$6 Million Business-Incubator Program Quietly Finds Way into New Budget

March 14, 2013

Investigative Reports

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Business-Incubator ProgramThe S.C. Department of Commerce has slipped in a $6 million business-incubator program to the proposed 2013-14 state budget that passed the House Wednesday.

It’s unclear why the program is needed given the existence of several business incubators in the state.

The House in a vote of 116 to 1 Wednesday gave final approval to the fiscal 2014 budget (H. 3710) and sent its proposed $22.7 billion state spending plan to the Senate. The House also unanimously approved a list of projects, including the business-incubator program, to be funded next fiscal year with $112.6 million from the Capital Reserve Fund (H. 3711).

“I wish the Senate would just rubber stamp it and send it on back because it (the budget) takes care of our people,” said House Ways and Means Committee Chairman Brian White, R-Anderson, in remarks made to lawmakers after the two votes.

He said he expects to come back later with changes to the House version of the budget. The fiscal year begins July 1.

The fiscal 2014 budget bill and Capital Reserve Fund have separate appropriations for the business-incubator program $5 million in the budget bill and $1 million in the reserve fund – a “rainy-day” fund that in recent years has been raided by lawmakers for various projects.

More than $7.5 million, for example, is designated in the Capital Reserve Fund for the S.C. Technical College System’s “readySC” program, which trains workers for specific companies. The reserve fund also would give another $5.5 million to the Technical College System for “system-wide infrastructure and workforce development,” and $5.3 million to Commerce’s “deal-closing” fund.

The business-incubator program was not included in the executive budget proposed by Gov. Nikki Haley in December. It also did not emerge in the budget documents that Commerce officials prepared for the Office of State Budget, nor was it mentioned in any recent Commerce press releases.

Commerce spokeswoman Amy Love did not return phone calls or emails from The Nerve Wednesday seeking information about the program, which, according to a budget proviso, is intended to “invest in technology-based economic development projects.”

The budget proviso description states that eligible projects should:

  • Foster economic development;
  • Encourage technological innovation and business recruitment;
  • Leverage the state’s scientific potential and existing knowledge base; or
  • Encourage research and development collaboration.

Commerce can spend $300,000 on the business-incubator program’s administrative costs, and “$400,000 shall be designated for the digital design initiative.”

The Nerve did not receive responses Wednesday from the three members of the House Ways and Means subcommittee that heard Commerce’s funding request – Rep. Gary Simrill, R-York and chairman of the Economic Development and Natural Resources Subcommittee; Rep. Dwight Loftis, R-Greenville; and Rep. Leon Stavrinakis, D-Charleston.

The Nerve also contacted Haley spokesman Rob Godfrey by email to learn if the governor has knowledge of the business-incubator program. Godfrey did not respond.

The Athens, Ohio-based National Business Incubation Association (NBIA) works with individuals or public entities that start incubator programs for entrepreneurs with start-up or emerging companies.

Linda Knopp, the NBIA’s director of policy analysis and research, said in recent months she has spoken to an economic development official in South Carolina, but she could not recall the agency.

Business-incubator programs can be designed for niche industries and can provide equipment for companies while occupying a shared space, which is created to strengthen communication between business owners experiencing the same challenges, Knopp said.

“Typically these programs provide entities with various types of assistance to push them to the next level,” she said.

Knopp said one business might need a better marketing plan, while another might need more money to boost its position for profitability. Businesses that graduate from the programs launch out on their own, she said.

Knopp said the success rate for businesses that graduate from incubator programs can be as high as 87 percent, with an 84 percent chance the business owner stays in the community where the incubator program was located.

During the Great Recession, some incubator programs died because their government funding dried up, Knopp said. However, she said some people who have lost jobs in recent years have started new companies and found a business incubator to assist them.

The NBIA reported that as of October, there were more than 1,200 business incubators in the United States.

The state Department of Commerce has another budget proviso that would allocate $300,000 to the private, nonprofit South Carolina Council on Competitiveness, better known as New Carolina, “to provide funds for existing business economic development activities.”

A representative of New Carolina did not return a phone call to The Nerve Wednesday seeking comment about the proposed $300,000. The Nerve in 2010 first raised questions about New Carolina, which, according to federal tax records, received $905,000 in government funding from fiscal 2006 through 2008, including at least $800,000 from Commerce.

Haley did not list the proposed appropriation for New Carolina in her executive budget for fiscal 2014.

Olson can be reached at (803) 254-4411 or curt@thenerve.org. Follow him on Twitter @thenerve_curt and @olson_curt. Follow The Nerve on Facebook and on Twitter @thenervesc.