“Innovation” was an oft-mentioned buzzword at the annual Emerging Issues Forum, an event sponsored by North Carolina State University that this year focuses on healthcare.

Underlying the discussion about health practices and new drugs is the subtle suggestion that more investment and support is needed from the state. The topic may gather even more attention this week as lawmakers return to Raleigh to start the legislative session.

Donald deBethizy, president and CEO of Winston-Salem, N.C. drug development company Targacept,(NSDQ:TRGT) raised that point in a panel discussion titled “North Carolina’s Potential for Innovation.” deBethizy said the state needs to create a Life Sciences Development Corporation. This entity would step in and help biotechnology companies by providing them loans. deBethizy said government stepped up to support the growth of the oil and gas industries. He argues that government should support the biotechnology industry, where the research and development of today leads to the drugs and jobs of tomorrow.

Sam Taylor, the president of trade group NC BIO, said that the loans are an investment in North Carolina’s economy. Taylor argues that incentives are needed not only to attract companies to come to the state, but also to entice companies that have operations in North Carolina to stay and grow in the state.

If lawmakers do discuss the Life Sciences Development Corp., they’ll be taking up a matter that was first proposed in 2009. Senate Bill 580 passed in the Senate but failed in the House of Representatives.

It’s hard to argue against Taylor’s point about the significance of the life sciences to the Tar Heel State’s economy. North Carolina has more than 500 life science companies, according to the state’s Biotechnology Center. Drug development has played a key role in the transition of North Carolina’s economy from manufacturing, textiles and tobacco to pharmaceuticals and technology.

But it’s also going to be hard to make the case that lawmakers find some way to financially support the industry at a time when all areas of state government are under scrutiny to find places to cut. The state’s $19 billion budget is projected to have a $3.7 billion shortfall and all state agencies are taking a hit to help the state to close the budget gap. That’s not the kind of environment where lawmakers can easily make the case to financially support biotech companies.

Taylor argues that North Carolina needs to offer companies incentives because Texas, Pennsylvania and other states are nipping at the Tar Heel State to surpass it in biotech prominence.

“North Carolina can’t afford to be the state that doesn’t offer incentives,” Taylor said.

If lawmakers even debate the Life Science Development Corporation again, expect that they’ll be asking the hard question of whether North Carolina can afford it.