• WisBusiness

Monday, August 9, 2010

Learning from other states about economic growth -- as others learn from Wisconsin

By Tom Still
LOUISVILLE, Ky. – Much like Wisconsin, Kentucky is a “flyover state” to many business people on the East and West coasts. And, much like the Wisconsin economy, Kentucky is best known for a few iconic products: Bourbon, tobacco and horses are Kentucky trademarks; beer, cheese and Harley-Davidson motorcycles (for now) are familiar Wisconsin brands.

The coastal image of states such as Wisconsin and Kentucky is understandably limited, especially when it comes to how those states are incubating jobs in high-growth sectors of the economy. It’s barely noticed outside the Midwest, for example, but business leaders in “Flyover Country” often exchange information about what works – and what doesn’t – when it comes to stimulating tech-based economic growth.

Such an exchange took place last week at the Venture Club of Louisville, which asked me and Joe Kremer of the Tech Council’s Wisconsin Angel Network to describe the entrepreneurial culture in Wisconsin. Members of the club – which includes angel and venture capitalists, entrepreneurs and more – wanted to learn about the Tech Council, Wisconsin’s network of angel investors, the Governor’s Business Plan Contest and the state’s tax credits for investors in early stage companies.

The Louisville crowd seemed impressed by Wisconsin’s renewed emphasis on entrepreneurism, its commitment to higher education, and its ability to attract research and development dollars to its major universities and colleges. It’s a message that often resonates in other mid-continent states, as well, including Illinois and Minnesota. Both states have recently adopted tax credit programs modeled after Wisconsin’s investor credits.

Then again, people and programs often seem more impressive when viewed from afar. As Mark Twain once observed, an expert is “an ordinary fellow from another town.”

Two days before the Louisville event, the Wisconsin Economic Summit held the first of three meetings to discuss ways to invigorate the state’s economy. A report commissioned by Competitive Wisconsin Inc., the Wisconsin Economic Development Association and the Wisconsin Counties Association was unveiled, and the consultants who wrote the report painted a dreary picture of the state’s economy.

Deloitte Consulting and Newmark Knight Frank recommended dismantling the state Department of Commerce and creating a quasi-autonomous board in its place. The report confirmed what many already suspected: Wisconsin lags the U.S. average in per capita income and job creation, and has invested sparingly in economic development over time. In fact, the consultants noted, some U.S. counties spend more each year on economic attraction than Wisconsin.

The report described the state’s approach as “a scattered broadcast of ideas and hopes instead of a well-rooted strategy for change.”

So, which is it? Is Wisconsin a model for other states to follow – or an example of how not to grow a state economy?

It may be a little of both. The Deloitte-NKF study properly raised questions about Wisconsin’s approach to economic development over time and recommended some aggressive solutions, including creation of a state development fund that would attract outside investment from private equity firms. That’s consistent with recommendations by the Tech Council in its July 2010 report, “Looking to the future: A case for bold action.”

Such funds have been established in a number of Midwest states, including Ohio, Indiana, Minnesota and Kansas. The Ohio fund, which is part of its Third Frontier program, has helped create thousands of jobs in hundreds of new companies – mostly in the technology sector.

The Deloitte-NKF study also recommended repositioning Wisconsin’s brand through a targeted marketing campaign; aligning state economic development efforts as well as its educational institutions around promising industry clusters; and more. It wasn’t difficult to see the report was written by site selection experts, however, as it also called for a statewide “shovel-ready” sites program with expedited permitting processes.

Some leaders of the Wisconsin Economic Summit process have argued the state’s best bet isn’t a renewed focus on luring companies from other states and countries. Instead, they contend, the state should create the right conditions for homegrown companies to flourish. That includes hands-on assistance for entrepreneurs, attracting more early stage capital and creating a “knowledge economy” workforce. And, as those companies grow, they will be more likely to stay if the tax and regulatory climate is hospitable.

Wisconsin has been doing a much better job of that in recent years. While it’s still very much a work in progress, so are similar business start-up efforts in most other states.

Policymakers and economic development leaders in Wisconsin should not be afraid to learn from others outside the state. In fact, the current economic crisis demands it. The good news is that other states are learning a thing or two from Wisconsin, as well. -- Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.


Comments: 5

At August 11, 2010 at 8:49 PM, Blogger John said...

Between 2008 and 2009, Wisconsin saw a net loss of nearly 6,000 residents to other states. During this same time period, my home state of Arizona—despite its miserable economy and dire budget situation—enjoyed a net gain of more than 15,000 residents (not counting immigrants from other countries; you know, places like Sweden). My adopted state of Texas netted more than 143,000 individuals from elsewhere in the U.S.

When it comes to employment, Wisconsin is barely better than middle of the pack. Seventeen states have lower unemployment than Wisconsin’s 7.9% rate (as of June); three states have unemployment roughly the same as Wisconsin’s; and twenty-nine states have higher unemployment.

How about income? Wisconsin’s household income ranks 21st among states; its personal income per capita ranks 27th.

As an incubator for businesses, Wisconsin also fails to impress. Between 2003 and 2008, the state ranked 24th in terms of growth in the number of business start-ups.

Public education? Wisconsin’s eighth graders are in the fat part of the curve, not in the right-hand tail where you’d like them to be. Their 2009 math scores were below those of students in 8 other states, and roughly equal to those of students in 15 states. The 2009 reading scores were worse: 11 states performed better, and 20 states performed essentially the same. (This was not always the case. As recently as the 1990s, Wisconsin students’ test scores put the state in the first tier nationally, not the second tier, where it sits now.)

On matters of taxes, spending, and debt, here are a few representative measures: Wisconsin ranks 20th in per capita state/local tax burden (where a ranking of 1 indicates a higher tax burden); 26th on state/local per capita spending; and 28th on state/local debt per capita.

Percentage of adults with a college degree? Wisconsin ranks 28th. Infant mortality? Wisconsin is 27th. Homeownership rate? 26th. Economic growth? 27th. Religious service attendance? 33rd. Violent crime? 34th. (Lower is better on this one.)

Now, for the obligatory caveat: yes, I have accentuated the negative. There is plenty going right in Wisconsin, and I have not discussed that here. The point of this exercise, however, is not to celebrate what is good, but to challenge the public and policymakers to work on the things that could be better.

In the view of this outsider, there’s a great deal that could be better. Wisconsin in 2010 is a very ordinary state—no longer “elite,” or “first tier,” or “A list,” if ever it was. Rather, depending on the measure, it usually shows up in a very crowded second tier of states or in the undistinguished middle.

At August 11, 2010 at 8:51 PM, Blogger John said...

The sadest part is that our best and brightest, are at best "mediocre".

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