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GOP Plan to Cut Grants Seen as Another Blow to High-Tech Research : Technology: Private investors should decide what warrants funds, Republicans say. Beneficiaries such as O.C.'s Aesthetic Solutions defend federal program.

March 31, 1995|ROSS KERBER | TIMES STAFF WRITER

LAGUNA NIGUEL — Gary Falacara figures his software company would never have made it beyond a business plan on his hard-disk drive were it not for a $1.7-million grant from the U.S. Commerce Department.

Falacara used the money last year to start Aesthetic Solutions, which is developing software to improve virtual reality computer simulations.

The Laguna Niguel company is one of 59 in California that have received such grants from the federal agency's high-tech funding arm, the National Institute of Standards and Technology, or NIST.

But the new Republican-controlled Congress wants to cut technology grants as part of its budget reduction plans in its "contract with America," and the once-booming Commerce Department faces several lean fiscal years at best.

Conservative representatives such as Dana Rohrabacher (R-Huntington Beach) argue that private investors, rather than government officials, should decide which research deserves funding.

The cuts would be a blow both to defense firms trying to convert to other lines of business and to start-ups convinced of the potential of their technologies. Local executives say NIST's grim future is a reminder that defense spending that once supported so much research won't be replaced easily.

"With NIST, we thought we were on to a great new research agency" to replace declining defense spending, said Ron Walecki, business development manager for AlliedSignal Ceramic Components in Torrance.

AlliedSignal is nearing the end of a $2-million project to develop a nontoxic process to cast ceramic components. The money includes a $1.16-million NIST grant that has kept 10 engineers employed full-time.

To develop the same technology under a defense contract, Walecki said, the company would have had to look for a much bigger project. "We would have had to come up with something much more grandiose, like a new jet engine for $80 million," to win Defense Department attention.

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Before 1988, NIST was the sleepy National Bureau of Standards, which ran projects such as the atomic clock in Boulder, Colo. The name change marked the start of a broader mission for the agency, exemplified by the NIST technology grants program started in 1991 by the Bush Administration with a budget of $36.9 million.

This year, the Clinton Administration had planned to spend $431 million on the program, but several Republican-backed bills to cut that by up to 25% are now making their way through Congress.

Other government programs, such as the Pentagon-led Technology Reinvestment Project, also have channeled funds to companies shifting to the commercial sector. But NIST grants have been available for a wider range of research projects.

Clinton Administration officials argue the NIST money will help U.S. firms develop technologies with large commercial potential but without the short-term payoff needed to attract private investment.

They point out that American companies led the research into such technologies as videocassette recorders and notebook computer screens, but found it easier to pursue other products, leaving Japanese companies to reap the commercial successes.

Republicans, though, say decisions on who gets government grants are distorted by politics.

"You're going to see business executives who are friends of politicians, or who have similar thinking, getting all the support," said Rohrabacher in a telephone interview this week.

"Companies that have gotten the money are going to say how great it is, and companies that didn't get the money aren't going to say anything because they want to get some of it themselves," he said.

Rohrabacher, who voted for cuts in NIST funding earlier this month, said he might accept a compromise if the agency's rules were changed so its money could be lent to companies at low interest rates rather than granted to them outright.

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But a loan program could create the sort of scrutiny and paperwork that companies have avoided through the grant program, said Jim Osborne, vice president for advanced chemistry at Beckman Instruments Inc. in Fullerton.

Osborne is familiar with NIST grants in his role as chairman of the Genosensor Consortium, an eight-member group of businesses and nonprofit research groups. Genosensor is in its second year of a five-year, $18.4-million program--half of which is funded by NIST--to identify human DNA samples through a computerized matching process. Consortium members put up the rest of the money.

"Whether we find anything is a bet, and we're comfortable making that bet jointly with academia and the U.S. government," Osborne said. Without the NIST grant, he said, "it would be a major investment for any one member of the consortium, and most companies wouldn't be willing to do it."

To Falacara of Aesthetic Solutions, those who oppose government funding on ideological grounds simply don't appreciate the fact that firms such as his don't make a profit on the work the funding allows them to do until they prove their products in the market.

"There's nothing to be gained for us if we don't produce something we can use by the end of this," Falacara said. "I don't put too much stock in the idea that the world doesn't need my idea just because I can't find some venture capital to do it in two years or less."

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