despite the acknowledged payoffs, the Legislature swept all but $18 million in fund resources into the general fund budget, and declared no funding would be available in the next budget biennium.

Unless there is a change of heart, or a veto of fund-related budget lines by Gov. Jay Inslee, the fund will be out of business.

Fund Executive Director John DesRosier says legislators don’t deny the fund’s stimulus value, but they add that the state Supreme Court’s McCleary decision is forcing them to put education funding first, second and third. The Senate was prepared to kill the program as of June 30; the House is letting the fund fulfill the commitments already made.

The fund, he notes, attracted millions in add-on private investment, and also partnered with local efforts like the Health Sciences and Services Authority to help support Spokane’s effort to become a biomed hub.

Inslee made biotechnology one of the foundations for his economic growth plan. Whether he chooses to veto the budget provisions for the life sciences fund will test that commitment.

He should. And a push next year for renewal of the R&D credits should be on his agenda, as well.

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