Established in 2022, the Arizona Health Innovation Trust Fund (AHIT) is designed to help Arizona become home to a top-ten life science sector by helping to bridge the “valley of death.” During the 2023 legislative session, our elected leaders have the opportunity to make the investment that will capitalize the AHIT.
On Tuesday, February 7th, Arizona life science leaders testified in support of Senate Bill 1084. The bill proposes a $200 million investment in AHIT.
Capitalizing the Arizona Health Innovation Trust Fund (AHIT)is an investment in Arizona’s future and continues the process that the Senate, House, and Governor began in 2022 when AHIT was created in the Arizona State Treasurer’s Office (ASTO) with the State Treasurer as trustee. In December 2022, ASTO has completed the process outlined in the statute and AHIT is ready to be funded.
The amount of that funding will be determined as Arizona’s leaders develop and pass the FY24 budget.
Arizona’s funding gap
Arizona’s health innovation sector is the beneficiary of over $25 billion in public and private investments in its discovery and healthcare delivery infrastructure over the last 20 years. The result is over $38 billion in economic impact in the year 2021 alone.
However, the process of creating health innovations has three parts: discovery, development, and delivery. This middle component, development, is the bridge that discoveries originating at our universities, hospitals, and small businesses must cross before they can create a benefit for the people who need them. Arizona’s development infrastructure also must be supported. That is what AHIT is designed to do.
Arizona leaders have set a goal to make Arizona home to a top-ten life science sector. The impact of reaching top-ten status will be significant. In 2021, the #10 state had an economic impact of over $78 billion.
When AHIT was created, the goal for the corpus of the trust was established at $200 million. Arizona’s AHIT investments are managed by ASTO. After the funds have matured for 5 years, ASTO will make distributions of 4% annually to an Arizona 501c3 public charity to fulfill the statutory requirements of this public-private partnership:
- provides entrepreneurial education, mentoring and support to persons in the health innovation and health care delivery sectors;
- provides programs that support workforce development;
- provides programs that support the development and commercialization of health innovation;
- has entered into an endowment agreement with the Treasurer that includes investment procedures, maturity timelines, other requirements established by the Treasurer and entity reporting requirements.
The non-profit entity must annually submit the report, as prescribed by the Treasurer, to the Governor, the President of the Senate, the Speaker of the House of Representatives, and the Treasurer by each December 31.
How much is needed?
The current estimate of the funds needed to bridge Arizona’s health innovation development gap is $10 million per year. As the sector grows, the need will grow. Under AHIT’s endowment model, the core investment capital will grow to meet this need. The table below illustrates what a 4% distribution from the trust would be at the 5-year maturity date following your FY24 investment into AHIT:
|$250 M||$200 M||$150 M||$100 M||$50 M||$25 M||$10 M|
|$10 M||$8 M||$6 M||$4 M||$2 M||$1 M||$0.4 M|
As an endowment model, similar to the trusts established under ASTO that are managed for Arizona’s cities and towns, investment returns on the core capital continue to grow and replenish the trust.
Capitalizing the Arizona Health Innovation Trust Fund in FY24 is an investment in Arizona’s future that will yield returns on an ongoing basis. It will yield benefits to Arizona today and for generations to come delivering both economic and health impact.
The level of investment budgeted in FY24 will also send a strong signal to the business, philanthropic, and investment sectors that are watching this process. These partners will be critically important in supporting the development work that needs to be done during the 5-year period while AHIT investments mature.
The next step
The next step in the legislative process for SB1084 is its hearing in the Senate Appropriations Committee on February 14, 2023 at 2 PM.
To learn how members of the community can show their support for this process, click here to contact AZBio.