(The Center Square) — Pennsylvania could become a national leader in innovation — if the support is there and state leaders embrace reform.
“Innovation matters so much to economic performance, yet the state’s innovation drift is resulting in a broader economic drift,” Brookings Metro Senior Fellow Mark Muro told legislators Friday at a Senate Majority Policy Committee hearing on innovation. “We’re really challenging the state to, above all, commit to innovation…the state needs to try harder on this front. We think you could win — if you actually tried harder.”
Experts argued that the commonwealth is falling short of its potential, squandering the opportunity it has now and failing to leverage its current assets.
One problem is a hyper-concentration in a few locations, limiting growth in small metros and rural areas.
“Roughly 99% of Pennsylvania’s higher education r&d takes place in the Philadelphia, State College, and Pittsburgh metro areas,” Brooking Metro Senior Research Associate Robert Maxim said. “Firms in smaller communities across the state, whether they be in advanced manufacturing, energy production, agriculture, or some other industry, have less access to the cutting-edge advancements being discovered in Pennsylvania universities.”
The key to growth, Muro and Maxim argued, was to find ways to connect new tech and ideas to the overlooked parts of Pennsylvania.
Maxim suggested a $20 million “challenge grant,” similar to the state’s innovation hub, that would support innovative businesses outside Pennsylvania’s main trifecta.
They also suggested that Pennsylvania needs to rebuild its investment in innovation; the state spends only 20% on such investments compared to neighboring Ohio.
That state money, however, has limits.
“We don’t believe the government should be in the business of picking winners and losers,” Chris Molineaux, president and CEO of Life Sciences Pennsylvania, said. “What we do believe in is the government can provide seed capital — can provide the capital to catalyze some of these companies based on thorough scrutiny.”
More taxpayer funding, too, isn’t necessarily the most pressing need for growth. Instead, experts noted their concerns with red tape, permitting delays, and the state’s tax system.
They noted that getting Pennsylvania’s corporate net income tax more in line with other states was important, as was letting start-ups that suffer business losses in one year deduct those losses during a profitable year (called a net operating loss carryforward).
“Business-friendly, growth-friendly tax and regulatory environment, that’s really table stakes — that’s really the core foundation that any state needs to succeed,” Matt Smith, chief growth officer for the Allegheny Conference, said.
Sen. Dan Laughlin, R-Erie, spoke of broad reform efforts to boost all businesses.
“How did we get here? We weren’t always bad at what we do,” Laughlin said. “Grass doesn’t grow in the shade. Our red tape and our taxes are the shade that we’re throwing on our growth and innovation…As we work to lower our taxes and lower our red tape hurdles, it’ll help all of our businesses grow and expand.”
