In our unstable hyper-partisan political era, the $3 billion Wisconsin budget surplus has become a political football. Shouldn’t it be appreciated, instead, as a huge strategic opportunity?
Invested well, those one-time funds could be used for initiatives that break new ground for the state’s prosperity and societal well-being. Here are some concepts that could move the state forward:
Wisconsin has come a long way in the last 25 years in building a robust venture capital ecosystem. Angel funding, for instance, is now readily available for launching new ventures (Thank You, Angels!). However, much needed second and third funding rounds are still scarce.
We have learned that entrepreneurs are the pioneers who reinvent the economy, create jobs, and offset the erosions in the old economy. Yet they need more help. Most face a missing link for accelerating startup companies — Venture Capital A-rounds. Those are scarce investments in sales and marketing just as the entrepreneurial venture is taking off, but short of robust capital for cash flow. That gap in venture money limits the ability to exploit early products success.
We as a state could extend our existing successful 25% tax credit program for angels to include Round-A investments. Wisconsin could use $250 million of the surplus as an evergreen fund to invest further in high-growth startups that are about to take off.
The Wisconsin Economic Development Corporation has done an exemplary job of administering and managing the Act 255 Investment Tax Credits that help angel investors to take the initial plunge on new ventures. It could do follow-on good work on a fund to propel the new companies up the hockey stick toward breakout growth.
One way to go would be preferred notes with interest several points above bank commercial rate. That instrument would allow ventures to grow, add employees and to avoid dilution of the founding investors. Such non-dilutive capital to fund growth would set Wisconsin apart from other states.
Investments by the new fund would pay for itself in short order from the taxes from the new companies and their employees.
Bear in mind that the almost all net job-creation in the nation and Wisconsin come from startup companies.
Here is another strategic need: Partisanship killed the highly successful Knowles-Nelson Stewardship Fund that helped to conserve lands and water in Wisconsin. It had been in place for 47 years.
There are still many highly valuable and working lands that need to be protected for future generations. Let’s use another $250 million of the surplus as an endowment fund for the purchase or easements of these lands for public recreational enjoyment and production of food and timber. Only the earnings would need to be used.
The “endowment” could also be used for repairs and upgrades at run-down state parks.
The fatal weakness of the Knowles-Nelson initiative was that it depended on debt financing. A permanent capital fund would eliminate the need for debt service year-in-year-out. It would be a perpetual legacy.
Our policy-makers in Madison should be acutely aware that, despite partisan politics, more than three-quarters of Wisconsinites support the kind of conservation that Knowles-Nelson accomplished. Bless those two visionaries and their successors.
Rep. Dan Knodl has rightly called for tweaks in any new conservation bill to make sure the funds are used for access to acquired lands.
Democrats like David Crowley, the Democratic governor nominee, want to use a big hunk of the surplus for education. To get a surplus bill passed on a bipartisan basis, use as much as $500 million for K-12 schools. It’s one-time money, so direct it to one-time purposes.
Another $500 million as an endowment could be used to raise the percentage of Wisconsin students at UW-Madison from 45% today toward a goal of 75%. The UW-Madison graduates who are Wisconsin born and raised here mostly stay here for their careers and families. We can’t lose our future leaders to other universities and states.
Every Wisconsin citizen will have ideas beyond mine on how to spend the $3 billion surplus. I’m open to such strategic thought. Send them to me for public airing at www.johntorinus.com.
