Already slashed to $1M, MTC funding for startups, innovation centers could hinge on COVID-19

Editor’s note: The following is part of Startland News’ ongoing coverage of the impact of Coronavirus (COVID-19) on Kansas City’s entrepreneur community, as well as how innovation is helping to drive a new normal in the ecosystem. Click here to follow related stories as they develop.

A years-long effort to scale back Missouri’s funding for startup investment — coupled with dwindling state financial projections because of COVID-19 shutdowns — could spell the end for the Missouri Technology Corporation, as advocates await Gov. Mike Parson’s decision on the 2021 budget.

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What is MTC?

The Missouri Technology Corporation is a state organization that supports startups through direct co-investments and a matching grant program (including through efforts like LaunchKC and Digital Sandbox KC), as well as providing funding to nine innovation centers — including those at the University of Missouri in Kansas City and Columbia, as well as Innovation Stockyard in St. Joseph.

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On May 8, the Missouri Legislature allocated $1 million to MTC in the state’s nearly $35 billion 2021 budget — reduced from $3 million recommended for MTC earlier that week by the Senate Appropriations Committee (and down from $17 million in 2016).

The Missouri House initially set aside no money in the 2021 budget for MTC, with the $1 million resulting from the conference committee process between the two governing bodies.

Impact from MTC has been felt in Kansas City for years — especially among startups gaining funding through LaunchKC competitions and Digital Sandbox KC awards, as well as MTC matching grants. Startups having previously earned MTC funding run the gamut from now-GovTech powerhouse PayIt to backstitch and StoryUp/Healium — both among Startland News’ Kansas City Startups to Watch in 2020.

Click here to check out the Missouri Technology Corporation’s funding portfolio.

MTC’s funding fate now rests in the hands of Parson, who has not signaled when he will sign the 2021 budget or if he will exercise a line item veto to remove any specific allocations. The governor indicated previously that MTC should expect its funding to be cut to $1 million for 2021, but that was before COVID-19 began wreaking havoc on the state’s economy.

Parson; state Sen. Dan Hegeman, R-Cosby, the chair of the Senate Appropriations Committee who also serves on MTC’s board of directors and is a spokesman for Evergy in Kansas City; and state Sen. Lincoln Hough, R-Springfield, vice chair of the Senate Appropriations Committee, did not respond to questions from Startland News about MTC funding or the timeline for the budget approval process.

Missouri State Capitol, Jefferson City; Photo courtesy of the Missouri Governor’s Office

On Thursday, however, Parson said at a socially distanced statehouse press conference that he expects to withhold an unspecified amount of funding from the budget as the state continues to grapple with the economic fallout of COVID-19. The 2021 fiscal year begins July 1.

“The biggest challenge we still have going forward is the budget,” Parson said  Thursday, standing before a small group of staff, reporters and cameras. “We still have a lot of work to do on the appropriations process. I think there will be more withholds coming up this month, before we ever get to July. By July 1, if the federal government doesn’t do some backfill with the CARES Act — people need to be prepared that there’s going to be a lot of things that will have to happen in the State of Missouri to balance the budget. As the governor, I have to balance the budget, and I’m going to do it.”

Though Parson did not indicate which departments would be impacted, the governor already recalled the entire $2.9 million 2020 MTC budget to help cover unexpected shortfalls because of the pandemic. The move was part of a $227 million expenditure reduction, which ran the gamut across state programs.

NEXT Missouri, a statewide coalition that has been a vocal advocate for MTC funding, previously indicated the program could run short-term on its cash reserves, but emphasized the solution was not sustainable.

Jack Scatizzi, executive director of MTC, declined to comment on the program’s funding for this story.

MTC specifically has been a target of budget cuts led by Republicans in recent years — with funding at more than $17 million in 2016 when Eric Greitens was elected governor, to $13 million the next year, and finally down to less than $3 million for 2020.

Scatizzi expressed optimism before the May 8 budget vote that the state would see the value in ongoing support for the program, according to communication to innovation centers funded by MTC.

“We know Missouri entrepreneurs, small businesses, and innovation centers will be key to our state’s economic development strategy to recover from the COVID-19 pandemic,” he said, pledging to “vigorously pursue … a steady level of funding.”