Economic development policy – largely all about catching up on job creation over the last two decades – is up for grabs as the state gets ready for Governor–elect Tony Evers and a Democratic agenda.
Were he governor already, Evers probably would probably not support the $28 million subsidy put through on deadline for Kimberly-Clark by lame duck Republican Gov. Walker last week. Evers may even try to cut back parts of the landmark subsidy deal with Foxconn.
Therein lies the difference between the two parties. Walker made the state “open for business.” Evers will try to make the state open for government.
Evers and his cabinet will make the case for more investment or spending –you choose the word – in education and road building. They will argue that big infrastructure and education commitments promote a healthy economy in the long run.
They will see deals for individual companies as too narrow, too conflictual and too expensive. They have a point. The K-C deal will save less than 400 jobs in a hurting industry at a cost of more than $70,000 per job. At $5,000 per job in tax revenue (sales and income tax), it will take 14 years for the state treasury to get the money back.
Note that the Walker subsidy for Foxconn was four times higher for each of the 13,000 promised jobs. Both deals require major capital expenditures by the companies.
Republicans justified the Foxconn largesse, which I supported, as a game changer to lift the state’s economy to higher levels of technology. It will be years before we know if Walker’s monster development bet pays off. Walker (he’s gone) won’t be held accountable down the road, but his Republican Party will be.
Recruiting outside companies and supporting expansions of existing companies has been the Walker game plan. It’s hard to see Evers following suit.
The governor-to-be comes off as agnostic to business dynamics at best. He signaled his belief in government primacy when he proposed during his campaign to eliminate the private-public partnership for job creation – the Wisconsin Economic Development Corporation (WEDC) – in favor of going back to a government agency.
His disdain for WEDC comes at a time when it has had a nice series of wins: the Haribo candy maker in Kenosha County, the headquarters expansions in the M7 Region of MIchels Corp., Komatsu Corp. and Leonardo DRS. These are signature projects.
With come consistency, Evers has signaled a de-emphasis on manufacturing with his proposal to eliminate the exemption on corporate income taxes for two bedrock bases of the Wisconsin economy: manufacturing and agri-business. In a strategic sense, Evers may have a case: first, he is looking for tax revenues to fund middle-class tax cuts and more government spending; second, manufacturing and farms are not big job creators in the new economy.
The growth is in services, like insurance, IT, education and health care. Government jobs keep growing, too, regardless of which party is in power. Will Evers be smart enough to tilt to the more dynamic clusters? We’ll see. Other states have made the pivot to services.
Evers has several startup executives in his transition team. And he is pulling in bright people to look at many major issues in the state. Will that lead to a more robust state strategy to promote new ventures? That’s where most new net jobs come from. It’s where the Rust Belt is being re-invented. It was not a priority for the Walker team.
Evers, who appears unappreciative of the reality that all tax revenues derive from private companies, could run to daylight in the entrepreneurial world. Make heroes of he people who have the guts to start companies. Expand the state’s successful tax credit program for angel and venture investors. Venture capital has been growing fast in Wisconsin, but needs to grow way faster.
Furthermore, Wisconsin has a long suit in research and development, with more than $1 billion of academic R&D in Madison and more than $300 million in the M7 Region. Patents in the M7 private sector are strong.
The state is doing a better job of turning our intellectual property into startup companies, but there is plenty of room for improvement. UW – Milwaukee is becoming a hotbed of entrepreneurial activities, but lacks the massive funds available at UW – Madison. The Medical College of Wisconsin is stepping up.
One avenue for the Evers team would be to challenge the Wisconsin Alumni Research Foundation, with $3 billion in assets, to clip fewer coupons and make a major commitment to venture investing. It does token early stage investing now.
It should do so across the state, not just parochially in Dane County. State taxpayers built UW – Madison and its R&D and licensing prowess.
Gov. Evers, use your bully pulpit. You may be luke cool toward major corporations, but Democrats have always been friendly to small business people, to entrepreneurs. Stake out that ground so you don’t come off totally anti-business.
Meanwhile, learn to live with the reality that other states will continue to heavily recruit major corporate expansions. Wisconsin can’t be out of that game until other states do so.
WEDC is not going away, even if Evers so desires. The Republican legislature will block any such move. Despite ankle-biting critiques of its management practices and some lapses, all non-critical in scope, it remains a more effective organization than all previous renditions.
With low unemployment, job creation may not seem high priority as Evers takes office. But, anyone who has been around a while knows that the economy moves in cycles and that we always will need new jobs in new sectors.
Footnote: One of my grandfathers was in the now nearly defunct newspaper business; the other was a lumberjack when the White Pine forest was going to last forever.
