WisBusiness: Hefty pushes for state-paid job incentives to get economy out of "major trouble"
By Kay Nolan
A leading Wisconsin executive and longtime key figure in the state's economic development efforts reiterated his belief that those efforts have failed embarrassingly, but offered few ideas on how Wisconsin can improve an economy he calls grim.
"The next generation of business leaders will have to step up and figure out what we need to do," said Thomas Hefty, retired CEO of Blue Cross-Blue Shield of Wisconsin, in remarks Thursday in Brookfield to about 40 members of the Wisconsin Innovation Network. The group is the membership subsidiary of the Wisconsin Technology Council, the governor's advisory panel on science and technology business growth.
Hefty is the co-author, along with John Torinus Jr., president of Serigraph Inc. in West Bend, of "Wisconsin flunks its economics test," a report published in the July edition of Wisconsin Interests, a publication of the Wisconsin Policy Research Institute.
The report blasts state officials for remaining optimistic about Wisconsin's economy, and says the state's economic development plans suffer from a multitude of laudable goals but a lack of central focus. It accuses Wisconsin's Department of Workforce Development of re-computing unemployment figures in 2008 to make them appear more rosy than they are. But DWD says states have no ability to massage or manipulate unemployment numbers in any way -- the federal Bureau of Labor Statistics controls the data and monitors how states report it.
“John and I have been on every economic development council since 1984,” said Hefty, who co-chaired Gov. Jim Doyle’s Economic Growth Council from 2003 to 2005. “We wrote the article out of embarrassment. In a nutshell, Wisconsin’s economy is in major trouble.”
The report cites numerous statistics ranking Wisconsin below the national average in wages, job growth and per capita income. In some measures of economic success, the state ranks dead last, the authors say. Hefty said the most startling statistic shows that Wisconsin’s average wages have fallen to the level of Alabama’s – 85.6 percent of the national average. Yet, companies are not flocking to Wisconsin to take advantage of its low wages, he said. Although climate and taxes are often presumed as reasons, when comparing Wisconsin, Iowa, Minnesota and Illinois – all Midwestern states with higher-than-average taxes, the three others have doubled Wisconsin’s job growth, and Iowa has tripled it, Hefty said.
Hefty and Torinus suggest that the state's efforts should focus on attracting a cluster of like-minded new industries to the state, such as a Silicon Valley-type cluster of technology companies, rather than working to keep past industries.
Hefty also said Wisconsin needs to spend $40,000 to $50,000 per job in incentives to potential employers. Iowa, he said, spent $50,000 per job to attract a new IBM facility. While some people argue that taxpayers should not have to pay big companies such sums, it’s become the reality amid nationwide competition for jobs, Hefty said.
Some of the business professionals in attendance questioned whether Wisconsin has an unspoken culture that hurts business growth.
Richard Wilkey, who in 1973 founded Fisher-Barton, a Watertown manufacturer of lawnmower blades, said he recently opened a plant in South Carolina and plans to move additional 75 jobs there from Wisconsin, due to what he says is a business environment far more hostile than Wisconsin’s winters.
“You should do a study on actual days of production lost due to the climate. It’s not many at all. Even during a snowstorm, we only lose a few people here,” said Wilkey, who operates two plants in Watertown and one in Sun Prairie. “If there’s even a forecast of bad weather in South Carolina, the plant practically shuts down.”
It’s the cost of doing business that is persuading him to continue expanding his business out of state.
“We’re going to make more money in South Carolina,” he said. “Health care costs $5,000 less per employee, compared with Wisconsin. Taxes are lower. I had already made the decision to move, but I was actually approached by South Carolina. They came to me and offered me training for my workers, other incentives. Wisconsin never did that.
“Here in Wisconsin, manufacturing is a pejorative word. I’m convinced the hierarchy in Wisconsin couldn’t care less if manufacturing disappeared,” said Wilkey.
Julie Penman, associate vice president at HGA Architects and Engineers of Milwaukee, disputed Hefty’s conclusion that Wisconsin’s universities fail to encourage new patents and research that aligns with local businesses.
“It’s not like everybody is ignoring this,” she said. “Universities definitely have put together a master plan.”
With a pending change in the governor’s office, Penman said voters should press gubernatorial candidates to discuss their plans for economic growth.