HB2545

SECTION 1. The legislature finds that the Hawaii technology development corporation is advancing economic diversification and strengthening the innovation economy by supporting more than sixty-five small businesses, catalyzing the creation of high-wage jobs, and fostering new research and development in emerging sectors. The legislature further finds that the small business innovation research program has demonstrated measurable success, rising in national ranking from ninth place in 2012 to 2014 to sixth place in 2022 to 2024 in the country for small business innovation research funding per $1,000,000 gross domestic product. This shows a significant economic return on investment. In 2024, the twenty-seven Hawaii companies that received a total of $2,500,000 in state funds leveraged approximately $33,000,000 in federal awards.

The legislature also finds that the high cost of living in Hawaii necessitates the creation of higher-salary jobs in fields such as artificial intelligence, computer software, biotechnology, ocean science, renewable energy, nanotechnology, medical testing and devices, aerospace, and defense.

The legislature finds that states underserved by venture‑capital markets, including Hawaii, benefit disproportionately from the federal Small Business Innovation Research and Small Business Technology Transfer programs, which help build regional innovation ecosystems. A 2026 review by the National Academies of Sciences, Engineering, and Medicine concluded that these programs generate strong returns by enabling participating firms to attract significant additional federal research and development funding, serving as key entry points into the defense innovation ecosystem, and supporting higher rates of patenting, follow‑on financing, and successful technology transition—particularly for firms receiving multiple awards. The review further found that companies receiving state matching support are more likely to secure federal contracts, generate intellectual property, and contribute to national security capabilities.

The legislature notes that Hawaii's strategic Indo‑Pacific location, together with the presence of federal facilities, military installations, and research institutions, presents exceptional opportunities for Hawaii‑based companies to contribute to defense and dual‑use technology development. The federal competitive review process already provides rigorous technical and business evaluation, and additional state‑level review would impose unnecessary administrative burden and delay time‑sensitive innovation.

Accordingly, the purpose of this Act is to promote economic diversification by:

(1) Requiring the Hawaii technology development corporation to establish the small business innovation research matching program;

(2) Requiring the Hawaii technology development corporation to establish a science, technology, engineering, and mathematics education outreach program in collaboration with the department of education;

(3) Requiring the Hawaii technology development corporation to develop an economic diversification strategic plan for the State; and

(4) Appropriating funds.

SECTION 2. Chapter 206M, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§206M- Small business innovation research matching program. (a) There is established within the development corporation the small business innovation research matching program to provide matching grants to companies based in the State that have received federal small business innovation research or small business technology transfer awards.

(b) Any company with a principal place of business in the State that has received a federal phase I or phase II small business innovation research and small business technology transfer awards from any federal agency shall be eligible for state matching funds under this section without additional state technical or business review. Receipt of a federal small business innovation research and small business technology transfer award shall constitute sufficient evidence of technical and business merit.

(c) New small business innovation research and small business technology transfer participants and companies with demonstrated track records in the programs shall be eligible for matching funds under this section.

(d) State matching funds shall equal fifty per cent of the federal small business innovation research and small business technology transfer award amount.

(e) Companies shall submit a simple application to the corporation within ninety days of receiving a federal small business innovation research and small business technology transfer award notification, including:

(1) A copy of federal award notice;

(2) Documentation of principal place of business operating in the State;

(3) A brief description of how state matching funds will be used to advance the project; and

(4) Acknowledgment of annual reporting requirements.

(f) The development corporation shall approve or deny applications within thirty days of receipt. Companies meeting eligibility requirements in subsection (b) shall be automatically approved unless insufficient funds remain.

(g) The development corporation shall establish an annual application period for matching fund requests. If applications for matching funds exceed available appropriations, the development corporation shall distribute funds as follows:

(1) All eligible applications received within the application period shall be considered together;

(2) If total requested matching funds exceed available funds, the corporation shall distribute available funds on a pro-rata basis to all eligible applicants, calculated proportionally based on each applicant's requested matching amount relative to the total requested matching funds; and

(3) Any funds remaining unallocated at the end of the fiscal year may carry forward to the next fiscal year, subject to any constitutional limitations and applicable appropriation laws.

(h) The development corporation shall establish a science, technology, engineering, and mathematics education outreach program in collaboration with the department of education to promote science, technology, engineering, and mathematics education and career awareness. Under this program:

(1) Each company receiving matching funds pursuant to this section shall deliver a minimum of two presentations to public school students within one year of receiving matching funds;

(2) Presentations shall showcase innovation and technology development occurring in the State, describe career pathways in science and technology fields, and encourage students to pursue science, technology, engineering, and mathematics education and careers; and

(3) The development corporation shall coordinate with the department of education to schedule presentations and identify appropriate grade levels and schools, with priority given to schools in underserved communities.

(i) The development corporation shall track and report annually to the legislature no later than twenty days prior to the convening of each regular session on:

(1) The total state matching funds provided and total federal small business innovation research and small business technology transfer awards leveraged;

(2) The number of applications received, approved, and denied, including reasons for denial;

(3) The average time from application to approval;

(4) Distribution of awards by company;

(5) Any instances where insufficient funds required equitable distribution measures under subsection (g);

(6) Follow-on federal research and development contracts and procurement awards received by supported companies;

(7) Number of phase I to phase II transitions;

(8) Patents filed and awarded;

(9) Private sector investment attracted;

(10) Jobs created and retained in the State, including the number of jobs and salary ranges reported in the following bands:

(A) under $50,000;

(B) $50,000 to $79,999;

(D) $100,000 to $124,999;

(E) $125,000 to $149,999;

(F) $150,000 to $199,999; and

(G) $200,000 or more;

(11) Technologies transitioned into defense or commercial use;

(12) Partnerships established with defense prime contractors and federal facilities;

(13) Geographic distribution of supported companies across all counties;

(14) Total payroll dollars generated by supported companies in the State;

(15) Company revenue growth, including total annual revenues and percentage change from prior year;

(16) Number of science, technology, engineering, and mathematics education presentations delivered to public school students pursuant to subsection (h), including the number of schools reached, students engaged, and grade levels served;

(17) Technology sector and industry classification of supported companies; and

(18) Return on investment ratio, calculated as total federal funding secured per state dollar invested."

SECTION 3. (a) The Hawaii technology development corporation shall develop an economic diversification strategic plan for the State. The economic diversification strategic plan shall include:

(1) Clear goals and objectives;

(2) Measurable outcomes and performance indicators; and

(3) Recommended timelines and actions to strengthen emerging industries and high-wage job sectors.

(b) The Hawaii technology development corporation shall submit the strategic plan and any proposed legislation to the legislature no later than twenty days prior to the convening of the regular session of 2027.

SECTION 4. There is appropriated out of the general revenues of the State of Hawaii the sum of $ or so much thereof as may be necessary for fiscal year 2026-2027 for economic diversification and defense ecosystem development pursuant to this Act, to be allocated as follows:

(1) $ for the Hawaii technology development corporation to develop an economic diversification strategic plan pursuant to section 3 of this Act;

(2) $ for the Hawaii small business innovation research matching program established in section 2 of this Act;

(3) $ for the manufacturing assistance program, to help Hawaii-based manufacturers become globally competitive and support the scale-up and transition of technologies developed under the federal small business innovation research and small business technology transfer programs into production; and

(4) $ for commercialization and technology transition support, including:

(A) Accelerator and small business training programs to help develop companies that are solving large-scale problems in the community using innovative, advanced manufacturing, and technology-based solutions;

(B) Support for intellectual property protection, market research, and business development activities identified by the National Academies of Sciences, Engineering, and Medicine as critical success factors for small business innovation research and small business technology transfer commercialization;

(C) Facilitation of partnerships between Hawaii small business innovation research and small business technology transfer companies and defense prime contractors, acquisition program offices, and research institutions to support technology transition; and

(D) Assistance in navigating federal procurement processes and transitioning technologies into programs of record.

The sum appropriated shall be expended by the Hawaii technology development corporation for the purposes of this Act.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect on July 1, 2026.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	2545
THIRTY-THIRD LEGISLATURE, 2026
STATE OF HAWAII