Biting a hand that feeds us

Declining state support of UW–Madison threatens a key economic development engine.

From the pages of In Business magazine.

Gov. Scott Walker’s controversial cuts to the University of Wisconsin System generated national headlines, but less dramatic is the fact that flagging state support of the university system has been unfolding for several years. The gradual and continuing erosion, done primarily for the purpose of pumping more dollars into K-12 education, threatens to undermine the university’s $15 billion annual economic impact to Wisconsin, say university and UW System executives.

UW–Madison’s share of the $250 million in budget cuts totals $63 million this year. Factor in the $23 million in cuts from the current budget, which have been made permanent, and the university must cut $86 million in the forthcoming year. Economic development programs have not been completely spared, as Chancellor Rebecca Blank has responded with a combination of department cuts and tuition increases for out-of-state and professional students.

The cuts are not unique to Wisconsin, as state budgets nationally are challenged with higher health care, infrastructure, and corrections costs. However, further erosion of state support could not only stunt the taxpayer investment that has helped grow Wisconsin’s flagship university, it could undermine the institution’s ability to be an economic force multiplier. A recent study by NorthStar Consulting found that for every taxpayer dollar spent on UW–Madison, the university generates $24 for the state’s economy. Private-sector businesses are among the largest beneficiaries of the university’s economic activity, as direct expenditures by UW–Madison alone create $4.5 billion in annual business for Wisconsin companies.

Yet state revenue support continues to fall — from 43% of the university’s overall budget in 1974, the year UW–Madison merged with the UW System, to 17% today.

Most everyone understands the university’s role in developing the future workforce — UW–Madison alone graduates about 10,000 students annually — and many know that it’s the fourth largest research institution in the United States, bringing more than $1.1 billion in federal awards to the local economy.

Beyond Madison, the general public might not be fully aware of what occurs behind the scenes in the form of industry outreach. “There have been direct institution-to-business relationships, which has been encouraged because we need to adhere to the Wisconsin Idea that the boundaries of the university are actually the boundaries of the state,” states Regina Millner, president of the UW System Board of Regents.

In this look at the economic impact of UW–Madison, we explore some under-the-radar ways the university contributes to economic development.

Public-private partners

Among the business-related entities affiliated with UW–Madison are the Fluno Center for Executive Education, the Morgridge Institute, the Wisconsin Alumni Research Foundation, the university’s licensing arm, and University Research Park, home to companies spun out of campus research. In all, UW–Madison research has led to the formation of roughly 300 startup companies in Wisconsin; they support more than 24,972 jobs and contribute $2.3 billion to the state economy.

This technology transfer is one of the university’s better known contributions to commerce, but even though research has led to the formation of companies like Cellular Dynamics, founded by stem cell research pioneer James Thomson, the university is not satisfied with the rate of transfer. Less well known is the Discovery-to-Product (D2P) initiative, a new joint initiative between the university and WARF. It was established to advance the commercialization of ideas and intellectual property.

Under the Discovery-to-Product initiative directed by John Biondi, pictured, UW–Madison hopes to improve its rate of technology transfer.

John Biondi, director of D2P, says the initiative selects projects twice a year and provides funding to move them to commercialization. It takes projects with proven technology and focuses on their value proposition to identify applicable markets.Biondi described D2P’s work as a custom acceleration process focused on UW–Madison innovations, and not just technologies developed in sophisticated faculty labs, but also dorm-room projects from undergraduates. “As they go through the process from proof-of-concept to the market, we help them gather materials they need to present to the investment community,” Biondi says.

The initiative is working with approximately 25 projects, including four that have already formed startup companies. They represent a broad range of technologies, including one that develops new stem cell culture tools used in drug discovery, another involving a 3-D bone imaging process that allows radiologists and oncologists to specifically monitor the efficacy of drug therapies in cancer treatment, an animal science project that takes an egg-based protein and develops it into a substitute for antibiotics that are fed to farm animals raised for meat, and a smartphone technology that allows consumers to have personal and business phone numbers on one device.

“We think we can move the needle on technology transfer, and it’s not that we’re so wonderful,” Biondi notes, “it’s just a process that historically has not been applied to innovation inside of the university.”



Ag-gregate impact

Agriculture is not only an $88 billion industry in Wisconsin, according to the University of Wisconsin–Extension, it’s a major research focus of UW–Madison. The College of Agricultural and Life Sciences (CALS) has 19 academic departments and works throughout the state. Entities like the Food Research Institute, the Wisconsin Center for Dairy Research, and the Center for Integrated Agricultural Systems (CIAS) work in partnership with farmers and other agricultural interests.

CIAS, a research center in CALS, is working with the ag industry to develop sustainable farming practices and build a market ecosystem for locally produced food, and its outreach has involved transforming the way supply-chain actors view the market. Michael Bell, who directs the Center, is trying to get farmers to think more about relationships and less about competition.

Bell, an environmental sociologist, says area farmers have not only embraced sustainable farming techniques, they now are more willing to share those techniques. That’s a different mindset than Bell encountered years ago with a large industrial-scale producer who was nervous about talking to Bell because competitors might find out what he’s doing. “It’s not just about value in the sense of economic value, but values reflected in the person-to-person commitments through concern for community and for ecology,” Bell says. “When you have that basis or sense that we are part of a larger endeavor, with everyone helping each other, you have a model for care and concern and not competition.”

Agriculture isn’t the only industry where university outreach is a constant. Susan LaBelle, managing director of the Office of Corporate Relations, which helps businesses connect to university resources, noted the role of various UW–Madison research consortia that allow member businesses to engage with faculty members and share best practices. The College of Engineering alone has 15 research consortia, including an E-Business Consortium that covers topics such as information security and Web marketing.

While much campus research is done in collaboration with large-company sponsors, the consortia enable a broad range of businesses to tap into university expertise for a modest annual membership fee. “Sometimes companies think the only two things they can do on campus are hire students or sponsor a large research project,” LaBelle says, “and these consortia are what I consider a low-cost entryway for companies to take advantage of the expertise on campus.”

Extending a hand

The UW–Extension has offices in each of the state’s 72 counties; each office is either supported or primarily staffed by UW–Madison. The Extension includes the Division for Business and Entrepreneurship, which oversees small business development centers at UW–Madison and on campuses around the state. In 2014, 170 Wisconsin entrepreneurs using the division’s services opened new businesses.

The division also oversees the UW Flexible Option program, a competency-based online program for adult professionals that want to complete work on their bachelor’s degree. Degree programs in health care and information technology were the first to be established, and a bachelor’s degree in business administration is the next likely addition. “Students who use these programs will be able to progress in their careers and earn salary increases, so it really feeds into the whole economic ecosystem,” states Cathy Sandeen, chancellor of University of Wisconsin Colleges and the UW–Extension.

Final appeal

Patrick Heaney, CEO and founder of NCD Technologies, chose to pursue a PhD at UW–Madison because of its focus on collaborative, interdisciplinary research. He earned a doctoral degree in materials science engineering in 2009, and launched the company based on technology he developed.

Heaney has engineered diamond and diamond-like coatings used on extremely small tools, adding precision and longevity to them. The technology was patented through WARF and supported by small business innovation research grants, and Heaney took advantage of the local small business development center.

After realizing that cutting tools are part of a heavily commoditized market, NCD changed its focus to customized work, but Heaney might not have launched a company here if not for UW–Madison’s interdisciplinary collaboration. “We were required to take classes in three different departments,” Heaney notes. “It was not just the support I got from the university ­— what really made it happen was learning to embrace that multidisciplinary approach and using different ideas from different places.”

While many UW business programs generate revenue and are at least partially self-supporting, there is still concern about declining state support. Historical perspective is provided by John Devereux, former president of Genetics Computer Group, a maker of DNA and protein sequence software known as the “Wisconsin Package.” The technology was developed within the university, spun out into a private business, and later acquired for $20 million.

Now a local business consultant, Devereux is concerned that UW–Madison could become a “fully unfunded” university in terms of state dollars, even though it contributes more than it takes in. “If you had an investment that did that, you would try to invest more in it, not less,” he notes. “At its simplest level, this institution is a goldmine.”

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