• WisBusiness

Wednesday, December 23, 2009

Bring back the punchbowl for small business


By Jeff Hoffman
Argue all you want about the true effectiveness of the $787 billion American Reinvestment and Recovery Act; however there is one program that has helped small business get back on its feet.

Unfortunately, just as small business is starting to see the light at the end of this very dark economic tunnel the available funding of $375 million for SBA stimulus loans was exhausted as of Nov. 23.

There are two critical items that have made the SBA stimulus loan a very effective tool for borrowers:

1.) The upfront fees (which can total approximately 3 percent of the loan) were waived

2.) The government guarantee for lenders was upped from 75 percent to 90 percent of the loan. This additional security for lenders led to the ability to get deals done in what has become an extremely conservative conventional lending market.

As of Dec. 8 there were 679 requests for the SBA stimulus loans totaling $313.4 million dollars that have been put on hold until Congress decides whether or not to act on this issue.

U.S. Sens. Olympia Snowe, R-Maine, and Mary Landrieu, D-La., have just introduced a bipartisan bill that would call for the extension of the SBA package until Dec. 31 of 2010 and also increase the maximum loan size of the SBA 7(a) from $2 million to $5 million and the SBA 504 loan from $1.5 million to $5.5 million.

With health care commanding the full attention of the Senate right now it is unlikely that this issue will receive much attention in the immediate future and this piece of legislation will most likely be included in some type of jobs bill (Stimulus Part II) being considered for 2010.

Meanwhile many small businesses that finally have the confidence to move forward with expansion have one of the proven successful "stimulants" removed from the economic recovery. According to the SBA, the average weekly loan volume prior to the expiration was up 60 percent from the weeks preceding the passage of the Stimulus package.

I have seen first hand the effectiveness of this program via a start up business by the name of Innovation Station.

Innovation Station was in the middle of purchasing a facility for their new daycare business in Brookfield and then September 2008 hit the financial world and Innovation Station was no longer qualified for a loan. Innovation Station went to five separate banks over the course of five months to try to salvage their dream and finally found a lender that got them approved via the SBA stimulus program. After being open for only four months Innovation Station is exceeding their financial projections and they are up to three employees. While it does appear that we are emerging from the Great Recession the private sector, especially small business, needs to start growing again to sustain a healthy economic recovery.

With the increased lending standards that entrepreneurs face and the difficulty in obtaining capital, the extension and expansion of the SBA stimulus funds are an appropriate measure for growth that Congress should act upon immediately.

If our elected representatives truly want "JOBS! JOBS! JOBS!" this program should be brought back "NOW! NOW! NOW!". Please consider contacting Senators Kohl and Feingold and let them know to keep money flowing to small business.

-- Hoffman is president of the Independent Business Association of Wisconsin and vice president at Judson & Associates, s.c.

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Tuesday, December 22, 2009

Holiday perks list includes naughty and nice in politics, business


By Tom Still
A source close to the toy industry has once again leaked a copy of Santa's perks list for Wisconsin politicians and newsmakers. Here's what the good boys and girls in Madison and Washington will reportedly find in their stockings this Christmas week. But they better not pout and they better not cry if an alert district attorney asks why gifts were delivered down chimneys after midnight.

Gov. Jim Doyle: A fat sack of money to help trim the state's budget deficit would be nice, but with checked bags costing $15 each these days, Santa must travel light. So let's give Doyle a T-shirt that reads: "One more year and I'm outta' here!"

Milwaukee Mayor Tom Barrett: A helping hand (literally). Barrett took a vicious beating last summer at State Fair Park when he intervened in a domestic dispute, and still has only partial use of his right hand. Now a candidate for governor, Barrett is also learning how to cut meat, write and button his shirt all over again. He recently joked he has "very good third-grade penmanship." That's OK, Mr. Mayor. If you're elected governor, vetoing bad budget bills only requires a few strokes of the pen.

Milwaukee County Executive Scott Walker: A link to www.onehitwondercentral.com. Walker's campaign for governor thus far has dwelled on cutting spending and taxes, but now that the latest Wisconsin Taxpayers Alliance report shows Wisconsin slipping out of the ranks of the nation's biggest spending and taxing states, Walker needs a second tune. "How I'll Love the Economy Better Than Those Other Guys" has a nice ring to it.

Former U.S. Rep. Mark Neumann: A copy of Ross Perot's book, "United We Stand." Because Republicans are notorious for deciding early which candidates to back in their own primaries, Neumann finds himself swimming upstream in the GOP's race for governor. But what if this successful businessman borrowed a page from Perot and ran a third-party race? As 1992 presidential candidate Perot might say, "Why not, dad-gummit?"

The state Veterans Affairs Board: A copy of Dr. Seuss' "The Grinch Who Stole Christmas." Veterans Affairs Secretary John Scocos was serving a National Guard stint in Iraq at the time of some questionable spending at a state veterans' facility. When Scocos returned to his civilian job running the Department of Veterans Affairs, he was eventually fired over things that appear to have happened while he was overseas. That's not the best public-relations message for an agency that tells private employers to protect the jobs of workers who must fulfill military obligations.

The state Department of Natural Resources: How about 200,000 or so deer GPS units for the 2010 hunting season? A company just across the border in Duluth, Minn., sells global positioning systems to help hunters find lost dogs. However, the bigger problem (and market opportunity) is that Wisconsin hunters can't seem to find the deer the DNR game wardens swear are out there. Perhaps White Bear Technologies can adapt its GPS units to fit around the necks of those phantom deer.

The Madison City Council: A copy of "A New Yorkers View of the World." This famous New Yorker magazine cover depicts a map of the world as seen by self-absorbed New Yorkers. About half of the map is devoted to details of Manhattan and the world west of the Hudson River is shown as largely a wasteland. That's how some anti-business politicos in Madison view Wisconsin's capital city -- as an imperious economic island. In the real world, however, money and opportunities can (and do) move elsewhere.

Wisconsin's congressional delegation: A link to "The Coastie Song," an Internet hit. The state's two senators and eight House of Representatives members often find themselves outnumbered by the "coasties," those members of Congress who hail from the populous East and West coasts. It's time for all good "sconnies" on Capitol Hill to band together, especially when it comes to getting Wisconsin's fair share of federal aid. In 2007, for example, Wisconsin ranked 49th among the 50 states in federal aid per capita to K-12 students. Are "sconnie" kids somehow less deserving -- or are we leaving money on the table?

Google: What to get the company that has everything and still craves more? Santa's answer: A history book that describes what happens to those who aspire to global domination. A Paris court has ruled that Google's expansion into digital books breaks France's copyright laws, and a judge slapped the Internet search leader with a $14,300-a-day fine until it stops showing literary snippets. Google will appeal, of course, but the ruling has at least slowed Google in its crusade to scan all the world's books into a digital library accessible to anyone with an Internet connection. If you Google the phrase "intellectual property" right now, the definition might come back "Vive la France!"

For Wisconsin's rising political stars: In an era when scandal and partisanship drives more good people away from politics than it attracts, it's reassuring to know that quality office-holders continue to be attracted to public service. That's a gift to Wisconsin citizens. Happy holidays, everyone!

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Monday, December 21, 2009

Modern farms protect natural resources and our economic future


By Laurie Fischer
It's becoming increasingly popular to reminisce about simpler times and how good things used to be. Today's dairy farmers, like their agricultural forefathers, share a commitment to produce safe, nutritious and affordable food products. But agriculture is very different now.

Remember the '57 Chevy? That wonderful body style made it a classic. But have you driven one lately? No power steering, no air conditioning, no seat belts, no air bags, no computers to manage performance, horrible gas mileage and no emissions controls.

Comparing modern farming with the old days is like comparing the '57 Chevy with a 2010 model. Today's dairy farmers use technology never dreamt of by our parents or grandparents. Can you think of any business in the United States that hasn't changed significantly in the last 50 years? Dairy farmers have changed in order to remain competitive with other states and other countries. And they have done so responsibly.

The rural beauty of Wisconsin is close to the hearts of dairy farmers. Environmental protection and the adoption of new farming practices are not mutually exclusive. In fact, research conducted at the University of Minnesota and published by the American Society of Agricultural and Biological Engineers indicates that larger farms do a better job protecting the environment because they have the resources to have specialists dedicated to managing environmental issues.

Wisconsin has strong laws that hold permitted dairies to a "zero discharge" standard. These laws are more stringent than those governing municipal treatment plants. Dairy farmers support these laws because they are concerned about protecting our land, air, and water.

The milk and cheese produced in our state are important economic pillars. The Dairy Business Association feels it is important that we grow and sustain an industry that is critical to Wisconsin's future. You can rely on our dairy farmers to protect and maintain a quality rural way of life and to take their environmental responsibility seriously.

-- Fischer is executive director of the Dairy Business Association.

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Wednesday, December 16, 2009

Give market forces a chance to meet energy and climate change needs


By Tom Still
Some days, it seems the only certainty about the U.S. economy is uncertainty.

Three of the economy's largest sectors -- health care, finance and energy -- are in varying degrees of flux, in part because Washington seems bent on keeping it that way. President Obama and Congress can't seem to bring closure to the health-care reform debate, the financial industry is under pressure from the Loan Officer in Chief to make more small business loans, and the Copenhagen climate change talks have raised more doubts than confidence.

Layer on a $12 trillion national debt that will be financed by $200 billion in federal debt service payments this year alone, it's a wonder the economy is performing as well as it is.

The growing schism over international, national and even state regulations tied to global climate change -- and how that affects the energy sector -- is a prime example of what's causing heartburn among business leaders.

The Copenhagen climate talks are entering their last phase, but negotiators have made less progress toward reaching an agreement on global greenhouse gas emissions than some would have hoped. With China and India balking and smaller nations adopting a "blame-America-first" stance, perhaps the impasse is no surprise.

Compounding the uncertainty of what an international agreement might hold is the U.S. Environmental Protection Agency's expanding reach over carbon emissions from all sources. The EPA, in response to a 2007 U.S. Supreme Court decision that ruled greenhouse gases are a pollutant subject to the Clean Air Act, appears poised to place greenhouse limits on everything from factories to real-estate development.

National business groups are worried that a command-and-control regime established by the EPA will lead to new and burdensome requirements on manufacturing, the construction industry and other sectors -- driving up energy costs and choking job creation.

In Wisconsin, groups such as the Alliance of Automobile Manufacturers, Wisconsin Automobile and Truck Dealers Association, and Wisconsin Corn Growers Association are voicing their dismay over new standards for car emissions proposed in state climate change legislation unveiled last week.

Those groups believe the state emission standards, which are not unlike those adopted in California, are unnecessary because of a national program on greenhouse gas emissions and fuel economy standards.

"By adopting (the California standards) Wisconsin is implementing a public policy that provides no measureable environmental benefit above and beyond its federal counterparts and creates significant challenges for the ethanol industry," read a letter from the groups to Gov. Jim Doyle and members of the Governor's Task Force on Global Warming.

What's missing in this debate is a commitment to letting the markets work. Capitalism is far cleaner than undemocratic systems of government, as was demonstrated when the Iron Curtain collapsed, revealing a legacy of Communist-era pollution. Now that China has moved toward a market economy, it is slowly cleaning its air and water -- even as its production and consumption grows.

Some of the best examples of land, water and wildlife conservation in the world are private or a blend of private and public incentives, not top-down public solutions. Manufacturers, energy producers and consumers, land owners and other business leaders are as concerned about the possible results of climate change as much as anyone. But they're also worried a command-and-control response will lead to less innovation, not more.

Wisconsin is a state with every reason to enhance production of homegrown alternative energy sources, to conserve energy and to diversify its energy sources. After all, a state that lacks coal, oil and natural gas is largely dependent on others -- whether those others live in Oklahoma, Saudi Arabia or Venezuela.

Innovation is taking place in the state's research and development labs, both public and private, and inside major companies such as Johnson Controls, Rockwell Automation, Kohler and Orion Energy Systems. It's also bubbling up in smaller but emerging firms that are finding better ways to produce second-generation biofuels, wind energy, solar energy and much more. They deserve a chance to work.

Better, cleaner sources of energy are needed. But solutions that value regulation over innovation won't solve the problem without creating more uncertainty in an already uncertain time.

-- Still is president of the Wisconsin Technology Council. He is co-author of "Hands-On Environmentalism," published by Encounter Books, which examined private conservation strategies.

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Tuesday, December 15, 2009

GreenBiz: Lakeshore Tech a leader in wind tech ed


By Gregg Hoffmann
Not many students go to class 100 feet or more in the air, but those enrolled in the Lakeshore Technical College Wind Energy Associate Degree program do just that.

Practical experience in installing, maintaining and even rescuing people is gained on a wind turbine that was installed on the Cleveland, Wisconsin, campus in 2004. Students also do internships with a variety of commercial wind turbine companies around the country.

More turbines are in the pipeline for LTC, which, as of August 2008, was one of eight schools training people in wind energy technology in the country.

The LTC program is four semesters and a summer internship long. It currently has almost 40 students and the class for fall 2010 has a waiting list. "It has really mushroomed in the last 18 months or so," said Doug Lindsey, dean of trade and industry, agriculture, and apprenticeship. "When we first started working in the area in 2003, we could not find a market.

"We put the turbine up in part to produce some of our own energy on campus (an estimated 3 percent of the campus electrical energy needs) and as a demo site. But, things have changed."

The story about how it changed, and how LTC has carved out a niche in the fastest growing segment of renewable energy production, is an interesting one. "We had a student, Velvet Sommers, who had taken a couple of our courses while she was still at Lincoln High School in Manitowoc," Lindsey said. "She had some credits to burn and wanted to go up in the turbine to learn about it.

"We basically built a course for Velvet, and this 98-pound student in red pants went up the turbine with a crew. The local newspaper did a story, it was picked up by AP and the phones have been ringing off the hook ever since."

Wind energy also was a natural for LTC, which is a good place in the state for wind, not far from Lake Michigan. Three wind farms are located within a relatively few miles of the campus. So, a school that ranks 13th in total enrollment of the 16 technical schools in Wisconsin suddenly found itself in demand.

The school also had strong electrical and other program, so it wasn't a big transition to turbines. "I tell people that a wind turbine basically is a jet plane on a stick," Lindsey said. "We were already teaching some of the things that could be adapted to turbines."

Industrial leaders and groups have rallied to the LTC program. "We've had great partners from the industry," Lindsey said. "Without them, we could not have built what we have so far."

Focus on Energy provided a grant for construction of the turbine. WE Energies has helped with grants and the two entities also have combined for assistance in a photovoltaic solar project that also has started in campus.

In 2005, LTC received the Innovation Award from the Interstate Renewable Energy Council for the wind energy demonstration site.

A large Danish wind company, Vestas, GE and other companies have assisted in taking students as interns, with equipment donations and in other ways.

Jenny Heinzen serves as lead instructor for the program and has been an innovator since its beginning. A student-teacher ratio of 6 to 1 has been maintained so far in the program.

The LTC web site tells students they will learn to install, test, service and repair wind turbine components, troubleshoot and maintain control systems, learn climbing safety practices. Courses range from an introduction to wind systems course to industrial codes, troubleshooting and frequency drive procedures.

Associate degree graduates can prepare for careers as wind turbine technicians, mechanics and tower climbers, installation technicians, operation and maintenance technicians and wind farm maintenance managers.

Lindsey said additional standards are being developed for wind energy training by the American Wind Energy Association. Some LTC practices are used as models for establishing those standards.

U.S and Canadian commercial wind farms have been growing at 25 percent annually. That has created an intense demand for LTC graduates and others trained upper-level technicians.

Solar power should create the next intense demand, Lindsey projected. Then, small wind power systems -- which could be used in condominium complexes, retail developments and other industries -- could be the next wave.

LTC hopes to continue its reputation as a leader in education on emerging energy systems by expanding into these areas.

"As an institution of higher learning, we have a responsibility -- to our students, to the region and to ourselves -- to develop strategies which will allow LTC to make its contribution to environmental awareness and change," Lindsey said.

-- Hoffmann has written many columns and features for WisPolitics.com and WisBusiness.com over the years. He will write the GreenBiz column monthly.

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Tuesday, December 8, 2009

Timing is everything: 2009 year-end tax planning tips



By Kevin Reardon
The window of opportunity for many tax-saving moves closes on December 31. Set aside time to evaluate your tax situation now, while there's still time to affect your bottom line for the 2009 tax year.

The basics: timing is everything

Year-end tax planning is as much about the 2010 tax year as it is about the 2009 tax year. There's a real opportunity for tax savings when you can predict that your income tax rate will be lower in one year than in the other. If that's the case, some simple year-end moves can pay off in a big way.

If you think your tax bracket next year will be the same or lower than your tax bracket this year, look for opportunities to defer income to 2010. For example, you may be able to defer a year-end bonus, or delay the collection of business debts, rents, and payments for services. Similarly, you may be able to accelerate deductions into 2009 by paying some deductible expenses such as medical expenses, interest, and state and local taxes before year-end.

AMT: what you don't know could hurt you

If you're subject to the alternative minimum tax (AMT), traditional year-end maneuvers, like deferring income and accelerating deductions, can actually hurt you. The AMT -- essentially a separate federal income tax system with its own rates and rules -- effectively disallows a number of itemized deductions, making it a significant consideration when it comes to year-end moves.

For example, if you're subject to the AMT in 2009, pre-paying 2010 state and local taxes won't help your 2009 tax situation, but could hurt your 2010 bottom line. Legislation earlier this year included the latest in a long series of temporary "fixes" for AMT, but this patch (which includes increased AMT exemption amounts) expires at the end of the year. While it's likely that additional legislation will be passed to address 2010, right now AMT exemption amounts for 2010 are scheduled to return to pre-2001 levels.

IRA and retirement plan contributions

Traditional IRAs (assuming that you qualify to make deductible contributions) and employer-sponsored retirement plans such as 401(k) plans allow you to contribute funds pretax, reducing your 2009 income. Contributions you make to a Roth IRA (assuming that you meet the income requirements) or a Roth 401(k) aren't deductible, so there's no tax benefit for 2009, but qualified Roth distributions are completely free from federal income tax--making these retirement savings vehicles very appealing.

For 2009, the maximum amount that you can contribute to a 401(k) plan is $16,500, and you can contribute up to $5,000 to an IRA. If you're age 50 or older, you can contribute up to $22,000 to a 401(k) and up to $6,000 to an IRA. The window to make 2009 contributions to your 401(k) closes at the end of the year, while you can generally make 2009 contributions to your IRA until April 15, 2010.

RMDs suspended for 2009

When you reach age 70 1/2, you're generally required to start taking required minimum distributions (RMDs) from any traditional IRAs or employer-sponsored retirement plans you own. RMD requirements, however, were suspended for 2009. This presents an opportunity for those normally required to take RMDs to postpone the receipt of taxable income. If you already took an RMD for 2009, you may be able to roll over the RMD to the same (or to a different) IRA or eligible retirement plan -- you generally have until the later of 60 days from the time you took the distribution or November 30, 2009.

Roth IRA 2010 conversions

It's worth looking ahead to 2010, when special rules will apply to Roth conversions. Current limitations based on income and filing status that prevent many individuals from converting a traditional IRA to a Roth IRA will be eliminated in 2010. Additionally, if you convert in 2010, half the income that results from the conversion can be reported on your 2011 federal income tax return and half on your 2012 return (you can choose to report the full conversion tax on your 2010 return, if you want).

This might influence the decisions you make now; for example, if you're currently working but aren't eligible to contribute to a Roth IRA, you might consider making a contribution to a traditional IRA for 2009 in anticipation of making a 2010 Roth conversion. Or, if you plan on making a 2010 Roth conversion and opting to pay the conversion tax on your 2010 return, you might consider trying to defer deductions until next year to offset that conversion tax.

Bonus depreciation and expensing

If you're self-employed or a small-business owner, you'll want to take note of the special depreciation rules that are scheduled to expire at the end of the year. Depreciation rules for 2009 allow an additional 50% first-year depreciation deduction for qualifying property purchased for use in your business on or before December 31

In lieu of depreciation, Section 179 deduction rules allow for the deduction, or "expensing," of up to $250,000 of the cost of qualifying property placed in service during 2009. Currently, that limit is scheduled to drop to $125,000 (adjusted for inflation) in 2010.

Also worth noting

* A tax credit of up to $8,000 is available in 2009 for qualified first-time homebuyers. A tax credit of up to $6,500 is available for qualified existing homeowners who purchase a new principal residence after November 6, 2009.

* The first $2,400 of unemployment compensation received in 2009 is excluded from income for federal income tax purposes.

* If you itemize deductions, 2009 is the last year you'll have the option to deduct state and local sales tax instead of state and local income tax.

* Individuals who do not itemize deductions are able to claim an additional standard deduction of up to $500 ($1,000 for married couples filing jointly) for real estate property taxes paid for 2009, the last year this deduction will be available.

* The temporary deduction for sales and excise tax relating to the purchase of a qualified new automobile, light truck, or motorcycle applies to vehicles purchased through December 31, 2009.

* The above-the-line (maximum $4,000) deduction for qualified tuition and related expenses expires at the end of 2009, as does the above-the-line deduction for up to $250 in out-of-pocket classroom expenses paid by educational professionals.

* Individuals age 70 1/2 or older have only until December 31, 2009, to make charitable contributions of up to $100,000 directly from an IRA to a qualified charity, without including the distribution in income.

Talk to a professional

When it comes to year-end planning, there's always a lot to think about. A financial professional can help you evaluate your situation and determine if any year-end moves make sense for you.

-- Reardon is a Fee-Only financial planner and is owner & president of Brookfield-based Shakespeare Wealth Management Inc. He can be reached at 262-814-1600 or Kevin@ShakespeareWealthManagement.com.

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Monday, December 7, 2009

In western Wisconsin, regional economic growth has 'Momentum' of its own


By Tom Still
In parts of western Wisconsin, the ties to Minnesota seem almost as strong as those to the Badger state. Many people in Wisconsin's border counties read Twin Cities newspapers, watch Twin Cities television stations, follow Twin Cities sports teams and, most likely of all, see their economic destinies as linked to Minnesota's metropolitan powerhouse.

Western Wisconsin's economic links to Minneapolis and St. Paul are tight, but the magnet effect of the Twin Cities' economy doesn't preclude a regional identity for the Wisconsin counties east of the St. Croix River. In fact, it helps to define it.

Building on metro market ties while nurturing home-grown strengths is the role of Momentum West Inc., a non-profit confederation of 10 counties in western Wisconsin. It is an example of how regional economic development has found a niche.

Momentum West is a phoenix, having risen from the still-warm ashes of Momentum Chippewa Valley, a predecessor, three-county effort. With renewed leadership and buy-in from corporate, academic and community investors, Momentum West was born in December 2007 and now includes Barron, Chippewa, Clark, Dunn, Eau Claire, Pepin, Pierce, Polk, Rusk and St. Croix counties. Major cities in that footprint include Eau Claire, Chippewa Falls, Hudson, River Falls, New Richmond and Menomonie, where the group held its annual meeting last week.

Its mission seems simple enough: Develop partnerships, leverage resources and market the region as a great place to live, work and do business. Executing is a bit more complicated, as it involves meeting the sometimes conflicting needs of communities and investors who cooperate where cooperation makes sense -- but who compete where competition is necessary.

For now, cooperation is winning out. Momentum West leaders know it's tough for individual cities or counties to market themselves in a world of competing messages. But a regional approach to defining the shared attributes of all 10 counties carries some weight, assuming the message is pitched to the right audience.

That's been the thinking behind regional economic development efforts in Wisconsin for nearly a decade. The idea took off during the Wisconsin Economic Summits in 2000 through 2003 with the realization there is no single "state economy," but rather a matrix of overlapping regional economies that don't respect city, county or even state borders.

In addition to Momentum West, those regional groups today include 7 Rivers in the La Crosse area (which include parts of Minnesota and Iowa), Thrive in the Madison area, NEW North in northeast Wisconsin, Grow North in north-central Wisconsin, Centergy in central Wisconsin and Milwaukee 7 in southeast Wisconsin. Some groups are more active than others, but they're all trying to define their regions strengths in ways that work for their collective parts.

For Momentum West, the Twin Cities economy is both foundation and competitor. The Twin Cities can draw Wisconsin companies, workers and investors into its orbit -- and simultaneously spin out economic activity on the Wisconsin side of the border.

Among the regional advantages touted by Momentum West is a well-educated workforce, in part the product of three UW System campuses (Stout, River Falls and Eau Claire) and two technical colleges (Chippewa Valley and Indianhead) as well as some private colleges and universities. Many of those institutions pride themselves on working with the business sector.

UW-Stout is a prime example. Since the late 1980s, the Stout Technology Transfer Institute has engaged dozens of companies in solving manufacturing issues, thus saving or creating jobs. Its Northwest Manufacturing Outreach Center is a national example and its technology park, a partnership with the city of Menomonie, the Stout Foundation and Xcel Energy, houses 24 buildings, more than 40 companies and 1,200 jobs.

The region can also boast of high quality of life, lower costs of living, solid communications, energy and transportation structures, and companies that fall into clusters of emerging industries (such as bio-agriculture and bioenergy), growth industries (electronics, computers, medical devices, packaging and plastics) and enabling industries (nanotechnology and chemicals).

Regional economic development strategies have their pitfalls, of course. Such regions may not be readily identifiable outside the state. Will someone living in Michigan be drawn to "Thrive" here? Will a business leader in Minnesota distinguish between "New North" and "Grow North" -- or, for that matter, think they're anywhere but in his own state? Building brands is neither cheap nor short-term. There may also be a temptation to trade city-by-city competition for region-by-region rivalry, which can be Balkanizing for Wisconsin as a whole.

The leaders of Momentum West understand those challenges and more. They won't run from their economic ties in the Twin Cities, but they won't be content to live in their shadow, either.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Wednesday, December 2, 2009

Controlling costs must be a part of federal health care solution


By Tom Still
To say small business owners in Wisconsin are nervous about the outcome of the debate over health-care reform is like saying a football quarterback is jittery just before a 300-pound defensive end grinds him into the turf. Both know what's coming -- and both can only hope to get back on their feet once it's over.

Representatives of small business have become persuaded that, no matter what version of the health-care bill is adopted by Congress, they will pay more to provide health care to employees. Those same small business owners believe neither the House nor the Senate bill address spiraling costs, the core problem from an employer perspective. They also believe Congress will ratchet up already burdensome costs in two main ways -- through expensive new coverage requirements and by forcing the nation's insured to pay more to cover the uninsured.

There's no doubt the federal debate has been about reforming access to health care, rather than controlling costs. Most health-care reformers in Congress want to see the nation's 46 million uninsured -- more than 15 percent of the population -- protected by a safety net. They contend it costs the United States billions of dollars in lost productivity, social woes, family bankruptcies and more for so many people to go without health insurance.

While access to health-care poses real problems, so does a system that consumes 17 percent of the Gross National Product and which forces employers to choose between hiring another worker or salting away money for the next double-digit increase in health-care premiums.

A recent actuarial analysis by Wellpoint Inc., the parent company to Blue Cross & Blue Shield of Wisconsin, concluded the most likely compromise of the bills pending before the House and Senate would increase premiums by 17 percent for a small business with eight workers of average age and health status. That's on top of increases already coming, with or without reform.

Skeptics might say such estimates are more insurance company "spin control," but even discounting the self-interest of the insurers it's safe to say Congress and the White House have thought far more about improving health-care access than controlling costs.

Here are some suggestions for addressing the cost side of the equation, and keeping more money in the hands of small businesses that create the bulk of the nation's jobs.

* Focus on wellness, disease prevention and ways to better manage chronic illnesses, such as diabetes and heart disease. Chronic illnesses account for 75 percent of U.S. health care costs.

* Provide incentives to hospitals and clinics in crossover markets to collaborate where possible, rather than compete over every service. Cost increases in health care can be slowed when health-care organizations avoid service and facility duplication. Hospitals and clinics may make more money on specialists, but primary care keeps customer costs down because those medical professionals stress wellness, prevention and disease management.

* Accelerate the movement toward digitizing medical records, which first gained federal support when former Wisconsin Gov. Tommy Thompson was secretary of Health and Human Services. President Obama is right about moving this idea ahead. Electronic health records will provide a long-term foundation for higher quality care while reducing errors and giving medical professionals better data. It's a ready example of how technology can help patients.

* Pass the Comparative Effectiveness Research Act of 2009. The basic idea behind "comparative effectiveness" is to create a national database to share information about how new or different therapies, treatments and diagnostics work for patients. Medical professionals would have near-instant access to that information.

* Allow small businesses more, not less, leeway in buying coverage plans that fit their employees. Such plans might cover mostly catastrophic cases, preventative care and child medical care, with relatively high employee-paid deductibles for everything else.

Health care reform is inevitable because the current U.S. system has its flaws. In the rush to improve access, however, let's not forget that rising costs will create a new and more serious crisis if small businesses stop creating jobs.

-- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.

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Tuesday, December 1, 2009

Time for state government to invest in venture capital

By Bill Kraus
John Torinus and Tom Hefty have weighed in and given the state an F on their economic test. They are tough graders, but it is hard to argue with their facts about lost jobs, low family incomes, shrinking wages. So what will reverse these discouraging trends? I don't hear anyone suggesting that the mainstays of the 20th century Wisconsin economy like paper, heavy machinery, and auto-related manufacturing are likely to return to their glory years.

The same article touts the cluster strategy which would build on still lively assets like GE's medical equipment and Milwaukee's hundred-plus water-related companies. They do not emphasize the prospects of the small, fledgling idea-driven companies being spawned by Wisconsin's research universities and institutions in, mostly, Madison and Milwaukee but they have in the past.

Happily they do not dwell on the usual government suspects: taxes, fees, regulation, attitude. They lament instead the lack of a new economic strategy for the state by the state.

They do view the dismal state of providing the kind of high-risk venture capital that is the mother's milk these aforementioned start-ups and early second stage enterprises need with rightful alarm.

This, happily, is something that state government can do something about. Or can it?

The Democrats in the state Senate have put together a stimulus proposal that would put modest amounts of state money into the hands of entrepreneurs to nourish and encourage job creation.

Why not a full-fledged venture capital program that would grow the state's economy with a tiny percentage of the money (over $70 billion at the moment) being invested by the state investment board on behalf of the thousands of people who have retired or will retire from their jobs in state and local government and education?

As it happens, I can tell you why not. This idea surfaced some 30 years ago and was immediately and vigorously opposed by the state employees' union, the directors of local government organizations, and the state teachers' union.

These risk-averse organizations preferred investments in the blue chips like, say, General Motors. So how well did that work out?

It would be foolish to pretend the safety firsters (if indeed there are any safe places) don't have a point. Venture investing is a risky business, and the rules of venture investing make its operatives easy marks for the advocates of the more traditional AAA stocks and bonds, even though these are unhappily in some disrepute these days.

But this doesn't make venture investing less risky or protect it from criticism.

This is why:

Venture investing, not unlike baseball, is mostly about failure. Even the best of the best in baseball and in venture investing rarely bat .300. This is bad.

What is worse is that those venture investments that go bad do so quickly. So right out of the box, the most canny practitioners have to own up to and abandon -- this is another unpleasant aspect of successful venture investing -- the early losers.

To succeed, venture investors have to spread their money around. If they want to get three successes they have to make 10 investments, seven of which will either fail completely or simply slog along and produce little if any in the way of earnings and growth. Those that fail, what's more, have to be jettisoned. Successful venture investors are ruthless about adhering to a "no good money after bad" strategy.

It is not hard to imagine what kind of public outcry will ensue from early failures and fast reinvestments with what is essentially public money because the public will have to replace those losses with more tax money if the three winners in this hypothetical example don't come through.

Can any elected official stand up to this kind of criticism? Does a chicken have lips? These are the same people who caved in on indexing the gas tax when the talk radio people raised the decibel level on that penny ante burden during the $4 a gallon trauma.

If they can and will, however, the rewards are provably worth it. Those three winners -- and the potential for one heroic success -- represent the future, the next Wisconsin economy. No one knows what they will be. No one knew a century ago that a salesman and a hardware dealer in the Fox River Valley would have an idea that would become Kimberly-Clark or that a man who built a dam in Wisconsin Rapids would find a way to use the excess power it created to make coated paper.

Wisconsin has the money. What Wisconsin needs is the will and the expertise and the guts to stand up to the inevitable criticism.

The alternative is another richly deserved F from John and Tom.

-- Kraus is a longtime politico and campaign finance reform advocate who served in Gov. Lee Sherman Dreyfus' administration.

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