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Louis Jacobson
By Louis Jacobson January 4, 2010

Administration funds business incubators, but with less money than promised

During the presidential campaign, Barack Obama promised to "invest $250 million per year to increase the number and size of incubators in disadvantaged communities throughout the country."
Incubators are institutions that promote economic development by aiding startup businesses. According to the National Business Incubation Association, the 1,000-plus incubators in the United States help entrepreneurs and new companies apply for and manage loans and connect with potential investors such as venture capitalists. Most are run by nonprofits, academic institutions or government entities.
The Obama administration was quite specific about its interest in promoting this model. Its fiscal year 2010 budget proposal for the Commerce Department's Economic Development Administration said that "special emphasis" will be placed "on two initiatives: 1) support for the creation of regional innovation clusters that leverage regions' existing competitive strengths to boost job creation and economic growth; and 2) support for networks of business incubators that encourage entrepreneurial activity in economically distressed areas and regions. EDA expects that each initiative will receive at least $50 million in funding." (The first of these initiatives is the subject of Promise 309 .)
The final appropriations bill for the department signed by the president doesn't specify a dollar amount devoted to incubators, but the total allocated to the Economic Development Administration stayed largely intact -- $293 million, compared to the $291 million initially requested. So sticking to the proposed $50 million allotment should be feasible.

Meanwhile, a report by House-Senate negotiators on the final bill reiterates their interest in the idea of incubators. The lawmakers said they "encourage EDA to continue to fund business incubation efforts," as long as the administration keeps congressional appropriators well-informed about the program's implementation.
The program to support incubators with federal dollars has been created and funded at the administration-requested level, but spending $50 million in fiscal year 2010 is not the same as spending $250 million, as the promise suggested. We rate this promise a Compromise.

Our Sources

Office of Management and Budget, proposed fiscal 2010 budget for the Commerce Department , accessed Dec. 23, 2009
House Appropriations Committee, statement of managers of for Division B--Commerce, Justice, Science and Related Agencies, accessed Dec. 23, 2009

National Business Incubation Association, frequently asked questions Web page , accessed Dec. 23, 2009
E-mail interview with Linda Knopp, director of news and information with the National Business Incubation Association, Dec. 23, 2009

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