MADISON – A few days before a committee of the Wisconsin Legislature held a hearing on an audit of the state’s 152 economic development programs, Florida Gov. Jeb Bush announced his state would spend $300 million to convince a major biomedical institute to open a center in Orlando. The events are related because they underscore differing philosophies about state business growth strategies.
The Legislature’s Joint Audit Committee met to hear an audit report that concluded Wisconsin’s economic development efforts include 152 programs, including some that are outdated or duplicative. The report generally urged greater accountability of how public dollars are spent.
In the latest two-year budget period, the state spent $152.8 million to create jobs, attract and retain businesses and otherwise spur economic growth. The Legislative Audit Bureau said that figure included money for grants and loans, spending on direct program services and administrative costs. Another $173.2 million was earmarked for tax credits, loan guarantees and bonding authority, but not all of that money was actually used.
In essence, the state set aside about $300 million over two years to grow Wisconsin’s economy. That’s not a trifling amount, but it represents about six-tenths of 1 percent of what the state spent on all programs during that same period.
In Florida, the president’s brother blew nearly that much money on one high-profile deal. The Burnham Institute for Medical Research, based in San Diego, announced in late August it will open a 175,000-square-foot laboratory as part of an emerging biomedical cluster in Orlando. The institute will employ about 300 people within a decade, but Bush and other Florida officials are betting it will spark a fast-growing tech park with thousands of jobs.
This wasn’t the first time Florida bought a ready-made biotech incubator. In 2003, Bush persuaded the Scripps Research Institute, also based in San Diego, to open a research center in Palm Beach County. That required about $500 million in state and local incentives.
Wisconsin will eventually spend $50 million to launch the Institutes for Discovery, the UW System’s version of the Burnham and Scripps labs, but that’s a relatively modest investment given how much private money will be poured into the Discovery project and Wisconsin’s historic reputation for excellence in biotech and life sciences. Wisconsin has built its biotech foundation over a century; Florida is trying to buy its high-tech industry off the shelf.
But is the Florida approach necessarily bad? Doesn’t it make sense to invest enough money to really make a difference, rather than spreading it around in smaller amounts?
Florida invests in smaller programs, too, and it’s a much larger state, but here are some of the pros and cons of the “Big Score” versus the “hedge your bets” approaches.
• Putting a lot of money into a specific project or program can dramatically raise visibility on a national scale, send a strong message about the seriousness of the state effort, and attract private dollars to the project. You can bet the Scripps and Burnham centers will elevate Florida on the biotech investment map.
• Spreading money around can ensure a more diverse economic development approach. When Florida spends a combined $800 million on two biotech projects, it’s picking a winner. Even with all its wealth, Florida may not be able to throw similar amounts at other opportunities – such as nanotechnology or biofuels – if it wanted. The state is committed to a high-cost, somewhat high-risk strategy.
• Spreading the risk over a range of projects and programs allows more geographic diversity in economic development, but it can mean that good programs are starved to pay for the care and feeding of weaker programs. Wisconsin is notorious for starting new programs in related fields rather than backing what already works. Wisconsin also prefers handing out tax credits (which are sometimes never used) over direct grants, even though most economic studies show grants are far more effective.
• Wisconsin is not above investing in the occasional big program, but even then, it plays it pretty safe. The $12 million that could be invested in Abbott’s mysterious pharmaceutical expansion in Kenosha won’t really happen until Abbott demonstrates it will create a prescribed number of jobs. That’s simply common sense. Likewise, the $50 million state investment in the Institutes for Discovery was conditioned on leveraging $100 million in private dollars. That has happened before the first spade of dirt has been turned.
Lawmakers are correct to demand that state economic development programs are effective and accountable. But they should also ask what other forward-minded states are doing and compare Wisconsin’s economic development investment on a per capita basis. If you don’t invest much, you’re not likely to get much in return.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.