Madison, Wis. – Because they live in a world where most ideas actually rise or fall on merit, entrepreneurs can be a bit naïve when it comes to how government works. The debate over the $57.7 billion Wisconsin state budget is a case in point.
As proposed by Gov. Jim Doyle, the two-year budget contains some good ideas for nudging along the state’s tech-based economy. The pool of tax credits for investors in qualified start-up companies would be expanded; money is set aside to jumpstart biofuels and other “cleantech” businesses; a catalyst to attract more venture capital would be created; and ideas for attracting, training, or retaining skilled workers would be pursued.
And that’s just the governor’s proposals. Ideas sponsored by some tech-savvy legislators, such as “Invest Wisconsin 2.0” by Sen. Ted Kanavas, would push the envelope even more.
Compared to what other states are investing in economic growth, the Wisconsin proposals are modest. They’re also targeted and rely primarily on the markets for long-term success. That should mean these programs – barely a rounding error in the budget – should pass, right?
The debate over the 2007-2009 state budget, which will last into the summer, must be closely watched by the state’s tech-based community. That includes researchers at UW institutions, investors who often provide the start-up money for the best ideas, and entrepreneurs who want to do business in a state that cares about them. Nothing can be taken for granted – even the best of ideas.
A larger game is at play between Democrat Doyle and the Legislature, which is divided into a Republican-controlled Assembly and a Democratic-run Senate. Some Republicans appear determined to strip the budget of anything that resembles a tax increase, even if it’s a user fee tied to a specific service, and some Democrats want to spend more than Doyle on some human services programs.
The combination means lawmakers from both sides could be tempted to “raid” dollars in one fund or another to pay for something else higher on their priority lists. It’s possible that even modest economic development programs could be targets.
That warning came through last week during a meeting of the Wisconsin Innovation Network in Madison, where a panel that included a key cabinet secretary, a top legislative staffer, an investor, and an entrepreneur discussed what the budget means to the tech economy.
When asked if he thought Assembly Republicans might try to take money from other programs to reduce taxes, Kanavas staffer Mike Richards said it was certainly possible. And because control of the Legislature’s two houses is split, funding for some programs may be in doubt until the end if lawmakers are unable to reach agreement on big-ticket items.
For the record: The state budget is driven by a relative handful of programs. Ten programs account for 83 percent of all state spending raised from state taxes; five account for 72 percent. The Big Five are K-12 school aids, Medicaid and related programs, the University of Wisconsin System, local government aids, and Corrections.
Economic growth programs that can be measured in a few millions of dollars are easily overlooked in a budget dominated by programs that spend billions.
Financial Institutions Secretary Lorrie Keating Heinemann told the WIN meeting that Doyle continues to build on his promise of supporting the tech economy, such as the proposed Wisconsin Venture Center. While other states are directly investing tens of millions of dollars in their tech economy, this $2 million proposal would help leverage private dollars at home and outside Wisconsin.
The case for investment
Toni Sikes, the founder and CEO of The Guild, reminded the WIN audience that state government can help create the right climate for the tech-based economy. Programs such as the investor tax credits, for example, have cost the state a few million dollars and helped spur tens of millions in “angel capital” investments.
John Neis, a veteran venture capitalist, said Wisconsin must continue to invest in the research capacity of the UW-Madison. “This is one of the leading research universities in the country,” Neis said, and a vital part of the state’s pipeline for new companies.
Of course, all this makes great sense – but that sometimes doesn’t matter in politics. During the coming budget debate, those who care about pushing Wisconsin’s tech-based economy to the next level should get involved. Good ideas without vocal champions may become discarded ideas.