APRIL 2013 IBAW RELEASES FEDERAL LEGISLATIVE PRIORITIES:
INSIDE THIS ISSUE
Implementing Comprehensive Entitlement Reform Comprehensive Tax Reform Moratorium on the Rule Making Process that
LAUBER: WHAT SEPARATES A CFO FROM A CONTROLLER?
would cost businesses more than $50 Million to Implement Increasing Access to VISAS for immigrants with advanced degrees and Start Up Businesses Congressional Checks & Balances
KEATING: TAX REFORM MOVING ALONG
on the EPA Rule making process
o Link t tation n e s e Pr ! Inside
JOHNSON: DEBT OUT OF CONTROL
no business is small At AT&T a storefront is as important as a skyscraper. Small businesses are the backbone of our economy. They are the engines of new opportunity and growth. Having access to innovative technologies drives success. And we’re here to make sure you’re connected. Always. AT&T is proud to support the Independent Business Association of Wisconsin.
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IBA MEDIA LINK Executive Director Steve Kohlmann Heritage Printing / Cultivate Communications President Ann Barry Hanneman Simandl Law Group S.C. President Elect 2013 Steve Van Lieshout K & S Technologies VP. State & National Programs Jeff Hoffman Judson & Assoc. Secretary John Weber Hypneumat
Governor Scott Walker addresses the skills gap in the Wisconsin workforce. Click here to listen.
Treasurer Casey Malek Kolb + Co. Membership / Sponsorship Heather Baylor Park Bank
Directors Bart Adams Kolb + Co. Larry Elton Advantage Leasing Richard Blomquist Blomquist Benefits Jason Kuwayama Godfrey & Kahn Tom Boelkow BSI Design, Build, Furnish Dave Drumel Staff Electric
Business Presentation Series Dan Schwartzer, State of Wisconsin Deputy Commissioner of Insurance
• How will the Obama Care federal exchanges take place? • What will business owners need to know to survive? • What does all this mean for you & your employees? Prior to his appointment, Deputy Commissioner Schwartzer owned his own association management and government relations firm that worked with trade associations from a variety of industries. He served as Executive Director for the Wisconsin Employee Benefit Advisors Association, representing insurance agents throughout Wisconsin, and Executive Director for the Wisconsin PPO Association, which represents PPO health plans. Deputy Commissioner Schwartzer was also Executive Director for the Wisconsin Economic Development Association, as well as Executive Director for the Independent Business Association of Wisconsin. Deputy Commissioner Schwartzer is a Wisconsin-licensed intermediary holding property, casualty, life, accident and health insurance licenses. He has over 25 years of experience in insurance, health care financing and business issues and over 12 years experience in association management.
Friday, April 19th - 7:00 am - 9:00 am The Wisconsin Club, 900 W. Wisconsin Ave. IBA Members- $30 Future Members - $40 To register click here.
MAY 17th John Felmy, Chief Economist American Petroleum Institute, Washington D.C. Mr. Felmy, American Petroleum Institute, Washington, D.C. John Felmy is chief economist of the American Petroleum Institute. He is responsible for overseeing economic, statistical and policy analysis of the Institute. He has more than 25 years experience in energy, economic and environmental analysis. He received his bachelor's and master's degrees in economics from Pennsylvania State University and a doctorate in Economics from the University of Maryland. Â Mr. Felmy is a member of several professional associations including the American Economics Association, the National Association for Business Economics and the International Association for Energy Economics. Click here to register.
SAVE THE DATE REGISTRATION OPENS SOON!
JUNE 21ST DIRK J. DEBBINK Chairman, MSI General VICE ADMIRAL CHIEF OF NAVY RESERVE COMMANDER, NAVY RESERVE FORCE (Ret.) Mr. Debbink is Chairman of MSI General, a design/build construction firm in Oconomowoc, WI. He has also recently retired as Vice Admiral, Chief of Navy Reserve, Commander, Navy Reserve Force in Washington D.C.
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The IBAW Difference Steve Kohlmann, IBAW Executive Director
In my conversations with potential new members I’m often asked “How is IBAW different from other business organizations?” Fair question. In my position at IBAW the organization isn’t far from my mind and topic of conversation daily so I suppose it can be difficult to communicate that those who don’t know anything about the organization. Imagine in your own life trying to communicate in a 30 second elevator speech the complexities of your day to day running of your business or how your company is different than your competition. Sure you know but being able to explain that in a easy way for the people you come in contact with might be somewhat problematic. This past week I was emailing back & forth with a potential member on this very topic. He wanted to know three basic things: 1: Where the organization has been. 2: Where the organization is now and 3: Where do you see the organization going. In trying to keep with the mindset of ‘Keep it simple’ I started to craft my message back to him. Before I knew it I was up to a rather lengthy email filled with information. I talked about our monthly programming with all the great speakers we have on business & political issues, our close relationship with elected officials in Madison & Washington D.C., our Business Behind the Scene events, and our grass roots lobby efforts by business owners. I also talked about this magazine that you’re reading right now. I hit the SEND button and immediately thought that I had blown it by sending an overwhelming amount of information in a email. But a response came back. “OK, how are you communicating for me in Washington?” That answer was very easy so I wrote back, “Next
week Monday we’re having a roundtable event with Senator Ron Johnson so small business owners can talk directly to him and let him know your concerns - and by the way - we’ll have a whole host of other elected officials there as well you can talk to. Come join us!” Due to a scheduling conflict my email partner would be out of town and couldn’t make the event. But the answer to his question must have been the right one because his application for membership and check arrived in the mail today. The IBAW isn’t as large as some other business organizations such as WMC or MMAC and we certainly don’t run on the budget or staff these larger organization enjoy, but I think what we are doing is pretty unique in the sense that we strive to keep you, the membership, engaged. I was asked recently to define if IBAW is successful. I firmly believe the IBAW is successful. Our programming is very high quality and we are well respected in Madison & Washington, D.C. In addition, I hear positive feedback from members and guests all the time on our programming and being proactive on legislative issues on the state and federal levels. IBAW members are very engaged in what we do. They are excited about where their organization is going and its mission. We recently had two nice stories printed in the Waukesha Freeman. And we operate in the black and not the red. All good stuff. IBAW has come a long way but as the old saying going “Success is a journey and not a destination.” Even though IBAW isn’t as large as other organizations that doesn’t mean what we do isn’t important. Regardless of size we will deliver a quality product and do the best possible job for the membership. Check out programming coming up in the next few months. Don’t forget to register and become engaged!
2013 Federal Legislative Priorities Compiled, researched & written by Jeff Hoffman, VP State & National Issues
The IBAW Board of Directors would like to thank Jeff Hoffman for the hard work in researching and writing of our 2013 Federal Legislative Priorities. These priorities, discussed & approved by the IBAW Board, will be sent to our elected officials in Washington,D.C. on behalf of the IBAW membership. #1. Implementing Comprehensive Entitlement Reform Washington has managed to escalate the budget brinksmanship game to a new level that has created massive uncertainty for businesses. “Fiscal Cliff” “Sequester” “Government Shutdown” appear in the daily business news headlines. While businesses tend to project in One year, Five year, and Ten year plans, Washington D.C, can’t seem to think past the next 5 minute news cycle. IBAW supports comprehensive entitlement reform that will create certainty within the markets for years to come. The first wave of the Baby Boomer generation is transitioning into retirement and the unfunded liabilities of the current Medicare/Medicaid and Social Security systems are the primary drivers of our long term debt issues. The programs in their current form are simply unsustainable. In 2012 Medicare/Medicaid & Social Security encompassed 42% of the Federal Budget, by 2022 this is projected to grow to 55%. Given the current fiscal trajectory, the U.S. will eclipse 100% of Debt to GDP by 2027. The IBAW believes that for a dynamic, capitalistic economy to flourish, Government spending needs to fall to 18% of GDP (presently 23.8% in 2012). Revamping Medicare/Medicaid and Social Security are the driving forces in achieving this goal. Since Medicare/Medicaid and Social Security are important safety nets in the lives of millions of American’s, a serious bi-partisan plan such as the Ryan – Wyden Medicare proposal and the Simpson – Bowles Social Security Proposal need to be taken up for consideration immediately. There are minor changes that the U.S. can implement right now to dramatically alter the course of the looming fiscal wreck that entitlement commitments are creating. A credible entitlement reform plan passed by Congress and approved by the President would position businesses to make long term capital investments due to a renewed belief that Washington can get its long term debt problems in order. #2. Comprehensive Tax Reform The U.S. needs a robust economy to assist in taming deficits and the IBAW supports a simplified overhaul of the tax code in which overall rates are lowered and itemized deductions are either simplified or removed all together. Lower rates would attract more capital from abroad, encourage more domestic investment, and increase growth and jobs. It would also minimize the loopholes that lead to a misallocation of national resources. Unfortunately, the Tax Payer Relief Act of 2012 that was a result of the Fiscal Cliff Negotiations heads in the wrong direction. An increase in overall rates for the “wealthiest” to 39.6%, a phase out of some deductions, and tax increases on Capital Gains and the Affordable Care Act will cost the top 1% roughly $76,000 per person in 2013. Many small businesses operate as S-Corps or LLC’s that pass through income to the individual and the individual (business owner) then re-invests his or her earnings back into the company. With a greater percentage of annual income going to the government, business owner’s will need to recalibrate expansion plans to account for less income to fund growth.
At a 35 % rate, the United States Corporate tax rate is also the highest around the Globe. In 2013 it is approximately 20% higher to operate a manufacturing business in the United States than operating that same plant oversees with taxation accounting for a large percentage of this cost differential. In order to remain a competitive place to conduct global business the United States needs to enact comprehensive across the board tax reform that reduces rates and phases out deductions. This simplification will create certainty within the markets and create a more fair and balanced tax code that benefits the small entrepreneur just as much as the largest corporation. #3. Moratorium on the Rule Making Process that would cost businesses more than $50 Million to Implement In light of the vast amount of new rules & regulations being enforced on businesses from the implementation of the Affordable Care Act, the founder of Subway Restaurants, Fred DeLuca, stated “If I started Subway today, Subway would not exist”. The Affordable Care Act amounted to 2,700 pages and hundreds of new rules, including 18 pages defining what a full time employee amounts to. Dodd Frank was 848 pages long, and with a little over 1/3 of the bill implemented, there are close to 10,000 pages of rules that have been crafted. Small Businesses are not equipped to handle the onslaught of new regulations that are being rolled out on the economy on a daily basis. A small business owner needs a team of high paid experts just to maneuver through new federal rules, let alone have enough time and money to navigate day to day issues affecting their respective businesses. IBAW believes that the vast amount of rules and regulations that have been implemented on the economy over the past several years have deterred and distracted would be entrepreneurs from attempting to scale business operations. It is estimated that on average, U.S. Businesses spend $161,000 per business on an annual basis to comply with rules & regulations. A moratorium on all new rules affecting businesses that will cost the economy in excess of $50 million dollars should be implemented as IBAW believes that excessive rules and regulations have led to a sub-par economic recovery. Small businesses have been forced to focus on the next rule or regulation as opposed to securing its next customer. #4. Increasing Access to VISAS for immigrants with advanced degrees and Start Up Businesses From 2006-2012, 24% of U.S. technology companies were founded by immigrants and 40% of all current Fortune 500 companies were created by an immigrant or first-generation American. To remain a global leader the United States needs to attract and retain the brightest and best minds from around the World. IBAW supports immigration reform that creates a predictable and efficient path to obtaining a visa and citizenship for immigrants who hold advanced degrees or operate a business. The H1-B program that was created in 1990 for high skilled workers allows for only 65,000 visas per year. There is also an annual cap on visas so that no country can have more than 7% of available visas issued per year. It is also estimated that of the 1.1 million green cards issued each year only 15% are provided to highly skilled immigrants. These are examples of the antiquated immigration policies of the United States that have limited our economic growth. Simple policy fixes such as providing an immigrant with a green card if they graduate with an advanced degree from a U.S. college are ideas to kick start the economy. The United States can not expect to remain a global business leader if we continue to put up barriers to attracting the best and brightest minds from around the world.
#5. Congressional Checks & Balances on the EPA Rule making process Under present law, the Environmental Protection Agency (EPA) has broad powers bestowed upon the agency that allows for it to impose administrative law upon industry with no accountability due to the American public. This has allowed for controversial pieces of legislation such as Cap & Trade to be gradually implemented through administrative rule and not through the congressional legislative process. Case in point is the EPA’s current “New Source Performance Standards” which will effectively make it impossible to construct new coal fired power plants within the United States and force dramatic rate increases on the existing coal fleet, which will in turn be passed on to the consumer. The EPA is also looking to force a heavy hand on regulation over the Fracking/Shale Industry which has been a boon to the United States economy. It is projected by the International Energy Agency that the United States will be considered the world’s largest oil producer by 2020 because of the shale revolution. Jobs in unconventional oil & gas industries are set to rise from 1.7 million in 2011 to 3 million jobs by 2020. The EPA issued its first set of regulations on the Fracking industry in the spring of 2012 and has expressed interest in transferring regulatory power of the industry away from the States and into the hands of the EPA. IBAW supports an all of the above energy policy in which the United States is a global leader in energy production and ensures American Businesses competitive utility rates. IBAW believes that the EPA rule making process needs to be reined in with congressional checks and balances in order to prevent unnecessary rules and regulations that will undermine the booming energy economy of the United States.
IBAW POSITION PAPERS DELIVERED IN PERSON On March 25th, the IBAW held a round table discussion with Senator Ron Johnson.
Here IBAW Executive Director, Steve Kohlmann, delivers the IBAW’s Federal Legislative Position Papers directly to Senator Johnson.
IBAW Lunch meeting with Wisconsin Supreme Court Justice Roggensack Wisconsin Supreme Court Justice Roggensack was the featured speaker at the March IBAW meeting at the Country Springs Hotel in Waukesha. Justice Roggensack talked about the upcoming election and also gave the group a unique & interesting insight at how cases are taken, ruled on as well as the inter workings of the Court.
Mayor of Brookfield, Steve Ponto also joined us for lunch and brought us up to speed on the latest developments happening in the City of Brookfield.
Roundtable Discussion with Senator Ron Johnson Draws Full House On March 25th the IBAW held a MEMBERS ONLY event - ‘A Roundtable discussion with Senator Ron Johnson’ hosted by our good friends at Kolb+Co. It was a full house as IBAW members and their guests were able to meet and network with each other and notable elected officials such as Lt. Gov. Kleefisch, Representative Dale Kooyenga, Chris Kapenga, State Senator Veah Vukmir, Waukesha County Chairman Paul Decker and Town of Brookfield Administrator, Rick Czopp.
Special guest Lt. Gov. Rebecca Kleefisch brought the group up to speed on the state budget and Gov. Walker’s future plans for education and workforce development. Her presentation followed up with a Q&A session.
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SENATOR JOHNSON’S FULL PRESENTATION AVAILABLE!
ABOVE: Guest Mike Kusch, owner of Hartland Service, gets an opportunity to talk about small business issues directly with Senator Johnson and Waukesha County Chairman Paul Decker.
RIGHT: Mike Topp of Jet Intermodal shares a minute with Senator Johnson.
What Separates a CFO from a Controller? John Lauber, Lauber CFOs
Business owners are often unsure what to expect from their financial person. All financial people are not created equal. There can be significant differences due to experience and aptitude. In companies with revenues between $5 and $50 million financial people generally perform at two different levels. In the context of this example the levels are: Controller • • • • • •
Salary $70,000-$90,000* Supervise all Accounting Functions and Staff Budgets & Projections Tax Compliance Cash Management Basic Special Projects and Analysis
Chief Financial Officer • • • • • • • •
Salary $110,000-$150,000* *Companies with revenues under $50 million Supervise Controller Duties Financing and Banking Relationship Financial Viewpoint on Management Team Confidant of Owner May Oversee IT and HR Special Projects like Acquisitions Help Set Strategic Direction
Companies with revenues under $50 million generally will have a controller or a CFO but not both. As a way to more clearly differentiate between what to expect from a Controller vs. a CFO following is a listing of typical financial management tasks. Those that require the experience and insight of a person at the CFO level are designated by a (CFO). Bring the Numbers to Life: • • • • • • •
Financial Statements Monthly Reporting Package Comparison with Budget Comparison with Prior Periods Trend Analysis Explanation of What’s Behind the Numbers (CFO) What Action Do the Results Suggest (CFO)
Provide The Metrics for Success • • • • • • • • • •
Weekly / Monthly Statistics and Graphs Cost Analysis Especially Major Items Effective Wage Rates Performance against Compensation Plans Make vs. Buy or Lease vs. Purchase Analysis Profitability of Jobs, Customers or Products (CFO) Productivity Information (CFO) Focus on what really “Drives” the Business (CFO) Evaluate and Update Systems eliminating things that don’t add value (CFO) Fact Based Analysis of Special Opportunities (CFO)
Manage the Cash • • • • • •
Collect Receivables Prioritize Disbursements Project Cash Requirements (CFO) Formulate Debt Structure (CFO) Support Banking Relationship with Credible Information Look for Ways to Enhance Cash-flow like Progress Payments, Consignment Inventories or streamlining internal billing processes (CFO)
Project and Protect • • • • • • • • • •
Establish Benchmarks & Budgets Oversee Granting of Credit Review and Approval Procedures over Disbursements Cost Accounting & Job Cost Systems Ensure Tax & Regulatory Compliance Implement Internal Controls Seek Competitive Bids Facilitate Preparation of a Financial Plan (CFO) Evaluate Pricing Strategies (CFO) “Mind the Store” (CFO)
Supply the Financial Perspective • • • • • • •
Management / Team Meeting Supervise the Accounting Function, Serving as Coach and Mentor to the Staff Responsibility for External Relationships Bring all of the Above Facts & Knowledge Together to Improve Management Decisions (CFO) Be an Objective Sounding Board (CFO) Proactively Address the Financial Impact of Problems and Opportunities (CFO) Assist in Setting the Company’s Strategic Direction (CFO)
Tax Reform Moving Along in the U.S. House Raymond J. Keating, Small Business Entrepreneurship Council
Tax reform is getting some serious attention in Washington, D.C., these days. Well, at least it is in the House of Representatives. The House GOP budget plan included a call for tax reform. Specifically, the plan zeroed in on consolidating the current personal income tax rate structure down to two rates of 10 percent and 25 percent; repealing the alternative minimum tax; and reducing the corporate tax rate to 25 percent. Those certainly would be positive steps. At the same time, U.S. Rep. Dave Camp, Ways and Means chairman, has working groups looking at key aspects of tax reform. The small business group just released its discussion paper. The focus was on the following proposals (as summarized by the committee): • “Spur investment in equipment needed to grow business operations by providing permanent expensing of investments and property under section 179 of the tax code; • “Simplify tax and accounting practices by expanding the use of the simpler ‘cash accounting’ method to businesses with gross receipts of $10 million or less; • “Provide relief for start-up and organizational costs by establishing a unified deduction for these expenses; • “and make tax compliance easier for partners and S corporation shareholders by reordering and simplifying the due dates of tax returns for partners and S corporations.” In addition, the small business discussion draft seeks feedback on options for the reform of tax rules governing S corporations and partnerships. While these ideas make for a good start, what’s needed is more meat on the bone. For example, how will capital gains be treated? That’s a critical question for entrepreneurs in need of capital. The House budget plan does note that “the prevalence of double taxation of capital and investment, all combine to suppress innovation, job creation, and economic growth.” That’s correct, and one would assume that this tax burden would be reduced or eliminated. But that is not spelled out. Ideally, to attract financial and sweat capital, if you will, the ideal capital gains tax rate is zero percent. The death tax also is an unfair, counterproductive layer of taxation. Will that be eliminated? Again, that’s a big question for family businesses and investors. Also, while extending Section 179 levels make sense. The best route is to allow the expensing of capital investments as a permanent option for all businesses. For good measure, the overall level of taxation matters. Under the House GOP plan, federal revenues as a share of GDP are targeted to top 19 percent over the coming decade. Considering that the economy always has faltered when federal revenues have approached or topped 19 percent of GDP, that’s an unwise, anti-growth level of taxation. So, more work is needed, and fortunately, it is coming. Thankfully, the House GOP is keeping the tax reform debate alive.
Welcome New IBAW Members! Jeffrey Schaefer Waukesha Roofing & Sheet Metal, Inc Carol White Greater Brookfield Chamber of Commerce
You Can Make a Difference In Wisconsin! Spread the word of IBA to your business associates pass on the IBA brochure! Download it in PDF format or pass the link on. Available at www.ibaw.com
Peter Musha Marine Bank Keith Baisden BMO Harris Bank
Get Informed Get Connected Get Involved
Join Wisconsin’s premier business association! Contact IBAW by clicking here.
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PAYING BY CHECK ? Make checks payable to IBA ʹ and mail to: IBA 960 Timber Pass Brookfield, WI 53045 WANT TO PAY ONLINE? You can also pay by Mastercard / Visa at the IBA Membership page. www.ibaw.com ________________________________________________________________________ The Independent Business Association of Wisconsin is a not-for-profit entity filed with the IRS under 501(c)(6) of the Internal Revenue Code. As a not-for-profit association, the members of The Independent Business Association, Inc. are allowed to deduct a percentage of dues that are not used for lobbying purposes. For the year 2012 based on the total income of the association and the lobbying expenses as reported on the Wisconsin State Ethics Board Lobbying reports for 2011 the percent of dues that were used for lobbing purposes is 15%. Therefore, the percent of dues that would be tax deductible is 85%.