Marotta: Wisconsin Business Climate Moving in the Right Direction

Department of Administration Secretary Marc Marotta is often referred to as the top political star in the Doyle administration. But don’t expect him to run for elective office anytime soon. His work at DOA, helping Gov. Jim Doyle foster a better business climate, apparently isn’t done.

He turned down the chance to run in Milwaukee’s 4th CD recently. And he says he likes the idea of moving from the private sector to government and then back. Then there’s the fact that he has four children under the age of 8. Running the “Department of All” is quite enough at this time, thank you, considering he’s commuting to greater Milwaukee.

Marotta, who came from the Milwaukee office of Foley and Lardner sporting close ties to many Milwaukee business leaders, portrayed the Doyle administration as a friend of business.

His assessment: “One of the other things is that they know that Wisconsin is open for business, and they know that this is a very pro-growth administration. I think that the Legislature will continue to exhibit pro-growth action, and I think that we are moving in the right direction. But we do have a fair ways to go.”

Marotta, a Harvard Law grad and former Marquette University basketball player, was the guest at a WisPolitics lunch on March 18. In addition to his political future, he discussed the apparent accidental destruction of Thompson administration records, the state’s fiscal situation and Doyle’s relationship with the Republican Legislature. Marotta answered questions from WisPolitics Editor Jeff Mayers, WisPolitics Associate Editor Melanie Fonder, Wisconsin Radio Network reporter Doug Cunningham and luncheon attendees.

The next Madison luncheon is April 14 with U.S. Sen. Russ Feingold. The cost is $15 for Madison Club members and $19 for non-members. RSVP to Loretta at the Madison Club at (608) 255-4861.

Mayers: … I hope you are enjoying lunch and welcome very much to the second Madison Club luncheon, today with Secretary Marc Marotta, from the ‘Department of All’ – the Department of Administration – right? It’s still the ‘Department of All,’ Marc?

Marotta: It is still the ‘Department of All,’ absolutely.

Mayers: I think you all know Secretary Marotta and we are going to try and keep our questions up here brief so we can open it up to the audience. Marc says that he is willing to take any and all questions, so take him up on that invitation. Marc, why don’t you make some opening remarks and then we can get to the questions.

Marotta: Thanks Jeff, I appreciate you having me here for this, and I appreciate all of the attendance. It’s a great crowd, and it has been great working with all of you — either in the press corps or governmental relations over the last 14 months. I told Jeff, and I will be very brief because you have heard all the spiel about economic development and the budget and everything else, so I will try to keep my remarks brief.

But I told him … I know there will be some tough questions in the audience, but I guarantee you they will not be as tough as two weeks ago when I addressed the Pharmacy Association right after we introduced the Canadian drug Web site. (Laughter.) Is there anybody from the Pharmacy Association here? (Laughter.) That was interesting, there (were) about 250 people there, and I said I would open it up for questions and I’m telling you, 100 hands went up, and there were 100 hostile hands. It was very interesting, but that whole thing has gotten a lot of attention. It has gotten a lot of national attention, and I was telling somebody the other day, `’You know a guy came up to me the other day and was very, very thankful we put out this Canadian Web site because he is able to save a lot of money now on some maintenance drugs.’ He said, ‘You know, I gotta tell you, the pharmaceutical companies — they charge all this money and a lot of it is because they advertise so heavily.’ And he said, ‘That advertising often isn’t factual. I’m telling you, I’ve been taking this Levitra now for the last three weeks and I still can’t throw one of those footballs through one of those tires.” (Laughter.)

So just briefly, I think there has been a lot accomplished in the last 14 months … despite reports of a lot of partisan fighting. … I think in ’97 Governor Thompson signed over 300 pieces of legislation in that legislative session. I think that we will exceed that in this legislative session. So despite a lot of the reports of partisanship, and there have been some, and there continues to be – that is just the way it is in politics — a lot has been accomplished. The budget. A lot has been accomplished on the economic development front .08.

There have been a lot of things that we have worked together to get done that I think advances the cause of the people in this state. So it has been a pleasure to again work with you. It has been a pleasure and a real privilege to serve to serve in this position. I see that one of my predecessors is here, Doris Hanson – and I would like to recognize Doris. And let’s open it up for questions. …

Mayers: Do you have your prediction who is going to win the big dance (in the NCAA tournament)?

Marotta: I used to study this thing more carefully a year or two ago, but now I am going to say Connecticut.

Mayers: OK, place your bets at the sports book. (Laughter.)

Marotta: See, you know now, people say now that you are going to run for higher office or you are going to run for some office and people speculate on that. But if I really was going to run for some office would I have made a prediction that some other team was going to win and not Wisconsin? (Laughter.)

Mayers: That’s right, your boss, he always names every Wisconsin team when asked about it. All right now to the second-biggest controversy of the week; this is more serious. How the heck did all of those records get lost or chewed up or thrown away? That sounds like something that a news organization would do accidentally.

Marotta: I wondered that too when I was first told about it. …We have done some internal investigating, and by the way – I would welcome any kind of other investigation. If the Speaker wants to investigate himself and if he wants to go in there and bring his staff and everybody else in there or if the audit bureau or the Justice Department, or whoever else wants to investigate, they are welcome to investigate, and I just want everybody to know that we are very open to that.

We do want to get to the bottom of that. I think it sort of has been overplayed in terms of the conspiracy theory because I don’t see anything and I would challenge anybody here to give us any reason why we would ever – why the Doyle administration would destroy documents from a prior administration. But particularly as it relates to Miller Park, where those documents might come in hand, particularly as we look to the team being sold.

But in any event, we are looking at it very carefully, and it has been explained to me as a computer error, where somebody downloaded some files into an Excel program and a certain column got screwed up. And apparently back in the middle of summer we used to have as a fail-safe where the boxes got labeled. And there were some green stickers for boxes that were supposed to go to the Historical Society and another kind of stickers for the boxes that were going to be destroyed. And they kind of stopped that process and relied more on this technology, and apparently it broke down. But there is nothing from my standpoint at least anyway that has ever come up that suggested anything but just human error or technological error.

Mayers: If you can’t blame a person blame a computer.

Marotta: That’s right.

Mayers: Why don’t you give us the budget picture, what it looks like. It still looks to be tight, the economy seems to be slowly coming out of the recession. … What does it look like for the next budget cycle and will there have to be more layoffs?

Marotta: I think that coming into this budget with 3.2 million and basically a billion of the hole plugged in the prior biennium with one-time tobacco money it was a real challenge as everybody here knows. I think we are in clearly a much better situation then were in the last budget. Two things I think that are challenges as we go into the next budget.

The first is just the economy and revenue. As you know, the Legislative Fiscal Bureau basically lowered its estimates on revenue because there hasn’t been the kind of job growth that we expected. Now you could look at it as a sort of a glass half-full, glass half-empty scenario. We had growth estimates in there that people say, ‘Jeez, these are very aggressive growth estimates in this economy.’ Well, the growth estimates on the corporate taxes have been exceeded by two or three times. Corporate profits are way up in this state. The sale tax estimates are very strong and they are on target, maybe even ahead of target. But the individual income tax, and that is maybe about 60 percent of our revenue, trails by a certain amount. And we are basically off by 1 percent in terms of growth as a result of that. So missing it by 1 percent is not all that bad and that is with only six months into the biennium. We are seeing some leading indicators right now that suggest that job growth will pick up . and that in order to continue to grow, manufacturers and other businesses need to start adding people. So we are seeing some tangential evidence of that, as well as anecdotal evidence and statistical evidence. So you know we are hopeful that on that front we will be OK. The governor fortunately vetoed into the balance $205 million. Otherwise, and essentially with the reduction and the revenue estimates, that was sort of wiped away. But if he hadn’t done that we would be in a heck of a lot worse situation right now.

The other is what people will always call the 800-pound gorilla, and that is Medicaid. And we have got a couple hundred million dollar hole in the Medicaid budget. Medicaid, I think for us, for other states, it may be an 800-pound gorilla, for us it is like a 400-pound gorilla. I think we can sort of manage Medicaid this year, and we will be able to get through it. It won’t be easy, and it won’t be without some considerable sacrifices, but I think we will be able to get through the Medicaid budget.

In the future though it is clear, it is very clear that we need to do something about the structural issues with Medicaid, the most serious of which it that we have, as a state, a lot of people in institutions relative to other states. A lot of people in long-term care facilities and in nursing homes, and that is for both the elderly and the disabled. And certainly relative to other states, we are very high. Now, one of the things we have tried to do with the feds, was to get a waiver to do a program in which we expanded family care. Which has worked very well in a number of counties; I think it is only in about five or six counties now. If we could expand family care throughout the state, and get people into community-based care and into home care, we could save money.

It will save money like right away. It’s almost like somebody saying to you, “I have a surefire investment for you and if you give me $100 it will return $1,000 tomorrow.” And you look into it, and there is no insider trading or anything, and it is a surefire investment and you want to do it and you know it is going to yield $1,000 but you don’t have $100 to put down. For us it is a matter of having some money to implement this change so that we can, you know, make that transition, if we can do that. And that is one of our big challenges — finding the money that enables us to expand family care, to get people out of the institutions, into home-based and community-based care, and that will be a big, big savings for us. So that is a big challenge. Those are two areas that I think present some budget challenges going into the next biennium.

Mayers: OK, now Melanie Fonder, the associate editor at WisPolitics, will ask the next question.

Fonder: Are we going to face a penalty over the Medicaid money with the GAO report that came out this week, saying we had received, I think $937 million extra dollars?

Marotta: It is a little early to discuss that. We have not fully been briefed and fully reviewed the GAO report. We are working on that right now, so I can have a better answer for you on that probably in a few weeks from now. It is pretty complicated, and I don’t know that we are at risk of losing that kind of money. It is something that is obviously of concern to us but it is not something that we have reached any conclusions on yet, Melanie.

You know the whole issue of (inter-governmental transfers) and how those things have been done over the last couple of years and even before that, Wisconsin was really at the leading edge of all that and now it has essentially been closed off, and a lot of states are suffering from the reduction on federal support. That is really our problem on Medicaid.

It is not an expenditure-side issue. On the expense side, you know expenses are pretty well in line. There have been some increased eligibility, increased utilization – certainly with the economy the way it is. So it has been a revenue side, it has been a federal revenue problem. You know I read The New York Times article I guess a month or so ago, and Secretary Thompson was talking about some of the abuses in the IGT area, and cited one state that did some things with counties and banks and wire transfers and all that stuff and I was thinking, what state is that? I think it was here. (Laughter.) But anyway, I guess the bottom line on the GAO report is that it is something we just need to review.

Mayers: That could make that 400-pound gorilla be 800 pounds again.

Marotta: Right.

Mayers: OK. Next question here from Doug Cunningham who is with the Wisconsin Radio Network.

Cunningham: Marc, again a little two-parter for you here. First is on the Taxpayers Bill of Rights. I know that Governor Doyle has expresses his view that that would be harmful to the economy. In one way, because it would limit some of the bonding that local governments could be able do, and that wouldn’t be a good thing in his view. I need to get your opinion on what that would do if indeed it happens. Speaker Gard has said he may have an extraordinary session to be able to do that and try to get that through. That’s the first thing, and the second is just about the working relationship between the Republicans who lead the Legislature and you guys. You guys have butted heads on a lot of different issues; TABOR seems like another one coming down the pipe.

Marotta: I fully expect TABOR to be getting a lot of attention in the upcoming months. We were just in New York, meeting with rating agencies, and they are very concerned with this because this would severely limit the ability of local units of government to expand, to do borrowings, to do TIF financings.

And it all depends on sort of how the bill or the amendment is drafted, but this would be a huge problem from the ratings agencies standpoint as it relates to rating of municipal debt. And it is a problem. We have met with investment bankers, and they just believe that it is very, very hard to get deals to market if you have something like TABOR in place. So it would severely hamper obviously local economic development efforts. It also, depending on how the way it is drafted, would strip a lot of available money away from schools. If you looked at this so-called freeze, which wasn’t really a freeze last time, that would have taken $400 million of available money out of the school systems. What that would have done would have been absolutely devastating to education in this state. Those decisions ought to be made, and this is the third point, ought to be made by those people closest to those units of local government.

I mean. if you believe in local control, which I think the Republicans do, I think it is a basic tenet of the Republican Party that they believe in local control. TABOR is the antithesis of that. So you take away local control, and I just don’t think that that is wise. Now I haven’t seen the proposed amendment; how it is going to be shaped out, is it going to be like Colorado, which has just devastated Colorado. Are we going to move to a model like California? We have seen what has happened in California with their educational system. Or are we going to do I think what the governor prefers to do, which is work with local units of government? Try to work on holding down property taxes, which I think we did very successfully this year. Even the schools did a good job on holding the line on taxes. Because they heard from constituents locally, and they responded to that concern.

So while property taxes are not where they ought to be — and they are still far too high in Wisconsin — I think that working with local units of government is a much better solution then to impose sort of a one-size-fits-all mandate. So we are happy to have that fight. It is very appealing to hear about a Taxpayers Bill of Rights, a property tax freeze. All of that is appealing politically, and it is a brilliant move politically. But it is horrible policy, and I think that when people of the state really understand the effects that is has, really understand what is going to happen in the state — to education, to economic development and their ability to control things locally; when they understand that — I think that you will see people will react negatively to it.

As far as our relationship, I think the relationship is improving. I think there has been some good constructive dialogue on a lot of areas. I think that regulatory reform was one in which we were able to work very closely together and get something done that frankly hasn’t be able to get done in a long time. And that was to streamline that process without lowering any environmental standards. And I think that the other, you know venture capital. And the venture capital bill that got through is not one that we hoped to get through. But we’ve got the dynamics of this Legislature and this governor, and we are not going to get everything through that we want, and they are not going to get everything through that they want. But we do have a venture capital bill that came through. We were able to work together on trying to fix part of the Medicaid problem, and that got done a few weeks ago. Again, not a great solution but it was the best solution that was available at the time and we were able to work together on that. There have been a number of areas where we have worked together, we have passed a lot of bills, but can it improve? Sure it can improve; it can improve more, and I expect it to improve more as we develop more and more trust with each other. I have had a good relationship with both the Senate Majority Leader and the Speaker. And I think we just need to continue to just be up front, frank, honest with each other — we can’t do this, we are going to veto this, we can work with you on this and we have seen a lot of improvement in that area.

Some people get it. Some people get it in the Legislature (get it); and then some people don’t. I think people have asked the question now, and leaders have frankly asked the question, `’Do we want to send the governor a bill that is going to get signed and make something happen? Or do we want to send him something that he is going veto?” The way to have something happen in the former is to sort work with us on this. And I think that that message has taken hold.

Mayers: Well it is nice to know that you are getting closer. OK, we will open it up for questions now.

Audience Question: It seems the only way out of the pressure of taxes is to grow the economy, and we really have become a branch-office state that has lost a lot of corporate headquarters and so as an economist, I feel it is really important that we grow businesses here in Wisconsin to take advantage of our intellectual capital. I would think that we should have a tax policy that supports that, that we don’t tax long-term capital gain. Then when I look at our tax system I learn that our largest employer, Wal-Mart, doesn’t pay corporate income taxes. What can we do to get our tax policy to really be promoting the growth of good high-quality companies here in the state, rather than subsidizing the activities of a company like Wal-Mart, who really has bad jobs?

Marotta: I agree, we really do need, and this is I think sort of a bipartisan call, that we should take a really good hard look at our tax structure. I am actually going to be participating in a tax symposium that is going to be held at Marquette University in April about this very topic, to sort of take a step back and look at the kinds of things that you are talking about and that is — is our tax structure such that there is fairness, that we promote the kinds of things that we want to promote? Are we generating the kind of revenue that we ought to generate?

If we could just get up to the national average in terms of wages, our budget deficit would have been 1.1 billion dollars less than it was. And that is money that could be used for tax relief, that can be used for job training, for education, for things that could be productive. So after we got through with the budget deficit and dealing with the budget, the governor I think focused, I would say there is a consensus on that — focuses on economic growth and his grow Wisconsin plan. …And when he announced it he said it wasn’t going to sit on the shelf, it was actually, these things were going to get done. And if you look, a lot of what was in that plan actually has got done. One of the things on the tax side — there have been a couple things on the tax side — but the single factor sales tax, which had been something people have been trying to get through — really imposed a penalty on job creation. And that had been something that governors in the past have tried to get through and were unsuccessful doing it. He was able to do that. I think that in terms of manufacturing, little things that we have done to try to make our manufacturing more competitive on the tax side have taken hold and gotten passed, with exemptions on utilities or smaller things.

But it represents an effort to look at the tax structure and I think that is something, you are absolutely right, we need to do that. But we need to continue to focus on …venture capital. …You know in the boom times for technology we got six times less venture capital than Minnesota. That is really unacceptable. One of the things we need to do is to facilitate more investment into ideas that are coming out of the university, out of Dean Medical, out of the Medical College of Wisconsin, out of Marshfield Clinic, out of all of the great institutions that we have where ideas are coming out of there, and how do we get those ideas to market? And there has been a real gap in the market in terms of early-stage venture capital.

I think the Senate recognized that. The Assembly was less aggressive in that area, but we got something out that. I think sends a good signal. So we will continue to pursue (these things). I think regulatory reform, while the direct impact is not going to be evident, I think making things easier for business to do here while still protecting what’s important is something that is critical.

So I was concerned about not having taken the kind of action that we needed to take on job training I think in the state, which is going to be very important as our economy is so dynamic right now and people are moving from certain less-skilled jobs to jobs that require more skill. And job training is so critical. And I was disappointed that the Legislature did not take up some of the initiatives that we had proposed on the job training side and instead focused on other things, that were frankly less productive and more divisive.

But you are absolutely right. Every cabinet secretary, every member of the governor’s staff comes to work everyday saying, ‘`How do we make the business climate in this state better?” And we create better, higher-paying, more jobs and I think that that is what we need to continue to focus on. But the tax issue is something that we really do need to take a step back and look at.

Audience Question: I was wondering what priority the state economic development program is placing on the re-use of some of our brownfields and how you balance the goals of environmental stewardship and economic development?

Marotta: Brownfields is something that was cut somewhat in the budget, but not to the point where it was not going to have an effect on this biennium. I think that when we look at the opportunities in the brownfields area — what comes to mind most is Milwaukee because of all of the industry.

When you look at that area where Tower Automotives was, a lot of jobs have been lost in that area and those areas are ripe for brownfields development. And if you want to take the attitude that this administration has taken, which I think people around the state want to take and I think have — that Milwaukee can’t be viewed as this problem; it ought to be viewed as an opportunity — brownfields is going to play a key role in that development.

The Menomonee Valley, of course, is an area where I think we really have worked hard to foster the brownfields development. I think there are some real tangible prospects in the Menomonee Valley that are out there. I think that this whole thing about our economy, I think some things are starting to move in the right direction. I mean, we are starting to add lots of jobs — jobs in the health-care area, jobs in the financial services area. I think that manufacturing hopefully has kind of hit its bottom and is starting to come up.

Especially now, China has got some real capacity problems. Raw material costs of getting raw materials over to China right now has been getting very, very high, sometimes prohibitively so. I think people are starting to look at manufacturing here again to do some of the things they were doing in Asia, whether that is a long-term solution is doubtful and we have to continue to move more and more towards the higher end.

But you know, you look at GE Medical choosing to locate its headquarters and you look at General Motors making a huge commitment to Janesville . And I think there are going to be other announcements as we go forward. One of the other things is that they know that Wisconsin is open for business, and they know that this is a very pro-growth administration. I think that the Legislature will continue to exhibit pro-growth action, and I think that we are moving in the right direction. But we do have a fair ways to go.

Mayers: OK, I am going to ask a question that people have been talking about –the minimum wage. There has been quite a debate about the minimum wage and the governor’s council, with support of business groups, did recommend a minimum wage increase and then Madison wanted to go higher. But the Legislature gave Doyle a bill to block Madison’s efforts. You don’t want a patchwork of minimum wages around the state, do you? (Doyle vetoed the Republican bill.)

Marotta: Well, I would hope that that is not the case, and I think we would rather not see … differences all across the state. We would like to see the council’s recommendation, though, get carried out and not be blocked by members of the Legislature and so that it is held up for a long, long time. I think it is clear that people in this state — there are 160,000 workers right now that are being paid the minimum wage. That minimum wage has not changed in a long, long time. … And so it is clear that we need to increase the minimum wage in this state.

I don’t see how working families can survive on that. I think that the compromise that was reached, or the proposal that came out of the committee council was one obviously that had bipartisan, well, support from the business community, support from labor. And the only people that opposed it were the two Republicans that sit on the council. It concerns us because we think it needs to happen. We would rather not have a patchwork, but we need a minimum wage increase in this state, and so we are going to have to see how things unfold in that area.

Mayers: What are your options if the Legislature blocks it? Are there any options?

Marotta: Ultimately, I think we will be able to get it through, but it could take some time. … (As) he already vetoed it, my guess is we have got some indication that we are going to get that minimum wage through. Because I think it is clear that the governor wanted to have that. … But I think that they are going to move this thing through and we are hopeful of that.

Mayers: I agree there are so many vetoes they are sometimes hard to keep track of. (Laughter.) You know this governor, he has laid down proposals obviously, but he has been identified by vetoes. And you talk about a record number of bills. I don’t know whether this is a record number of vetoes in the short tenure at this administration. Yet so far they haven’t been overridden. …Could you comment about this idea that the governor is in many ways identified by his vetoes, about what he is saying “no” to.

Marotta: Well, there were about as many vetoes here as there were back home in Pittsburgh when I used to get together for those Italian dinners.

Mayers: People are still getting that joke; let them get it. (Laughter.)

Marotta: Well, you know Tommy in one budget, I think there was like 420 vetoes in one budget. And that is because there was policy in that budget. So I think there was more in those budgets to veto.

Mayers: I guess I am talking about separate bills.

Marotta: Separate bills. I think it is just very clear that this governor, that when you send him something that he doesn’t agree with, he is going to veto it. And when you send him a bill saying that people in this room all ought to be or can carry loaded weapons and you put that on his desk, he has made it clear he’s going to veto that.

If you send him something that says we are going to redefine marriage again for the 82nd time and divide people again in this state, you know he is going to veto that. … (But) you talk about economic development, that sends a signal to the rest of the country that this is an intolerant state and that young people who really feel a little bit differently than a lot of other people do about this are going to be deterred from wanting to come and live in Wisconsin if we look like we are a state of intolerance.

He is going to veto things that he does not agree with, it’s clear. And we are going to uphold those vetoes. And that is what he was elected to do. I think the people of the state say, “Look, we elected him because we know what his values are,” and I heard a lot saying, `’Thank God that he was there to protect that veto on concealed carry law.” So the fact that he is known for some vetoes is not at all problematic from the administration standpoint.

Mayers: OK, this is a question about Marc Marotta to finish up. You made an allusion to it before. I mean you did once run for Congress and then you passed up I think the opportunity to run for the 4th CD here when Congressman Kleczka announced that he wasn’t running. Is there an elected political future — we know there is a political future, because here you are — but is there an elected political future for Marc Marotta?

Marotta: I honestly don’t, I mean right now, I don’t think so. I mean right now I love what I am doing right now. This job is an amazing job . I mean every half-hour the challenges are great.

I enjoyed being in the private sector as well and my view of all this, and it doesn’t necessarily apply to everybody, but I liked the idea of leaving the private sector, going into government and going back to the private sector. Not being somebody that is in this business as a lifetime job. I am not saying that I would never ever come back into government after I leave this job, but I do think that I sort of believe in the sort of citizen participation.

Plus, I have four kids under 8, and this hasn’t really, you know, gone over all that well in this family. A lot of time away . Kim has been very, very understanding, but you know, your personal life has to be, I think, conducive to running for office. And as you know, when you run, it is basically a couple of years out of your life, and I am not prepared to do any of that at this point. But I don’t know, we’ll see about it in the future.

Mayers: That’s not a Sherman-esque statement, but we will take it for what it is. All right, well thank you Marc, I want to thank you for taking the time.