Arizona State University officials are puzzled and dismayed by voters’ rejection of Proposition 102, which would have allowed the institution to own stock in private companies in exchange for research findings. But Arizona voters traditionally have been hesitant to amend the state constitution — particularly when it comes to provisions that are deemed safeguards.
Take Proposition 100, which would have allowed the Arizona Land Department to exchange certain state and private lands if such transactions were deemed to be in the public interest. The department should have that flexibility, but voters repeatedly have turned down similar constitutional amendments in the past, presumably out of fear the state would abuse that authority.
Similar fears may have been in play regarding Proposition 102, and overcoming the objections won't be easy.
Proposition 102 was strongly supported by ASU President Michael Crow as a way to allow the university to partner with promising start-up companies that stand to benefit from ASU research. Such relationships could be abused, which is why the provision is in the state constitution. Arizona’s founders wanted to keep the public and private sectors strictly separate.
But the world has changed in the last 100 years, and public universities across the country are vying not only to create world-class research departments in such emerging fields as bioscience, but to channel research findings into promising new industries that would boost the local economy. Arizona is behind the curve in that regard because of the constitutional ban on stock ownership.
Fledgling companies often cannot afford to pay up-front costs for research findings. Under Proposition 102 they would be able to exchange stocks for the research, with the university standing to gain if the business was successful; taxpayers would lose nothing if the business failed.
Like Proposition 100, Proposition 102 had built-in safeguards, including rigorous oversight, to guard against abuses. But voters apparently didn’t buy it in either case.
Thankfully, ASU has other options beside stock ownership as it expands its research capability. It can forge licensing and royalty agreements that would allow it to profit if a company benefiting from its research prospered.
Still, the stock ownership option should not be abandoned because of this single rejection at the polls. Just as state land exchange authority should be pursued, perhaps in context with other state Land Department reforms, so should university ownership of company stocks be pursued.
The key in both cases is assuring voters that enough safeguards are in place to prevent the abuses the state’s founders were guarding against a century ago, and that updating the constitution is in the public’s best interests.