RALEIGH — The North Carolina General Assembly’s Senate budget includes a provision reshaping the $500 million in endowment funds previously given to a nonprofit in 2023 for accelerating university research being brought to the marketplace.
In 2023, the legislature gave NCInnovation (NCI) $500 million in endowment funds split into two equal tranches. NCI was authorized to use $140 million of the total funds but instead opted to invest the principal amount, which accumulated more than $20 million in interest, $5.2 million of which was put toward the group’s first round of eight grants.
Under the Senate budget, NCInnovation would be required to transfer $100 million back to the state and $400 million to the UNC Board of Governors for North Carolina Children’s Health. The $100 million would be held in a newly created NCInnovation Reserve.
From 2025 to 2029, NCInnovation would get portions of the funding back, receiving $25 million annually to establish at least four regional innovation hubs, each aimed at commercializing research from North Carolina’s universities and community colleges, particularly in rural areas.
Strict oversight measures in the Senate’s budget include recipient requirements to maintain in-state headquarters, salary caps, conflict-of-interest policies and mandatory audits.
During the April 14 press conference unveiling the Senate budget, Sen. Brent Jackson (R-Sampson) explained the alteration to the funding for NCI “instead of letting the rumor mill run wild” about the group’s future.
“Instead of an endowment model, we’re moving it to a cash-flow basis, giving it enough funding for the next four years so we can just settle this question for the foreseeable future and allow it to focus on what matters the most — supporting innovative research that will make a real impact,” said Jackson. “Instead of NCInnovation earning roughly $25 million per year from the endowment, NCInnovation will now have $25 million per year in annual appropriations.”
Jackson said another benefit of this new model would be freeing up the state’s cash flow to invest in the new children’s hospital, stating, “This, in my opinion, is a win-win.”
NCI Board of Directors Chair Kelly King issued a statement to North State Journal on the Senate proposal.
“The Senate’s proposal provides NCInnovation with the same annual funding as what the endowment returned over the past year, and it continues that funding through the next two budget cycles,” said King. “I believe this is entirely consistent with NCInnovation’s budget for applied research grants and commercialization support services, and I am proud to stand with lawmakers in finding flexible ways to address all of the state’s budget priorities, including NCInnovation.
“As I have said all along, I do not hold a position on how policymakers should fund this effort. 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,” King said. “Thank you to North Carolina lawmakers for their continued support of this mission.”
The Senate budget’s changes to NCI’s funding structure followed a state audit of the group which found NCI was operating in accordance with state statutes. Additionally, two independent CPA firms verified that NCI’s records followed Generally Accepted Accounting Principles and state law requirements.
NCI President J. Bennet Waters praised and agreed with the audit results, noting the group had been a “target of a significant misinformation campaign by some media outlets,” a likely reference to the Carolina Journal, operated by the John Locke Foundation, which has been critical of NCI’s funding.
The audit of NCI was requested by one of NCI’s board members, Art Pope, who is the founder of the John Locke Foundation. He was appointed to NCI’s board by former House Speaker Tim Moore.
It took more than 1,438 hours at an “approximate cost of $222,968” to complete the audit, according to the state auditor’s report.
The Senate budget provisions are not the only action by lawmakers to attempt to take back NCI’s funds.
In February, Harry Warren (R-Rowan) filed House Bill 154, which aimed to claw back the $500 million as well as the remaining $15 million in interest. Warren told North State Journal he feels the group should be privately funded.
Warren’s House colleague, Rep. Ray Pickett (R-Watauga), has defended NCI. In a memo obtained by North State Journal that was sent to multiple House committees, Pickett rebutted remarks made about NCI in a media interview by Andy Jackson of the John Locke Foundation.
Members of the UNC Board of Governors Committee on Educational Planning, Policies and Programs also praised NCI’s work and potential at its Feb. 26 meeting.
