Tom Still column No. 78-05
“The year in review: Grading Wisconsin’s high-growth economy”
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By Tom Still
MADISON – Before the calendar turns to a new year, here are some category-by-category “grades” for Wisconsin’s high-growth, tech-based economy in 2005. Take it easy on the professor if you disagree; he doesn’t have a “back-up” position.
Innovation: A minus. Wisconsin continues to produce more than its share of patents and intellectual property, with organizations such as the Wisconsin Alumni Research Foundation (WARF) and the Medical College of Wisconsin leading the way. Academic research and development spending in the state continues to climb, although national trends are slowing. The real challenge is transferring technology to the marketplace; some states do more with less.
Political climate: B-minus. Sure, the Legislature came within a few votes of banning certain types of cloning research, but Gov. Jim Doyle vetoed that bill and it’s unlikely to come back soon. Lawmakers read public opinion polls regularly, and they know human embryonic stem cell research remains a 2-1 favorite. Aside from the stem cell debate, the Republican-led Legislature has been open to new ideas to spur investment and to attract and retain workers. If there’s one area of bipartisan agreement in the Capitol, it’s high-end economic development.
Business costs: C-plus. People love to gripe about Wisconsin taxes, and with good reason, but taxes aren’t the only cost related to running a business. The Milken Institute concluded this year that Wisconsin is in the middle of the pack in overall business costs, 21st out of 50 states. What’s most important is that our costs are very competitive when compared to “new economy” states such as California, Massachusetts and New York. Land prices, wages and electricity costs are relatively modest. Taxes remain high (3rd to 22nd, depending on which study you believe), but the change to a “single sales factor” tax for manufacturing and software companies will help.
Talent: C-plus. Wisconsin is an above-average state in producing college-level students but below average in terms of the percentage of college graduates in the workforce. That’s not so much because Wisconsin loses more grads than any other Midwest state; it does a poor job of attracting young talent from elsewhere. But that may be changing. More than 90 percent of Wisconsin’s two-year tech college grads stay, and some of the state’s larger cities are showing up on hip, quality-of-life surveys with regularity. Also, the state is beginning to attract experienced tech company managers to run its emerging companies. An emerging problem: Finding enough workers in some high-growth counties and metro areas.
Investment climate: B-minus. This may be the “most improved” category from 2004, although a lot of work remains to be done. Angel investment activity in the state appears on the rise, with more networks being formed and investments being reported. The State of Wisconsin Investment Board’s recent decision to allocate up to $50 million in two state venture capital firms is a strong sign of renewed faith in the high-tech sector. Outside investors follow SWIB and its $78 billion portfolio. The decision by Doyle and the Legislature to create a new class of tax credits for investments deserves applause – it is slowly working. Now, let’s ramp up the pace.
Infrastructure: B-plus. A year ago, there was no Wisconsin Angel Network, no Wisconsin Security Research Consortium and no Information Technology Association of Wisconsin. Regional efforts such as the Northeast Wisconsin Regional Economic Partnership were just under way, and there were fewer avenues for entrepreneurs and technologists to network their business plans and ideas. Today, Wisconsin is drawing attention nationally for some of its coordinated efforts. Even Milwaukee, which once had a semi-isolationist attitude, is pulling together. The credit goes to people across the state for quietly and effectively pushing for public-private cooperation, building on regional strengths and leveraging the power of technology and manufacturing “clusters.”
Overall grade: B. Wisconsin is making progress, although not yet quickly enough to satisfy everyone who wanted to see the state’s economy rebound overnight after the manufacturing downturn. A new economy is emerging in Wisconsin; let’s see if the grades improve again in 2006.
Still is president of the Wisconsin Technology Council. He is the former associate editor of the Wisconsin State Journal in Madison.