State government subsidies for businesses seeking — FEDERAL government subsidies ???

The logic behind stuff like this is just, just, just — stupefying:

North Carolina is a big defense state, with nearly 120,000 active duty and reserve personnel based here in the Army, Marine Corps, Air Force, Navy and Coast Guard, as well as National Guard. We are the fourth-largest state for warfighters. With civilian workers, we have around 140,000 Department of Defense folks.  The military contributes nearly $80 billion annually to our economy.

But we haven’t done as well with research and development military funding to boost young science and technology businesses.

We are an innovative state. The Department of Defense wants to do business with innovative companies and academics. That is the message from every general at every conference. But we don’t seem to be able to take full advantage of this. It has been difficult to pull together a concerted state strategy, even though report after report highlights the opportunities.

There’s a lot of activity, but it is disconnected, with no clearly designated hub responsible for sorting out priorities, building a consensus for a plan, pushing for resources and marketing North Carolina as a defense innovation state.

There’s an effort to change this, proposed by the North Carolina Board of Science, Technology & Innovation, a part of the state’s Department of Commerce. Last year,  a task force set up by the board recommended the creation of a new state-level champion to lead expansion of defense innovation, and that has evolved into the proposed North Carolina Defense Innovation Network.

Authorization and some funding for this got into the governor’s proposed budget earlier this year, and then some was included, sort of, in the House budget.  But it didn’t make it into the Senate version. And now a conference committee is working out differences between the House and Senate budgets.[…]

Okay.  The veto-proof “conservative revolution” on Jones Street is trying to spend a lot of money on wooing and propping up contractors seeking federal contracts and dollars.  Passing the tax money around and round. One big circular love-fest.


[…] The governor’s budget included $200,000 a year in recurring funding and $1 million in one-time funding. It would be under the direction of the science and technology board and run in consultation with the North Carolina Military Business Center’s  Defense Technology Transition Office (DEFTECH).  The NCMBC helps businesses get defense contracts –  the type of goods and services that make up typical military spending. DEFTECH focuses on helping smaller, innovative startups compete for the kind of R&D funds that the military is trying to spend, if companies can navigate the defense acquisition system, which isn’t easy.[…]

That’s right.  A state government entity helping you obtain business with the federal government.  *SIGH*

How about cutting taxes and regulations so real small businesses can actually catch a break out here?


[…] The House budget allocated $1 million in nonrecurring money and did not include language setting up the Defense Innovation Network. Instead, it directed the money be distributed as One North Carolina small business grants, a program that assists companies seeking Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) grants.

But the science and technology board’s proposal was to set up a network to take defense innovation to the next level in North Carolina, not to just beef up One NC. As outlined in authorizing language in the governor’s budget, the network would be responsible for leading and supporting efforts to help the defense innovation sector in North Carolina through greater state leadership, with funding behind it.

It would do this with a North Carolina Defense Strategic Review Council to work with the state’s academic, industry, and military assets for opportunities suited to our academic and industry strengths. It would also set up a Defense Innovation Accelerator. It would also organize efforts to market North Carolina as a leader in defense and national security innovation.

The goal would be to strengthen networks among entrepreneurs, innovation support organizations, the defense industry, and the Department of Defense; attract more capital investment into our defense innovation ecosystem; and increase the number of defense innovation startups, particularly among rural entrepreneurs and minorities.[…]

“Strengthen” entrepreneurs?  We’re spending state money helping these people obtain federal funds-we-don’t-have.  And we’re going to be *diverse* about it.  (KUMBAYA.)


[…]The state’s challenge tapping into the military’s sizable innovation budget came into focus in 2020. The science and technology board believed that North Carolina could be more  competitive in defense contracting, particularly in military R&D funding. The task force report said:

“Despite the state’s strong military presence and active innovation ecosystem, … total dollars in defense contracts spent on North Carolina’s businesses and research organizations rank the state as only 22nd in the country, and only 2% of the defense contracting dollars in the state are in research & development.”[…]

Is anyone stopping to question whether all of this contract money is actually essential spending?  You hear all sorts of stories about admirals and generals getting stuck with submarines and planes they don’t want and didn’t ask for because some politician wanted some “economic development” for their home territory.


[…] What was of particular concern was the state’s performance in the SBIR and STTR grant programs, which are important to R&D startups. Unlike private investors, the government doesn’t want a share of a startup company’s ownership. For many innovative startups, SBIRs and STTRs are a way to fund the business until there’s a product that can generate revenue.

Small businesses, the task force noted, are primary generators of technology innovation, and the SBIR and STTR programs are the single largest source of early-stage tec hnology development and commercialization funding for small businesses, with more than $3.7 billion nationally in 2019. And the DOD grants made up nearly half that, $1.8 billion.

However, the task force said, “North Carolina ranks well below the top states in DoD SBIR/STTR funding and garners far less DoD SBIR/ STTR funding than would be expected based on national patterns and its performance with other federal agencies. Clearly, North Carolina has untapped economic potential on this front. By maximizing this potential, North Carolina could realize a significant opportunity to be a leading hub of innovation for the U.S. defense industry.”

Last month, John Hardin, executive director of the science and technology board, briefed commanders of North Carolina’s military installations on the Defense Innovation Network proposal at a meeting at Camp Lejeune. In his presentation, he said that a fully funded, multi-year initiative — 2-$3 million annually — could get annual defense SBIR/STTR funding going to North Carolina small businesses up from around $27 million to more than $50 million and higher, which the task force said was a realistic estimate.

Roughly two-thirds of the Defense Innovation Network funding, as originally proposed,  would go for grants to help foster innovation among defense-related companies. It would be in the same tradition as other state-led initiatives, which created Research Triangle Park in the late 1950s and helped North Carolina become one of the leading life sciences states over the past 40 years.

North Carolina is “under-coordinated and under-resourced in defense innovation efforts,” said Hardin’s presentation of the task force findings. This has led to “underperformance due to lack of strategic leadership, coordination, funding, and marketing.” That has resulted in “substantial unrealized potential to expand [the] innovation ecosystem” and what’s needed is  “high-level State ownership and a strategic, resourced, sustained, and coordinated effort.”

Some concern

Typically, there isn’t a lot of visibility into a General Assembly budget conference. But there are efforts to keep the Defense Innovation Network proposal alive, including statements released by state officials. Last week, NC Commerce Secretary Machelle Baker Sanders said:  “North Carolina has an opportunity to be a leader in defense and national security innovation, but targeted investments are needed to be competitive. A more strategic and coordinated approach will better position the state for expanding our defense innovation economy.”


Complex job

Building up our defense innovation sector is a complicated job that requires knowledge of the sprawling Department of Defense acquisition and R&D funding process. It  requires knowledge of companies in a big state that are working on things that might be interesting to the DOD, but aren’t contractors yet. It requires awareness of researchers at our universities who are working on things that might be interesting to the DOD and could be commercialized. It requires bringing together all the various players in the R&D ecosystem, private and academic, when the state has to move fast to compete for new DOD innovation facilities, like the Army Futures Command, which North Carolina lost to Texas five years ago.[…]