Innovation.

The word buzzed around the state Capitol throughout the Legislative session, beginning with Gov. Linda Lingle's call to diversify the economy through science and technology and ending Thursday with the Legislature passing a dozen bills meant to do just that.

Many of Lingle's ideas remained intact, although in many cases the funding fell through, most notably a proposal to make the Employees' Retirement System invest $100 million of its $10.4 billion fund in promising Hawai'i-based tech companies — which by the end of session had morphed into a simple request for ERS to look into local investments.

Meanwhile, lawmakers had ideas of their own, and part of the more than $17 million innovation package included $500,000 to expand aerospace development in the Islands, as well as almost $5 million to start an Academy for Creative Media at the University of Hawai'i.

The aerospace money would help the state look for opportunities in that area as well as providing seed money for a Pacific International Center for Space Explorations.

Those in the science and technology industry say that what the state really needs to do is create a business-friendly environment to attract investors. The most significant work the Legislature did, in their view, was to protect the high-tech tax credits and incentives known as Acts 221/215, even while adding reporting requirements.

To many officials, the work done this session was a step in the right direction.

"It's always been our view that this is the right vision for Hawai'i's future, the right strategy and approach for our economy," said Ted Liu, director of the state Department of Business, Economic Development and Tourism. "I think some good ideas were passed this session and we've always said there are a lot of good ideas related to innovation that had been introduced, some by us and some by others."

Sen. Carol Fukunaga, chairwoman of the Senate's Economic Development and Taxation committee, anticipates this year's legislation will help new companies start up, stimulate the creation of new jobs, allow for existing companies to expand and "hopefully lead to a much more diversified economy."

Fukunaga credits the governor with bringing into focus ideas about innovation that have been rattling around for a number of years.

"The fact that the governor sort of started the ball rolling is a real plus," she said.

Liu said positive things came out of the session, but he was disappointed that many of the governor's work force development initiatives were not passed.

The administration's approach had included proposals to encourage high school and college students to enter science, technology, engineering and math, or STEM, fields as well as retrain existing workers to do more technical jobs.

While many of the education initiatives survived, most professional development proposals fell by the wayside.

Lifelong learning accounts, which would have allowed low- wage earners to set aside pre-tax dollars for education and professional development, and would be matched by their employers and the state, was a priority for the administration, but it failed before the Legislature.

A proposal to start a state rapid-response training program to help residents adjust to changes in the job market was also dropped.

However, Liu said the administration will work with what it has.

"On some initiatives they gave seed money that has challenged us to do as much with that as possible. I intend to do that," he said.

Some of the seed money is going to a Music Enterprise and Learning Program Experience program at Honolulu Community College.

Over the next two years, $400,000 will be put toward a technology center and incubator in Kaka'ako.

During the next fiscal year, $5 million will be awarded in research funding for small locally based tech companies.

In addition, the Legislature funded a number of initiatives aimed at public schools so that kids can start building up their STEM skills — and hopefully steer some into technical fields.

"This program received unprecedented industry and bipartisan support to leverage federal R&D investment coming into Hawai'i," he said via e-mail. "In the last three years, (about) $1.5 billion has been invested into Hawai'i's innovation industries due to the support of Hawai'i's congressional delegation."

Kitajima also said keeping the high-tech tax incentives mostly intact will encourage more investors to look to companies that offer well-paying jobs based on ideas and creativity.

"Act 215 gives Hawai'i investors (and outside investors) a reason to look beyond Hawai'i real estate and other investments they know very well," he said. "It also gives them an opportunity to pause and to look at investments that have a larger trickle-down effect."

Attracting investors is critical, said Darren Kimura, president and CEO of Sopogy Inc., who was also relieved that Acts 221 and 215 were not changed in a way that would have made investors pull out, as feared earlier in the session.

"Without seed capital, it's a real challenge to get a start-up company going," he said. "To get traction without capital is hard."

Kimura said investment capital is also needed to create jobs that will draw the best and brightest Hawai'i graduates back to the state. "We need to create an environment where companies can get funded and succeed," he said.

In an environment friendly to scientific companies, Kimura predicts there will be jobs for all the people the state wants to train.

"Work force development is one of the top things we need to have," he said. "We have that glass ceiling and we don't have the answer to necessarily break through that."

Reach Treena Shapiro at tshapiro@honoluluadvertiser.com.