• WisBusiness

Thursday, December 16, 2010

Remaking Commerce agency only part of the solution for the Wisconsin economy


By Tom Still
The Wisconsin Department of Commerce is the highly visible tip of a larger iceberg – the state’s myriad economic development programs. While proposals to reshape that tip may help Wisconsin’s economy move ahead, reformers shouldn’t ignore what lurks beneath the surface.

Four years ago, a report by the Legislative Audit Bureau noted that Wisconsin’s 152 economic development programs are spread among eight arms of state government – the Department of Agriculture, Trade and Consumer Protection; the Department of Natural Resources; the Department of Tourism; the Department of Transportation; the University of Wisconsin System; the Wisconsin Housing and Economic Development Authority; the Wisconsin Technical College System and Commerce.

While Commerce is the largest single agency devoted to economic and business development, both in terms of its programs and its budget for grants, loans, bonding and tax credits, other agencies touch the economy in many ways. Even within Commerce, no more than a third of its employees are actually devoted to economic, business and community development; the rest are regulators in programs as diverse as building safety, petroleum tank inspection and amusement park rides.

As Gov.-elect Scott Walker and the Legislature consider how to get the most out of state economic development efforts, one emerging answer is to dismantle Commerce and rebuild it along the lines of a public-private partnership, a model followed in some states.

That approach may work, but it could leave programs in seven other state agencies essentially untouched. Another option may be to relieve Commerce of its regulatory functions and make it a central clearinghouse for programs now housed in other state agencies.

No matter where they’re administered, state economic development programs all offer one of these five categories of assistance:

* Direct services, which can be as simple as information and technical assistance;

* Grants and loans, which are generally state tax dollars intended to promote economic development;

* Tax credits, which offset the income tax liability of businesses that meet specific criteria;

* Loan guarantees, which are commitments by state agencies to repay the principal obtained from private lenders in the event borrowers default on their loans; and

* Bonding authorization, which represents the state’s approval for WHEDA or municipal governments to issue bonds on behalf of businesses seeking to finance economic growth projects.

The largest spending category of the five is bonding authority, followed by grants and loans, direct services, loan guarantees and tax credits. At present, however, no single agency is empowered to use all of those tools.

If policymakers are looking for efficiencies, it may make sense to designate Commerce as the “traffic cop” for economic development programs across agency lines. Many of those programs might remain exactly where they are today, but Commerce could become the hub for determining what’s duplicative or outdated, tracking performance data, setting statewide and regional goals, and determining what state-run efforts are best suited for privatization.

Most important, such an approach might be less confusing for start-up and emerging businesses within Wisconsin as well as businesses outside the state that are checking out relocation or expansion opportunities.

In one sense, economic development should be a goal that cuts across all of government. A state that is “open for business” should exemplify that attitude in its public agencies as well as within its private business community. Sooner or later, a positive mindset can be infectious, even among public employees whose jobs may have little or nothing to do with economic development. After all, the jobs of those same public employees ultimately depend on Wisconsin building a healthy economy.

Innovation is the recurring theme of “Be Bold: The Wisconsin Prosperity Strategy,” a joint report issued last week by scores of participants in the Wisconsin Economic Summit process. The report stresses specific innovative approaches in the economy, in education, in government and more. Achieving that kind of broad-based innovation won’t be as simple as dismantling the Commerce Department – or any single state program.

Walker has set a goal of creating 250,000 jobs in four years, and everyone who lives in Wisconsin should hope that goal is met. There’s a choice: Spend valuable time focusing on the sins, real or perceived, of a single state agency – or share the responsibility for growth, in deed and in attitude.

-- Still is president of the Wisconsin Technology Council. He was a co-author of “Be Bold: The Wisconsin Prosperity Strategy,” which is available by clicking on this link or at http://www.wiroundtable.org/summit

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