ANNAPOLIS — A pared down version of the governor’s top economic proposal cleared a House of Delegates committee Tuesday, but significant differences remain with the direction senators are taking on the state-run venture fund plan.
The approval by the Ways and Means Committee sets up what will likely be a frenetic ride to the finish for the Invest Maryland program, which, along with hundreds of other bills, faces a Monday deadline for passage this year.
Invest Maryland would allow the state to sell tax credits to insurance companies to fill a venture fund to be targeted at high-tech companies. The committee’s version of the legislation cuts the amount of credits from the $142 million Gov. Martin O’Malley proposed to $100 million. Auctioning those tax credits with a floor of 70 cents on the dollar would yield the state $70 million in the House plan, as opposed to the $100 million in the governor’s bill.
“What we’re trying to do is get money right now to invest in Maryland companies,” said Del. Bill Frick, the Montgomery County Democrat whose subcommittee worked the bill. “There is a dearth of capital to invest in Maryland and we actually think that’s a particular problem right now due to the credit crunch.”
Frick said he expects the state to net at least $75 million for the venture fund from the tax credit auctions.
The House’s version of the legislation, filed as SB 180 and HB 173, also alters the distribution of the funds. One-third would be controlled by the Department of Business and Economic Development, which would focus its investments on entrepreneurial and early-stage companies. Two-thirds, or about $50 million, would be invested on the state’s behalf by private venture capitalists, with a focus on larger, growth-stage firms.
Principal and profits returned to DBED would be recycled into the program, while all returns from the private venture capitalists — 80 percent of the profits and all the principal of successful investments — would be pumped into the state’s general fund.
That would leave the private side of the program at the mercy of governors who set budget proposals and lawmakers who cut from them.
O’Malley’s proposal would have split the money evenly between DBED and private firms, with all investments focused on early-stage companies.
“This would be a more effective way to get the big players in venture capital in the state of Maryland,” House Majority Leader Kumar P. Barve said of the House’s changes.
Sen. Richard S. Madaleno Jr. said the Senate will wait to see the House version of the bill before adding its own amendments.
“I think we’re in agreement with many of the things in the House bill, but the funding mechanism remains a concern,” said Madaleno, who has taken the lead on the legislation in the Senate Budget and Taxation Committee.
Madaleno said the Senate could opt to fund the program with direct appropriations, to avoid giving up future tax obligations for lesser returns.
The credits on insurance premium taxes would be auctioned off between 2012 and 2014, netting the state one-third of the fund’s total each year, or $25 million under the House’s proposal.
Under the House’s plan, the financial impact of the program would be put off until a five-year stretch beginning in fiscal 2015. Then, $20 million in credits would be applied each year until 2019, down from $28.4 million per year in the governor’s proposal.
Delegates were, for the most part, positive in their reactions to the amended program Tuesday, but some sought larger carve-outs for rural and minority-owned firms that were defeated by the committee.
Del. Ronald A. George, R-Anne Arundel, proposed that control of the state’s share of the venture fund be turned over to the Maryland Technology Development Corp., which has a program dedicated to growing rural firms. George and other GOP lawmakers said TEDCO has more expertise than DBED in nurturing growth in young, bio-tech and high-tech companies
And Del. Jay Walker, D-Prince George’s, sought more money for minority-owned businesses through the Maryland Small Business Development Financing Authority. The share of funding that would go MSBDFA — one-quarter of DBED’s share — shrank as delegates decided to reduce the overall size of the program while holding the private side steady.
Walker said his amendment “gives these companies the chance to take advantage of the Invest Maryland bill.”
Both George’s and Walker’s amendments were defeated on voice votes.