Remarks at the Wisconsin Economic Development Association Conference
By Jay L. Smith, Co-Chair, Wisconsin Economic Summit III
Past President, UW System Board of Regents
Chairman, JLS Investments
I was pleased to get this invitation to speak here at your fall conference.
You are indeed the ground troops in the state’s fight for economic prosperity. When Wisconsin wins this fight, it will be because of your efforts.
Your work is vital to the state’s future. The old saying is that “all politics is local.”
Well, “all economic development is local” too!
Companies rarely choose to locate in a particular state. They locate in a community or a region. Businesses and their workers identify with their region.
The glue for economic development is available manpower, financing, business services, workforce training and infrastructure. The existence of these elements is a regional issue.
Yesterday Oshkosh B’Gosh (the clothing company in Oshkosh) announced that they will establish their design team in New York. They couldn’t get design talent to move to Wisconsin. To stay ahead they needed to move to New York where other designers locate. If a cluster of these activities were to exist here – those skills would be here not New York.
I only use this current example to show the power of clusters and the power of regional support and infrastructure.
One of my businesses is located in Sauk County.
The Sauk County Development Corporation, UW-Baraboo, local banks, and other business services are positioned to help grow our company, Teel Plastics. There is an infrastructure for Teel in Sauk County. As within a 50-mile radius are located a dozen other plastic companies using similar services. I know first-hand the importance of what you do.
I want to take this opportunity to thank Karna Hanna for the good work she does in Sauk County.
Like all of you, Karna knows the issues and works to find solutions. She cares about our state’s economy. So do you or you wouldn’t be here today.
It is very important that we collaborate – across communities, across regions, and across the state. If our state is to prosper, collaboration is a must.
I think you have the right theme for this meeting: Communication, Collaboration and Clusters – New Dynamics in Economic Development.
I want to focus on that theme. To do so I want to touch on three areas:
- State issues and the results of our first two economic summits
- The role of the university and how we can work more closely with you
- The importance of your work in addressing the state’s economic problems.
And I warn you – at the end of this discussion, I am going to ask you for some specific action.
Status of Wisconsin
First, I don’t need my economics degree to tell you that Wisconsin’s economy is in pretty tough shape.
We are losing important company headquarters, most recently Land’s End which was sold to Sears last spring. (We are; however, glad that Land’s End plans to maintain their employment here in the state.)
Our average annual per capita income is $28,066 – about $1400 below the national average. Average incomes in Illinois and Minnesota are more than $30,000 annually.
Wisconsin ranks third in the nation on state and local taxes as a percentage of personal income.
We rank 31st in the percentage of adults with a four-year college degree – below Minnesota, Illinois and Iowa.
We rank 50th among states in the number of college educated workers that we recruit into our workforce. That’s important because college educated workers earn a million dollars more in their lifetimes than those with a high school degree.
We are not creating enough of the high paying jobs for our graduates.
Wisconsin workers work harder for less money. Seventy-three percent of our labor force is working compared to 66% nationally.
A typical married couple with children in Wisconsin works 3,981 hours a year — far higher than the national average.
But, Wisconsin’s full-time workers earn three cents less per hour than the median U.S. wage for full-time workers – a sharp decline from 1979 when Wisconsin workers held a 73-cent wage advantage.
Milwaukee has slipped from the 27th market in the nation 15 years ago to 40th in the most recent rankings.
Wisconsin exports more federal tax money than it imports.
We all know that the state’s budget is in serious trouble. State spending commitments far outstrip state revenues. Money for economic development is likely to be squeezed even more as state officials make even deeper cuts to state agencies and higher education.
In a nutshell: Wisconsin faces many challenges. But I am encouraged because we have a lot going for us, too:
- A great hardworking workforce
- An outstanding educational system
- A quality of life that is the envy of the nation
- A low corporate tax rate
- Affordable housing and cost of living
- Exciting emerging clusters of business, especially in the biomedical and biotechnology fields.
- A can-do attitude
Converting those assets to long-term economic prosperity will require a much higher level of cooperation and collaboration than we have had in the past. That’s a challenge.
“We need mature conversations about our economy and that’s not happening in our legislature. Therefore, we need you to share in the leadership more than ever.”
You are the closest to the issues.
You have the best understanding of the local issues.
It is hard to move away from our comfort level – (how we’ve always done things.) It is hard to experiment with new partnerships and new ways of dealing with these issues.
This is what our past two statewide economic summits have been about.
When the Regents and the university first started this effort, we felt strongly that we needed to bring together the three legs of the stool – state and local government, the university and the private sector.
We thought we’d get about two or three hundred people at that first statewide economic summit.
Instead, close to a thousand people attended. Many of you were there.
It was an unprecedented coming together of leaders in business, government and education to start to plot a course for Wisconsin’s future.
Summit One created a significant body of new knowledge and facts that has since led to further study, policy development and specific action.
Summit One created new statewide synergies and partnerships between the business, labor, education and government sectors that are continuing two years later.
Summit One created a new energy around growing the state’s economy. (We have new angel investor networks in Madison, LaCrosse and one that is about to be created in Eau Claire.)
We have new venture capital interest in the state.
We have new regional efforts, many involving our UW campuses throughout the state.
You have been a part of these efforts.
In Summit Two, we focused on solutions and on building an action plan to address state problems.
We laid out five objectives for Summit Two:
- To report what had been done since Summit One
- To identify benchmarks for economic progress
- To broaden and strengthen partnerships
- To get specific commitments from business, government and university leaders to take action to grow the economy
- Identify a coordinating body to carry this work forward.
We came out of Summit Two focusing on five macro issues with measurable goals:
- Grow per capita income
- Bring in more federal dollars
- Grow our venture capital
- Increase the percentage of college graduates for our work force
- Lower our high tax burden
And we’re making progress on all of them/ which will be reported in Summit III.
In many ways the summits have been a catalyst.
· The Governor has announced his Build Wisconsin program and has brought together state government agencies for the first time (ever!) to develop a strategy for the state’s economic future.
There is a new regional tone to economic planning. They tell me the chambers of commerce in the Fox Valley and along Highway 41had never met in one room before. Today they are working together.
Many organizations (including WEDA) have focused on the issues brought forth at the summits. And there are other organizations as well:
Wisconsin Technology Council
Wisconsin Manufacturers and Commerce Association
Wisconsin Taxpayers Alliance
Greater Milwaukee Committee
Chambers of Commerce
One of the most important concepts to emerge from these summits has been the need for new alliances and new ways of dealing with old problems.
Summit Three promises to be as energizing, and exciting. And you need to be part of it.
Hundreds of people are already registered to come together in Milwaukee on October 14-16.
Monday – Promises to be a busy day as we have 24 workshops with 92 panelists.
Tuesday/Wednesday we will hear from keynote speakers Paul Gigot, Editorial Page Editor of the Wall Street Journal, and former US Commerce Secretary and President of SBC Communications, William Daley. We will also hear from Gary Stern the President of the Federal Reserve Bank of Minneapolis.
Governor Scott McCallum will present his economic agenda for Wisconsin and Attorney General Jim Doyle will share his plans regarding Wisconsin’s Economy.
Milwaukee County Executive Scott Walker and Mayor John Norquist will speak as well.
The Tuesday & Wednesday programs will feature many topics and over 70 panelists.
We will host sessions on clusters, regional efforts. Many people have helped plan this summit. I want to especially thank James Schneider, your president, for his important role.
At Summit 3, we will announce new ideas for state fiscal reform from eminent former state leaders.
We will also announce a new coordinating organization for this activity – that will carry our efforts forward. The development of this organization was a goal we announced at the last Summit. A group that will provide the connective tissue that we need to keep these important efforts going.
The organization will be a collaborative effort of the many existing organizations. I urge you to get involved with this activity.
I can feel the energy as I look forward to Summit III. A lot of important people are energized around Economic Development issues. We need to capitalize on this.
The Role of the University
Some of you may wonder why the UW Board of Regents and the UW System care so deeply about the state’s economy and why we have taken on the role of organizing these summits.
The university’s role in the state’s economy actually dates back to the day the UW first opened its doors.
The Wisconsin Idea is real and it’s powerful. The university takes seriously its role of serving the citizens of the state. Many breakthroughs in agriculture, manufacturing and more recently, biotechnology, emanate from our UW laboratories and classrooms.
The university also is the backbone of the state’s workforce. About 25,000 people annually graduate from the UW System and the vast majority stay and work in Wisconsin.
About a million people in the state have been educated by our institutions – (at our 13 two-year and 13 four-year universities and in our statewide UW-Extension programs.)
We want our graduates to have opportunities in the state, to earn good salaries and to become successful. It’s important that we have jobs in our state for these students.
At the same time, the University has a self-interest. The university’s budget depends on a healthy state economy. We depend on the state for about a third of our three billion dollar budget. As the state economy goes, so goes the university’s budget.
We know that large state budget cuts won’t solve the state’s fiscal problems and more likely, will cripple efforts – both statewide and local — to grow the economy.
The long-term solution is to grow the economy by investing. The state must invest more heavily in economic development. And we must work more efficiently together to make this happen.
This morning, I urge you to take as much advantage as you can of the resources of our university system.
- Be proactive.
- Bring your ideas.
- Ask for help.
- Learn about the UW system.
- Understand that economic development is part of the university’s public service mission.
Every day, our faculty and staff are out assisting Wisconsin communities and Wisconsin businesses. Let me give you just a few examples.
In Sauk County, where Teel Plastics is located, there is the Sauk County Institute of Leaders, an award-winning program now in its 6th year. It is a productive collaboration of UW-Extension, the Sauk County Development Corporation and the Baraboo, Sauk Prairie and Reedsburg Chambers of Commerce.
In 2000, UW Extension faculty worked with the development corporation to evaluate and quantify the importance of the health care industry on the well being of Sauk County.
The Marshfield Chamber of Commerce has partnered with UW-Marshfield/Wood County and the Mid-State Technical College to provide workshops for local businesses on a variety of topics.
UW-Stevens Point, UW-Marathon County and UW-Extension have been working with economic development associations, local governments and the technical colleges to develop a community-based economic development strategy for Northern Wisconsin called the Northern Edge. The project will profile best practices, do regional market studies and establish a grant program to fund promising business and economic development strategies.
This is a model for other regions that has already generated a commitment of $175,000 in federal support.
James Schneider and Andy Lewis, the UW-Extension resource agent in Grant County co-authored “First Impressions,” a program to provide communities with an honest evaluation of how well they handled visitors and this has been used successfully by more than 250 communities in five states.
UW-Platteville played a lead role in developing a business incubator in the Platteville Industrial Park. That campus also has collaborated with UW-Fox Valley to offer a new engineering program in the region at the request of local industry leaders.
The Southeast Region has TechStar, a collaboration of UW-Milwaukee, Marquette, UW-Parkside, the Medical College of Wisconsin that has already successfully assisted two companies that have been funded by venture capital.
There are many UWM outreach efforts to provide technical assistance and professional development for economic development staff in the southeast region.
UW-Extension recently collaborated with the Door County Chamber of Commerce and a Door County reservation software company to develop a groundbreaking data-mining project to identify the demographics and lifestyle characteristics of Door County tourists and have used that information to solicit new customers.
These are just some examples.
Statewide, our university has pledged to add 1280 graduates in high tech, high demand fields to meet local demand. Our chancellors have spearheaded many regional development discussions including the development of angel investor networks in La Crosse and the Eau Claire regions.
One of our greatest assets is our UW-Extension Small Business Development Center, led by Erica Kauten. What an energetic and talented advocate for business development!
Her group most recently has been working with WEDA to promote entrepreneurship.
Prior to the upcoming summit, SBDC sponsored eight one-hour web based discussions with nearly 100 business, government and economic development leaders from around the state to gather information on local and regional entrepreneurial development activities. You can hear the results at the Summit.
Clearly, UW-Extension is a major resource that you and your colleagues can and do draw on.
UW-Madison’s University-Industry Relations Program has been in existence for more than 30 years with the sole purpose of making the university and its resources more transparent to business. UIR helps develop relationships between industry and UW-Madison faculty and provides reviews of developing technologies through cooperative conferences. And UIR maintains a directory of UW-Madison research expertise and cooperation between industries. “You have a subject they will point you in the right direction within the system.”
The UIR website – www.wisc.edu/uir/partnerships has a wealth of information. I urge you to be proactive check it out. (Ask for their help.)
WARF – the Wisconsin Alumni Research Foundation – has been a huge boon to the state and to the university, transferring intellectual property developed by the university to existing companies in Wisconsin and to startups.
WARF has returned hundreds of millions of dollars to the university, the University, in turn, has used these funds to further research, and outreach that is of benefit to state companies. (Ask for their help.)
Putting “You” in the “You”niversity
We want to be more available to you. The university wants to help business and community development. Attitudes have changed a lot in the past ten years. Barriers to business have come down.
More is available to you today – partly thanks to the Internet. We are investing in being more available to your needs. You need to invest time and energy to get to know us.
You will hear more in the weeks ahead about the Regent’s plan to “Engage Wisconsin” and that plan involves you.
- Learn what’s available to you and take advantage of it.
- Work proactively with the university to identify local needs and opportunities. And we will work proactively to make our resources more widely accessible.
- Learn how to access faculty and students to help you do your work. Our students, are always looking for real-world experience.
- Encourage your local businesses to get more involved with the university and to take more advantage of university resources. Bring our faculty and local industrial leaders together.
- Think of the university as neutral ground for discussion and resolution of complex and controversial issues.
- Look into the industrial extension and technical assistance programs.
- Take advantage of the university’s analytical services. We are in the business of analyzing effectiveness, creating goals and measuring progress toward those goals.
In return, we ask for your support for the university. Let your legislators know how the UW system impacts your region. We need your help to keep our economic development efforts rolling; the UW budget has been eroded over the past decade and it’s becoming a smaller and smaller portion of the state budget.
Our GPR support per student is now $1000 below the national average. And that is why the Regents and the President have been clear: any further cuts to the university’s base budget must either be made up by tuition increases or enrollment cuts.
Overall, the university contributes $9.5 billion annually to Wisconsin’s economy. Those of you who have campuses in your districts know the importance of the university to your local community.
WE NEED YOUR HELP AS ADVOCATES FOR THE UNIVERSITY AND FOR ECONOMIC DEVELOPMENT PRIORITIES IN STATE FUNDING.
Your Role in Economic Development(From my vantage point.)
As I said at the outset, your success is vital to the state’s economic growth.
The more the university can help you with your work, the more we all will benefit. And the more we all collaborate – locally, regionally and statewide – the more effective we will be.
In your work, there are many things that you cannot personally control:
- National and state economic trends
But there are things you can control or at least help control:
- Improving the local business climate to recruit and retain businesses
- Improving your region’s entrepreneurial networks
- The promotion of your community.
- Creating collaborative partnerships to give leverage to your work.
We know this is a critical time for the state’s economy and several important events are coming up.
We will have a gubernatorial election in November. By all accounts, states that have done well economically have shared an important ingredient – leadership from the top. The Governor will play a key role in the state’s economic future.
Both candidates have economic plans on the table. I urge you to study them, to assess how these plans and approaches will best serve your community and your needs.
Both candidates will make presentations at Economic Summit III in October. I urge you to come and hear them.
Economic Summit III
I’ve given you a preview of our summit coming up in October.
Our website is on a letter in your packets.
Your themes of clusters, collaborations, and communications will be important themes at the summit as well.
We need your good ideas and participation.
IN THE “FOOD FOR THOUGHT” and “WHATS GOING ON AROUND US” CATEGORY – I want to share with you two personal experiences I’ve had in the past 10 days.
On Tuesday I met with Jim Clinton – the Exec. Director of the multi state Southern Growth Policy Board (a think tank) and he is the director of the famous Southern Technology Council (which has played an important role in reinventing the south.)
First he reminded me that they started their economic development strategy 17 years ago.
The first six issues they wrestled with 17 years ago were:
- How to turn the economy to higher paying jobs.
- What facts were needed: (They turned to benchmarking and establishing index indicators to measure progress.)
- How to start teaching technology in the classroom.
- How to stop the brain drain in the south.
- How to attract investment to the region.
- How to develop a seamless education system.
Do these subjects sound familiar? They are very similar to those that emerged from our Economic Summit I three years ago.
They are 17 years down the road in Regional Strategic Planning.
Wisconsin started a couple of years ago as a state.
We discussed what works:
- Study what behavior pays economic dividends in a specific area.
- To learn that building a regional economy is not easy – (the answers are not easy because it is not one thing – it’s a lot of things.)
- Regional partnerships are critical – (They require trust where each partner must invest. The partnership must be results driven.)
- Knowledge economy is important and that Universities are the source of knowledge.
- Borders are meaningless – cooperation needs to be across regions. Regional economic councils are important.
- Program names are important (Slogans and branding is important to rally people).
- It’s critical that regions need a single point of contact – one that coordinates activities. (People and business need to know who that is – and where to find them.)
- There is a need to simplify agreements (i.e. de lawyer the process)
- Its important to develop a data base and share it publicly.
- It’s important to develop policies and procedures that encourage entrepreneurships.
- It’s important to create a “Regional intellectual argument” that works.
- It’s important to think outside ones geography when developing a living plan.
- Local economic development does not have a lot of money – but states do.
- Nobody gets the job done alone!
James and I discussed a University’s Role in regional development – From that discussion came the following:
Universities are a primary source of knowledge as we move into a knowledge economy.
A state won’t necessarily succeed because a University succeeds. A University must contribute to a state’s success.
Faculty must be used extensively in outreach programs.
Universities and research parks are critical incubators for business ideas.
Universities need to solicit input – regarding what training is important to a region.
It is critical that University leadership supports economic Development and is dedicated to make it happen.
Universities must advance industry sponsored R & D (Industry sponsored R & D is closest to the real world.)
Barriers that existed between business and Universities are down. Technology transfer must be made easy. (Technology based jobs pay 95% more than non-technology based jobs.)
These two lists reflect what we know today and what the Southern Technology Council has learned over the past 17 years.
Lastly in my “Food for thought” and “What’s going on around us” category.
Ten days ago I was in Montreal, Canada on business.
I took time to visit Quebec’s new “Biotech City” which is being developed in conjunction with the University of Quebec in French speaking Laval across the river from Montreal.
They just won a worldwide award for their business development efforts.
I mention this to reinforce the fact that there is quality competition out there and they are moving fast.
I spent a morning with Pierre La Pointe the Director General.
Pierre started these efforts 3 ½ years ago. Today they are earning worldwide awards.
They are doing many things right.
They are centering around a branded concept “The Biotech City”.
They are a regional center of excellence in a cluster like approach.
They describe themselves as :
“Uniquely scientific – in a University environment – with business thinking.”
They have tied together education, government, and business.
They have tax incentives.
They are tied to a University.
They have incubators and a research park.
They are a major scientific business community with infrastructure.
They are developing partnerships with leading world businesses.
Since starting over 3 ½ years ago and the rental cost for their real estate has gone up 4 times due to demand.
I have invited the Director General to Madison to see if we can partner in same way in the Biotech world. (And at a minimum learn from each other.)
Again, I mention this experience to show that quality competition is moving fast, and to show what can be done in a short period of time. The award winning Biocity was an idea 4 years ago.
We are in a fight for the state’s economic future. It could go either way. The jury is still out. But it is a fight that will not be won in a day or a month or a year. We have to be committed over the long haul. I thank you because you have been in the trenches for a long time, fighting this good fight. Let’s fight it together.
Keep it up. We are making great progress; this is a fight that I know we can win.