GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1993

S	2 

SENATE BILL 188
Government Performance Audit Select Committee Substitute Adopted 4/5/93

Short Title:  GPAC/Econ. Dev. Rec.	(Public) 
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Sponsors:
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Referred to:  Appropriations.
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February 17, 1993

A BILL TO BE ENTITLED
AN ACT TO IMPLEMENT A RECOMMENDATION OF THE GOVERNMENT PERFORMANCE AUDIT COMMITTEE REGARDING ECONOMIC DEVELOPMENT.  
The General Assembly of North Carolina enacts:
–-BIOTECH MICROELECTRONICS REC.
Section 1. (a) The General Assembly finds that:
(1)	The General Assembly has established, directly or indirectly, the following four special purpose nonprofit agencies to conduct economic development activities:
a.	The North Carolina Biotechnology Center.
b.	The MCNC (Microelectronics Center of North Carolina).
c.	The Rural Economic Development Center, Inc.
d.	The Technological Development Authority, Inc.
(2)	The mission of each of these nonprofits is as follows:
a.	The mission of the Biotechnology Center is to provide long-term economic benefit to North Carolina through support of biotechnology research, development, and commercialization statewide.
b.	The mission of the MCNC is to accelerate the use of emerging electronics technologies through innovation and market-driven applications that improve quality of life.
c.	The mission of the Rural Economic Development Center is to develop and advocate innovative strategies to help stimulate economic growth and job creation throughout the State's rural areas.
d.	The mission of the Technological Development Authority is to increase the rate at which new jobs are created in all regions of the State, by stimulating the development of existing and new small businesses.
(3)	The Technological Development Authority was originally established as an independent State agency in 1983 but was reestablished as a nonprofit corporation in 1991.
(4)	The underlying premise under which the Technological Development Authority was created was that it would become self-sufficient within 10 years; such self-sufficiency would validate the assumption that investment in high-technology companies is viable in North Carolina's market.
(5)	The Technological Development Authority has indeed become self-sufficient so that, beginning with the 1993-94 fiscal year, it will not request State funding.
(6)	The State should establish a goal of self-sufficiency for those economic development entities for which self-sufficiency is viable.
(7)	The Center for Microelectronics Systems Technologies of the MCNC, which focuses on microelectronics technologies and markets use of the MCNC facility to users, and the Economic Development Loan Program and the Institute for Biotechnology Information of the Biotechnology Center, which provide support to start-up biotechnology businesses, are especially well-situated to become self-sufficient.
(8)	The following elements make self-sufficiency viable for these entities:
a.	A significant level of interest from private funding sources in the work they conduct.
b.	The growth projections for their respective technological focus areas.
c.	The advancements toward self-sufficiency they have already achieved.
(b)	It is the intent of the General Assembly to maintain funding for (i) the Center for Microelectronics Systems Technologies of the MCNC and (ii) the Economic Development Loan Program and the Institute for Biotechnology Information of the Biotechnology Center at current levels for the next four years (the 1993-94 fiscal year through the 1996-97 fiscal year) and then begin phaseout of the direct appropriations to these entities based on a schedule to be determined consistent with the results of the performance-based contracts with the State; provided however, such phaseout shall be completed no later than the 1999-2000 fiscal year. 
–-REVIEW FUTURE DEVELOPMENT NONPROFITS.
Sec. 2. (a) The General Assembly finds that:
(1)	The General Assembly has established, directly or indirectly, the following four special purpose nonprofit agencies to conduct economic development activities:
a.	The North Carolina Biotechnology Center.
b.	The MCNC (Microelectronics Center of North Carolina).
c.	The Rural Economic Development Center, Inc.
d.	The Technological Development Authority, Inc.
(2)	The mission of each of these nonprofits is as follows:
a.	The mission of the Biotechnology Center is to provide long-term economic benefit to North Carolina through support of biotechnology research, development, and commercialization statewide.
b.	The mission of the MCNC is to accelerate the use of emerging electronics technologies through innovation and market-driven applications that improve quality of life.
c.	The mission of the Rural Economic Development Center is to develop and advocate innovative strategies to help stimulate economic growth and job creation throughout the State's rural areas.
d.	The mission of the Technological Development Authority is to increase the rate at which new jobs are created in all regions of the State, by stimulating the development of existing and new small businesses.
(3)	In the 1991-92 fiscal year, these four nonprofits expended almost thirty million dollars ($30,000,000) in General Fund revenues justified in the budget process as economic development.
(4)	The use of nonprofits as a mechanism for State-initiated economic development is unusual but not unique among southeastern states.
(5)	Each of these special purpose nonprofits has demonstrated success in its respective area of focus and, as a group, they have contributed significantly to North Carolina's reputation as a State committed to innovative, technology-based research and development.
(6)	The nonprofit status of these entities allows them to use State dollars to leverage private investments, serve as an independent and objective liaison among public and private entities, and conduct objective, nonpartisan research.
(7)	For these reasons, the State should continue to use nonprofits to deliver economic development services.
(8)	However, legislation establishing nonprofits for economic development has not always specified the mission of the nonprofit or the outcomes it is supposed to attain; future legislation funding nonprofits should specify their mission and desired outcomes and should provide for a periodic, comprehensive review of the entity.
(b) It is the intent of the General Assembly that any future legislation establishing or funding a new nonprofit agency to conduct economic development activities will stipulate clearly the mission and purposes of the agency and will provide for periodic, comprehensive review of the agency.
–-DEVELOPMENT PERFORMANCE INDICATORS.
Sec. 3. (a)	The General Assembly finds that:
(1)	The term "economic development" encompasses all activities conducted for the express purpose of increasing and maintaining the economic vitality of North Carolina, including industrial and business recruiting, business retention, facilitating business creation, providing small business assistance, job training and work force preparedness programs, and investing in infrastructure, both physical (roads, utilities, etc.), and technological (fiber-optics networks and other information system links).
(2)	State General Fund expenditures for the 1991-92 fiscal year for economic development were approximately eighty-four million dollars ($84,000,000).
(3)	This eighty-four million dollar ($84,000,000) expenditure on economic development was allocated among 40 different State and State-associated programs and entities, which can be grouped into five broad categories:
a.	Nonprofit agencies.
b.	The Department of Community Colleges.
c.	The Department of Commerce.
d.	Other State Departments, including the Department of Agriculture, the Business Licensing Office of the Department of the Secretary of State, the Department of Administration, and the Department of Environment, Health, and Natural Resources.
e.	The University of North Carolina.
(4)	The results of State economic development activities are not effectively monitored and evaluated because, although the State employs several conventional methods of ensuring accountability of agencies involved in economic development (such as budgets, department plans, and internal audits), these accountability measures focus on inputs or on programs and budget levels, rather than on outcomes–the results of their efforts.
(5)	Most State agencies involved in economic development activities have not yet designed and implemented meaningful measures to evaluate and report on performance; as a result, the General Assembly has only a limited ability to evaluate the outcome of its significant investments in economic development.
(6)	To implement a truly integrated approach to economic development, each key agency must be accountable for its contribution to meeting the overall economic development goals of the State; performance indicators would provide an effective and appropriate means to assure this accountability on a regular basis.
(7)	The General Assembly should base its economic development budget allocations on outcomes, as measured by performance indicators.
(b)	Each State agency involved in economic development shall develop, in conjunction with the Office of State Budget and Management, performance indicators that are appropriate and measurable criteria, including criteria that each agency can influence and criteria based on baseline data and reasonable recommendations.  The performance indicators should articulate specific, measurable results for each agency and should be comprehensive, so that the General Assembly may base each agency's continued economic development appropriation on its effectiveness as measured by the performance indicators.
(c) This section becomes effective July 1, 1993.
Sec. 4. Sections 1 and 2 of this act are effective upon ratification.