Texas Emerging Technology Fund to Undergo Legislative Review

Published May 1, 2008

The Texas Legislature’s Committee on Economic Development will conduct a review of the Texas Emerging Technology Fund (TEFT), House Speaker Tom Craddick (R-Midland) has announced.

The $200 million TEFT was created in 2005 and reauthorized in 2007 at the request of Gov. Rick Perry (R), to seed technology companies, facilitate technology transfer from universities to the private sector, and fund technological research with potential commercial applications.

The program was initially popular among government and industry leaders, but it has subsequently raised concerns at the highest levels of the legislature. Some policy analysts worry the program encourages political favoritism.

“Some of the goals [of the projects] aren’t being met, but at the end of the day these companies don’t have penalties. They get a free ride,” said state Rep. Solomon Ortiz Jr. (D-Corpus Christi), who requested the committee conduct the review. “We have to make sure we are good stewards of taxpayer dollars.”

The committee will make recommendations to the full legislature in 2009.

Favoritism a Concern

When the bill authorizing TEFT was voted on in the Texas House of Representatives, only one legislator, Abel Herrero (D-Corpus Christi), voted against it. Herrero said he thought there were better ways to spend the money.

Now others are having second thoughts.

Devon Herrick, a senior fellow at the National Center for Policy Analysis, is skeptical about TEFT’s prospects.

“Over the past few decades, Texas has been rather successful in diversifying its economy from one too heavily dependent on petroleum and agriculture to one buttressed by high-technology companies employing highly educated workers. The Texas Emerging Technology Fund is designed to continue this trend,” Herrick explained.

“However,” Herrick continued, “one potential pitfall of using taxpayer funds to provide seed money for job creation is the process can become politicized, with funds sometimes used to protect jobs in politically powerful but declining industries.

“Let’s hope Texas politicians steer clear of this temptation,” said Herrick.

Governor Staying Course

In spite of the ongoing criticism and investigations, Perry is soldiering on with TETF.

On March 24 he announced the state will invest $250,000 through TETF in Halsa Pharmaceuticals, Inc. of Houston for the development and pilot manufacturing of a therapeutic drug treatment for obesity. Up to $1 million may be available to the company if it meets certain performance benchmarks.

On January 28 Perry’s office had announced a $750,000 investment in OrthoAccel Technologies, a Houston-based company that claims to have developed a revolutionary orthodontic device that will cut treatment time in half. According to the press release from the governor’s office, “The TETF investment will be used to attract additional management talent, complete device prototyping, and launch the first human trial, which will take place in Houston.”

‘Funding Gap’ Claimed

When questioned about the need for government to fund these kinds of programs, Allison Castle of Perry’s press office responded, “There exists a funding gap for emerging technology companies at this early stage, and that is one of the reasons why the fund was created. A larger percentage of early stage companies may not succeed due to technology and market risk.”

Castle said the success of TEFT cannot necessarily be measured in dollars and cents because not all the money is earmarked for investment in private enterprises. Much of the funding is reserved for attracting key scientists and funding scientific research in order to create an economic environment fertile for high-tech enterprises.

Jerome Cole ([email protected]) is a freelance writer living in Guangzhou, China.