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Wisconsin Jobs 2010 Making Wisconsin Competitive Again


WMC BOARD OF DIRECTORS DANIEL T. ARIENS, President & CEO Ariens Company, Brillion

ROBERT D. KAMPHUIS, Chairman, President & CEO Mayville Engineering Company, Inc., Mayville

EDWARD H. SCHAEFER, CEO Citizens Community Federal, Eau Claire

SIDNEY H. BLISS, President & CEO Bliss Communications, Janesville

LAURA E. KOHLER, Senior Vice President/Human Resources Kohler Company, Kohler

KARL A. SCHMIDT, President & CEO Belmark Inc., DePere

DAVID H. BRETTING, President & CEO C.G. Bretting Manufacturing Company, Inc., Ashland

JOHN R. LANG, Chairman & CEO A & E Incorporated, Racine

CHARLES A. SCHROCK, Chairman, President & CEO Integrys Energy Group, Green Bay

LEO P. BRIDEAU, President & CEO Columbia St. Mary’s Inc., Milwaukee

TOD B. LINSTROTH, Senior Partner & Past Chair & Member of Management Committee Michael Best & Friedrich LLP, Madison

RAJAN SHETH, Chairman, President & CEO Mead & Hunt, Inc., Madison

JOHN CASPER, President & CEO Oshkosh Chamber of Commerce, Oshkosh TIMOTHY L. CHRISTEN, CEO Baker Tilly Virchow Krause, LLP, Madison GENE P. DALHOFF, Executive Director Baraboo Area Chamber of Commerce, Baraboo MICHAEL J. DOUGHERTY, President & CEO D & S Manufacturing Company, Inc., Black River Falls JAMES D. FRIEDMAN, Partner Quarles & Brady LLP, Milwaukee MARK F. FURLONG, President & CEO Marshall & Ilsley Corporation, Milwaukee

JOHN A. MELLOWES, Chairman & CEO Charter Manufacturing Company, Inc., Mequon PAUL PALMBY, Executive Vice President & COO Seneca Foods Corporation, Janesville WILLIAM C. PARSONS, President Palmer Johnson Enterprises, Inc., Sturgeon Bay NICHOLAS T. PINCHUK, Chairman, President & CEO Snap-on Incorporated, Kenosha

JAC B. GARNER, President & CEO Webcrafters, Inc., Madison

DIANE S. POSTLER-SLATTERY, Ph.D., President/COO, SVP of Quality and Extended Services Aspirus Wausau Hospital, Wausau

REED E. HALL, Executive Director Marshfield Clinic, Marshfield

JOSEPH T. PREGONT, President & CEO Prent Corporation, Janesville

JAMES S. HANEY, President WMC, Madison

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RICHARD A. MEEUSEN, Chairman, President & CEO Badger Meter, Inc., Milwaukee

JOEL QUADRACCI, Chairman, President & CEO Quad/Graphics, Sussex

CURTIS L. HOPPESTAD, Global Director, Riding Lawn Equipment John Deere Horicon Works, Horicon

LARRY RAMBO, Regional CEO, Great Lakes Region Humana, Inc., Waukesha

THOMAS J. HOWATT, President & CEO Wausau Paper, Mosinee

JERRY G. RYDER, President InSinkErator Division, Emerson Electric Co., Racine

PAUL F. JADIN, President Green Bay Area Chamber of Commerce, Green Bay

MICHAEL W. SALSIEDER, President & General Counsel Kolbe & Kolbe Millwork Company, Inc., Wausau

ABRAHAM SLEIMAN, Plant Manager Hutchinson Technology, Inc., Eau Claire JAY L. SMITH, Chairman & CEO Teel Plastics, Inc., Baraboo MARY STARMANN-HARRISON, Regional President/CEO SSM Health Care of Wisconsin, Inc., Madison BARBARA J. SWAN, President Wisconsin Power & Light Company, Madison MICHAEL L. SWENSON, President & CEO Northern States Power Company - Wisconsin, An Xcel Energy Company, Eau Claire GLEN E. TELLOCK, Chairman & CEO The Manitowoc Company, Inc., Manitowoc TODD J. TESKE, President & CEO Briggs & Stratton Corporation, Wauwatosa JEFF THOMPSON, M.D., CEO Gundersen Lutheran, La Crosse JOHN B. TORINUS JR., Chairman Serigraph Inc., West Bend TODD WANEK, President & CEO Ashley Furniture Industries, Inc., Arcadia KELLY L. WOLFF, Vice President Manufacturing, Green Bay Operations Georgia-Pacific, Green Bay


PRESIDENT’S MESSAGE Dear Wisconsin Business Leader, In 2010, Wisconsin voters will determine the future of our state for generations to come. We are at a critical point in our state's history — a tipping point. Will we choose a new path of growth, hope and opportunity for our families? Or, will we continue the policies of recent years that have resulted in higher taxes, more regulations, more mandates, and massive job loss? The choices are clear. WMC is dedicated to making Wisconsin the most competitive state in the nation. James S. Haney WMC President

The WMC Board of Directors has unanimously approved the Wisconsin Jobs 2010 Agenda, a positive governing vision of what needs to happen to make Wisconsin competitive again. To create jobs. To help families prosper.

The challenge of making Wisconsin competitive again is a challenge worth our effort. The prosperity of 5 million people is at stake. I am absolutely confident that with the pioneering spirit of Wisconsin, we can achieve our dream of being the most competitive state in the nation. It will take work, and it won't happen overnight. But we can do it. Join us. Together, we will make Wisconsin the most competitive state in the nation! Sincerely,

James S. Haney WMC President

“We need to be a state that controls government spending, limits taxes, streamlines regulations, and holds the line on predatory lawsuits. That’s why I’m strongly supporting the Wisconsin Jobs 2010 agenda.” — Thomas J. Howatt

Thomas J. Howatt President & CEO Wausau Paper WMC Chair

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WISCONSIN JOBS 2010 MAKING WISCONSIN COMPETITIVE AGAIN

I

t is time to act in bold ways to improve Wisconsin’s business climate and create jobs! The quality of life we enjoy in Wisconsin hinges on assuring a strong economy with a growing job base.

The global economic recession has hit Wisconsin hard. More than 120,000 jobs have been lost in our state during this recession, and beyond this, many people are underemployed. Most experts are now predicting it may take years to restore the jobs lost during this deep, lengthy recession. As the national economy improves, Wisconsin will have to compete with other states to be sure jobs are retained, and new jobs created in our state. Unfortunately, Wisconsin’s business climate is rated low on most national surveys. We must act to transform the Wisconsin business environment to create jobs! States ranked with a more robust business climate have: • • • •

Tax systems that are low, fair, and simple to administer. Business-friendly regulatory systems that issue needed permits quickly and efficiently. Fair and predictable civil justice systems. Aggressive programs which bring together the resources of government and education to assist existing businesses with expansion, as well as recruiting new businesses.

All Wisconsin citizens have a stake in improving the Wisconsin business climate. A strong, freemarket economy provides the tax base necessary to support government’s role in educating, building infrastructure, protecting the environment, and caring for the needy. 3

The top priority for government officials at all levels must be to implement policies that foster private business growth and improve Wisconsin’s overall business climate to create jobs. Private business is the engine of prosperity, not government. We must position Wisconsin to lead the national recovery, or risk further stagnation and decline. Three game-changing priorities are the key to this transformation. Adopting these priorities and taking actions to implement them will demonstrate that Wisconsin is serious about becoming the most competitive state in the nation.


“It is time to act in bold ways to improve Wisconsin’s business climate and create jobs!”

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WISCONSIN JOBS 2010 MAKING WISCONSIN COMPETITIVE AGAIN AN AGENDA FOR JOBS LIVING WITHIN OUR MEANS

UNLEASHING PRIVATE INVESTMENT

ENSURING JUSTICE FOR ALL

Controlling government spending means more money in consumers’ pockets, and enables businesses to create more jobs for our families. We need to limit government spending and provide tax relief for individuals and businesses. That starts by:

When employers are burdened with unnecessary regulation, it costs us jobs. Fair regulations keep us safe; unfair regulations and regulatory delays lead to slower growth and higher unemployment. That starts by:

Everyone deserves a day in court. A fair legal system provides a stable climate for job creation. But, frivolous lawsuits and other lawsuit abuse hampers job creation. That starts by:

• LIMIT SPENDING: Putting limits on government spending increases and setting aside money for a rainy day fund. • BALANCE THE BUDGET: Balancing the state budget under generally accepted accounting principles.

• HARMONIZE REGULATIONS: Ensuring state regulations are in line with federal regulations and those in competitive states. • STREAMLINE PERMITTING: Establishing the Department of Commerce as the central business permitting agency, charged with quickly and aggressively securing all needed approvals for economic development.

• REFORM PRODUCT LIABILITY LAWS: Enacting comprehensive product liability and other legal reforms. • LIMIT PUNITIVE DAMAGES: Establishing strict limits on punitive damage awards.

• CUT TAXES: Sending a message to the world that Wisconsin is open for business by repealing recently enacted tax increases and providing incentives for job creation. 6


WISCONSIN MUST BE AGGRESSIVE TO COMPETE By James A. Buchen, WMC Vice President of Government Relations

W

isconsin has been hit hard by the recent recession. Businesses are struggling, property values are down, unemployment continues to increase, and tax collections are down — everyone is feeling the effects. The manufacturing sector, the historic backbone of our economy, has had the most significant job losses. More than 50,000 people have been laid off by manufacturing employers since 2008. This is on top of steady job losses throughout the decade. Since manufacturing employment peaked at a historic high in 2000, we have lost nearly 160,000 jobs. As a result of this steady erosion now, for James A. Buchen WMC Vice President the first time in state history, government employs more of Government Relations people in Wisconsin than the manufacturing sector. These disturbing trends concern everyone in Wisconsin because the availability of good paying jobs is central to the well-being of our families and our communities. In addition, the private sector economy provides the tax base to support government, public schools and the University system. So, when our economy is in decline and we are losing jobs, everyone suffers. The national economy will recover and there are signs that the turnaround has already begun. The question is, will Wisconsin businesses grow and expand in our state or look elsewhere when it comes time to add new jobs? The answer lies in how competitive they can be if they grow here versus another state. The relative level of taxation and regulation make a difference. These kinds of governmentimposed costs are collectively known as the “business climate.” 7


Manufacturing Jobs (thous)

Wisconsin Manufacturing Employment: 2000 - Present

Source: U.S. Census Bureau

“...for the first time in state history, government employs more people in Wisconsin than the manufacturing sector.� Unfortunately, when you compare the 50 states, Wisconsin does not do very well. Most independent rankings put Wisconsin in the bottom ten worst business climates in the country. These rankings appear in various national business publications, which contributes to a national perception that Wisconsin is not a competitive state in which to do business.

From an economic development standpoint, improving our overall business climate needs to be the top priority of policy makers. The first step is to understand the differences between Wisconsin and the states that are identified as having the best business climates. Then we must move aggressively to address the issues that undermine our competitiveness. 8


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BUSINESS CLIMATE RANKINGS: HOW DO WE COMPARE? Various groups and organizations analyze and rank state business climates. For the purposes of this analysis, we have chosen four of the most widely recognized and publicized state ranking reports. The top 10 states from each of the reports are shown below. We then identified those states that show up on three of the four lists for further analysis. They include Florida, Georgia, North Carolina, Utah and Virginia. We also included Texas because they lead the nation in job creation, and are so often cited as the most pro-business state in the country. By way of comparison, Wisconsin ranks among the 10 worst business climates in virtually all of the studies we looked at. The Forbes Best States For Business ranking measures six categories including: business costs, labor supply, regulatory environment, current economic climate, growth prospects, and quality of life. They factor in 33 different points of data and publish rankings in each of the six main areas outlined above, along with a composite rank. The CEO Confidence Index is based on an annual survey of 543 top CEOs from across the country. As such, it reflects the opinions of key business leaders as to the relative friendliness of the various states’ business climates. In the survey, the CEOs are asked to evaluate their own states on a range of issues including: regulation, tax policies, education, quality of living and infrastructure. They are also asked to grade all of the states on the following criteria: taxation and regulation, workforce quality and living environment. The Pollina Top 10 Pro-Business States analysis evaluates and ranks the states based on 33 factors including: taxes, human resources, right-to-work legislation, energy costs, infrastructure spending, worker’s compensation laws, economic incentive programs and state economic development efforts. The Tax Foundation’s State Business Tax Climate Index ranks the states based on an evaluation of the five major tax systems that impact business activities including: corporate, individual income, sales, unemployment insurance and property taxes. In general, state tax systems that levy low, flat rates on the broadest bases possible and treat all taxpayers the same, rank higher than those that don’t meet these criteria.

Forbes: The Best States for Business

CEO Confidence Index: The Best and Worst States for Job Growth and Business

Pollina Corporate: Top 10 Pro-Business States for 2009

Tax Foundation: 2010 State Business Tax Climate Index

1

Virginia

Texas

Virginia

South Dakota

2

Washington

North Carolina

Utah

Wyoming

3

Utah

Florida

North Carolina

Alaska

4

Colorado

Georgia

Wyoming

Nevada

5

North Carolina

Tennessee

South Carolina

Florida

6

Georgia

Nevada

South Dakota

Montana

7

North Dakota

Virginia

Kansas

New Hampshire

8

Texas

Arizona

Georgia

Delaware

9

Nebraska

South Carolina

Florida

Washington

10

Oregon

Colorado

Nebraska

Utah 10


WISCONSIN NEEDS TO RESTORE A PRO-JOBS CULTURE

T

he various rankings are an attempt to summarize the important business climate differences among the 50 states. Generally, they reflect variation in business costs attributable to factors that are directly, or indirectly, tied to public policy decisions. For example, the corporate income tax burden in a given state is a direct result of public policy decisions by a state legislature and governor. The relative cost of electricity is, in part, a result of public policy decisions such as whether or not to approve the construction of new generation, require a high level of renewable generation, or skew the rate structure toward industrial versus residential customers. Similarly, access to investment capital is affected by banking regulation and tax policy. Other important factors appear to include investment in infrastructure, the quality of education and training systems, and the presence of major research facilities, either public or private.

Successful states have a pro-jobs culture. Taxes lead the list of factors that make up virtually all state business climate rankings, and are the only issue evaluated in the Tax Foundation ranking. Taxes are most often cited by business leaders when discussing variation among the states, probably because they are easily quantifiable and come directly off the bottom line so the impact is obvious. If taxes take a larger portion of profits, that cost is passed along to either consumers (through higher prices), workers (through lower wages or fewer jobs), or shareholders (through lower dividends or share values). As a result, the level of taxation has a direct and immediate impact on the global competitiveness of business in a given state. Another reason business climate analysis tends to emphasize the relative level of taxation, is that unlike changes to a state’s health care, transportation or education systems, which can take decades to implement, changes to the tax code bring almost instantaneous benefits, or conversely detriments, to a state’s business climate. 11

The other leading factor common to most business-climate rankings is the relative level of regulation imposed on business. However, the variation in regulatory burden among the 50 states is harder to quantify. It is most often discussed in terms of the time it takes to get regulatory approval to site a new facility or expand existing operations. For example, one CEO responding to a business climate survey observed that in Texas “you can get a greenfield site if you choose, and be out of the ground in 10 to 12 months, with the shortest period of time less than six months.” By contrast, in Wisconsin it typically takes 12 to 18 months to get a pre-construction permit, which is needed before a major potential source of air emissions can begin construction on a greenfield site. In addition, permit decisions involving major industrial expansions in Wisconsin are usually challenged in court by environmental groups, adding years to the overall process. Those states that lead the list in the regulatory burden category tend to have very aggressive programs to assist companies in getting necessary permits. Other important aspects of regulatory burden include the scope and complexity of the laws and regulations governing business activity, employment and land use.

“Most independent rankings put Wisconsin in the bottom ten worst business climates in the country.” Reflecting the relative importance of taxes and regulation, one economist involved in the development of the Pollina business climate ranking observed that: “The best method for attracting jobs would be for states to have across-the-board cuts in corporate taxes and elimination of unnecessary and costly regulations.”


Beyond taxes and regulation, one of the most striking correlations in the underlying data is the relationship between the degree of unionization of the workforce and business climate. All of the states in our analysis have among the lowest unionization rates in the country. By contrast, Wisconsin has the 14th highest rate of unionization among the 50 states. The relative strength of state economic development programs is not a major factor in 3 of the 4 rankings we considered. However, the Pollina study does consider the relative strength of economic development efforts and financial commitment to incentives in their analysis. Clearly, public policy choices — taxes, regulation, and litigation — affect our business climate, and job creation.

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WHAT WILL IT TAKE FOR WISCONSIN TO BE THE MOST COMPETITIVE FLORIDA: Florida enjoys the obvious advantages of seacoast and climate. These factors result in a huge in-migration of retirees, along with their capital. In the area of taxation, Florida is able to finance its government without levying a personal income tax. In addition, their corporate income tax rate is a flat 5.5 percent versus Wisconsin’s 7.9 percent, and their property tax collections per capita and as a percentage of personal income, are lower than Wisconsin.

Utah has one of the fastest growing populations in the country, increasing by more than 403,000 from 2000 – 2007, nearly double the growth in Wisconsin’s population over the same period. They have also seen robust economic growth, increasing the number of jobs in the state by 24 percent over the last 10 years. Key business climate factors appear to be low levels of unionization, low electric rates and a favorable regulatory environment.

GEORGIA: Georgia is ranked at the top of the Forbes list in the regulatory

VIRGINIA: Virginia benefits from a highly educated workforce and leads

environment category. They also rank high in terms of workforce development, educational attainment, and training programs. They are one of the fastest growing states in the nation with a net in-migration of more than 1.3 million people between 2000 and 2007. By contrast, Wisconsin’s population grew by 229,000 during the same period. Georgia also ranks low in corporate income taxation — 41st out of 50 on a per capita basis.

the nation in terms of the proportion of its workforce employed in high tech industries. Energy costs in Virginia are 30 percent below the national average. The state’s tort environment ranks fifth best in the country, according to the Pacific Research Institute. The state’s finances are in good shape and it holds a AAA bond rating from Moody’s. While it is not considered a low tax state (it ranks 15th in the Tax Foundation: Business Tax Climate Index) it does uniquely benefit from substantial Federal spending. For example, it leads the nation by some margin in defense spending per capita with more than 11 percent of the total Defense Department budget spent in the state (Virginia - $46 billion, Wisconsin - $2.9 billion).

NORTH CAROLINA: North Carolina’s ranking is often attributed to its strong research infrastructure, combined with a welcoming overall business climate. Its University system, Research Triangle Park and extensive private R&D infrastructure puts it at the forefront of technology-related job creation. Overall, it ranked second behind Texas in the CEO Survey and third in terms of regulatory environment in the Forbes ranking.

TEXAS: Texas has a number of positive business climate factors. It is viewed as having a friendly regulatory environment with very short permitting timelines, and Texas is one of a handful of states that have no individual income tax and very low business taxes. It also has a strong technology sector driven by its research universities, government programs such as NASA, and certain industry clusters such as petrochemicals. The state also benefits from non-controllable factors such as the presence of extensive oil and gas reserves. As a result, the Houston area contains over 50 percent of the total US refining capacity for petrochemical products. 13

UTAH:

“...we must move aggressively to address the issues that undermine our competitiveness.” SUMMARY: In conclusion, the main controllable differences between those that rank high in the various business climate rankings and Wisconsin are taxes, regulation and workforce issues. There are many other significant factors; however, some are completely beyond our control such as climate and geography, and others may be influenced such as energy costs and federal spending.


STATE IN THE NATION? BENCHMARKING SUCCESS

Per Capita Venture Capital Investment 7

$ / Rank

$ / Rank

$ / Rank

Rank

$0 / 44

$131 / 31

$4,367 / 38

$1,091 / 28

$36.56 / 18

25

10.3% / 32

$924 / 23

$107 / 41

$10,675 / 20

$1,389 / 20

$51.13 / 15

1

3.0% / 50

10.5% / 29

$1,111 / 12

$173 / 20

$12,279 / 17

$1,119 / 26

$51.05 / 16

3

55.75 / 15

4.7% / 46

9.2% / 45

$0 / 44

$0 / 47

$4,171 / 39

$1,674 / 12

$65.71 / 10

10

23.8% / 5

57.22 / 13

5.8% / 41

11.0% / 19

$960 / 18

$149 / 28

$3,491 / 43

$1,576 / 16

$78.25 / 8

11

8.6% / 15

13.8% / 17

90.95 / 1

3.7% / 49

9.8% / 41

$1,330 / 8

$166 / 23

$15,463 / 11

$6,024 / 1

$63.25 / 12

2

4.3% / 30

5.8% / 39

34.10 / 33

14.3% / 14

11.6% / 11

$1,131 / 13

$165 / 24

$18,551 / 9

$521 / 44

$17.66 / 30

37

% / Rank

# / Rank

% / Rank

% / Rank

Florida

13.7% / 7

20.0% / 7

40.97 / 29

5.9% / 40

10.0% / 38

Georgia

16.0% / 4

11.6% / 20

49.14 / 19

4.4% / 47

North Carolina

12.2% / 9

11.3% / 21

43.95 / 24

Texas

14.1% / 6

19.0% / 8

Utah

18.0% / 3

Virginia Wisconsin

Population Growth 2000 – 2007 1 % / Rank

1

5

2

6

US Census Bureau US Department of Labor, Bureau of Labor Statistics 3American Electronics Association: Cyberstates Report 4Bureau of Economic Analysis and US Census Bureau, Compiled by Congressional Quarterly

Regulatory Environment 8

Per Capita Defense Spending 6

Average Electric Bill for Industrial Customers 5

Per Capita Income Tax (Corporate) 4 $ / Rank

State and Local Tax as % of Income 4

$ / Rank

Union Membership % of Total Employment 2

Per Capita Income Tax (Individual) 4

High Tech Employment Per 1000 Workers 3

Employment Growth % 1998-2008 2

COMPARING WISCONSIN TO HIGHLY COMPETITIVE STATES

US Department of Energy – Energy Information Administration US Department of Defense Price Waterhouse Coopers Money Tree Survey 8Forbes: Best States for Business 7

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W ISCONSIN ’ S BUSINESS VOICE S INCE 1911

WMC • PO Box 352, Madison, WI 53701-0352 Phone: (608) 258-3400 • Fax: (608) 258-3413 • www.wmc.org

WMC is a business association dedicated to making Wisconsin the most competitive state in the nation.


Wisconsin Jobs 2010: Making Wisconsin Competitive Again