State budget would revamp NCInnovation, group tasked with funding university research with commercial potential

NCInnovation, the public-private partnership tasked with turning research from local universities into job-creating commercial ventures, is facing a shakeup in the proposed state budget unveiled Monday by the North Carolina Senate.

The group was created in 2020 but was funded entirely by the private sector until 2023, when lawmakers agreed to give it $500 million to help fund its grants. But that was a politically contentious decision — Senate leaders wanted to give it $1 billion; House leaders had favored a much smaller $50 million — and in the years since it has remained a political lightning rod.

A new proposal tucked into the Senate budget plan would make the group give the state back all $500 million. But in return, the state would send the group $25 million a year for at least the next four years, which it could spend directly on grants instead of investing it.

Earlier this year, a group of House lawmakers filed a bill to take back the group’s $500 million. NCInnovation is currently investing that money, and using the returns to pay for the grants it gives out.

Yet while the group still faces critics in the legislature, NCInnovations says it has been a good steward of those taxpayer funds. Its endowment has grown, even after it dispersed its initial round of several million dollars in grant funding last year.

The Senate’s proposed $25 million annual payment over three years adds up to the same amount the group made from its investments this past year. So both sides see it as a win-win: NCInnovation gets to avoid the risks of investing and still maintain its current funding levels, and the legislature gets to take back hundreds of millions of dollars to spend on other priorities.

The changes could make NCInnovation more reliant on the legislature in the future, since there would now be an end date Kelly King, the retired BB&T Bank chairman and chief executive who serves as chair of NCInnovation’s board of directors, said in a statement to WRAL that he and other group leaders were happy with the more flexible funding arrangement.

“I do not hold a position on how policymakers should fund this effort,” he said. “Instead, NCInnovation will continue our work to advance the amazing applied research happening in all corners of this state, from lithium refining to PFAS filtration to cancer research.”

The legislature gave itself the power to appoint members to the group’s board in exchange for the money, and some of those members have at times found themselves at odds with the rest of the board. One is influential GOP donor Art Pope, who has called into question the group’s accounting standards and called for an audit. Last month State Auditor Dave Boliek, a Republican, published an audit into the group and found that it was complying with key rules tied to grant awards but promised to keep looking into it in the future.