From also-ran to excellence: Can Wisconsin make the economic grade?

Wisconsin’s economy is like the underachieving student who should be earning top grades, but who seems content to bring home a report card filled with Cs.

In one national survey after another, Wisconsin ranks in the lower half of the 50-state class when it comes to economic dynamism. Sure, there are flashes of brilliance – high marks for academic research and development, patents, exports and worker education – but Wisconsin’s overall ranking in economic performance is typically nothing to brag about.

Improving the state’s business climate grades is the challenge Gov. Jim Doyle faces this week as he unveils elements of his latest economic development plan, the third in his “Grow Wisconsin” series. His goal is simple: Break out of the ranks of the also-rans and compete with the A students.

Doyle is outlining his ideas and policies this week at forums that symbolize “new economy” sectors geared toward producing higher-wage jobs – as well as traditional economic sectors determined to retool and seize new markets.

For Doyle, the timing couldn’t be much better. About $200 million in gifts have jump-started his commitment to improve the education system. ULINE announced it will move to Wisconsin and bring more than 1,000 jobs. The old year ended with four state companies making Initial Public Offerings. Wisconsin exports continue to grow much faster than the U.S. average. Three-quarters of the business leaders responding to a major statewide survey expect to add jobs in 2008. And, so far, the housing and credit crisis that has devastated some states is far less severe in Wisconsin. But other recent rankings and surveys reinforce the fact that Wisconsin’s economy is far from the head of the class.

• Expansion Management magazine released its 12th annual “Legislative Quotient” survey in December, examining how state government policies affect the business climate. Wisconsin ranked 42nd overall, although it did score 27th in the five-year tax improvement scale. Expansion Management is read by corporate leaders who decide where to build or expand facilities.

• The American Legislative Exchange Council’s 2007 State Competitiveness Index ranked Wisconsin 30th overall based on 16 different measures. One hangover from the 1990s continues to haunt the state: Wisconsin was fifth from 1992 to 2000 in what ALEC described as “excess state spending.”

• The Beacon Hill Institute at Suffolk University in Boston gave Wisconsin a respectable 22nd place ranking in its 2007 competitiveness rankings, but that was down three places from 2006. Drags on the Wisconsin ranking included state and local taxes per capita (44th), bond rating (44th) and budget deficit as a percentage of the state Gross Domestic Product (46th). Also, a surge in violent crime hurt the figures.

• Several studies, ranging from the Brookings Institution to an analysis of moving company “inbound and outbound” moves, showed Wisconsin losing ground in migration since 2005. That may reflect the first wave of baby boomer retirements.

The decline in manufacturing jobs that began nearly 10 years ago is a major contributor to Wisconsin’s middle-of-the-road rankings. In November 1998, Wisconsin manufacturing employment peaked at 594,400 jobs. Today, there are roughly 495,000 jobs in that sector and another 24,000 temporary jobs engaged in producing goods. While output and exports have both increased significantly during that same period, it’s hard to overcome losing 80,000 high-wage jobs.

With his latest “Grow Wisconsin” plan, Doyle needs to produce more with less. He cannot expand government programs because there’s little money to do so; rather, he must make existing programs work better, provide incentives or simply get out of the way so the markets can work.

In Monday’s announcements, his most dramatic proposal called for capital gains tax exclusions for individuals, partnerships and limited liability corporations that reinvest those gains in Wisconsin start-up companies. If the Legislature accepts that idea, it will create national news – and boost Wisconsin in a lot of business climate rankings.

“We’re moving in the right direction, but we still have a lot of work to do,” Doyle said Monday. Let’s hope the C student is willing to learn.

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