America’s Dairyland vs. America

Regardless of the results of Tuesday’s recall elections, or for that matter the Nov. 6 elections, how the state is doing economically vs. the rest of the country should be important to every taxpayer and every voter.

Competitive Wisconsin commissioned the Wisconsin Taxpayers Alliance to create Measuring Success: Benchmarks for a Competitive Wisconsin to compare the state’s economic strengths and weaknesses to the rest of the country.

First, the punch line:

No one measure better reflects Wisconsin’s relative economic strength than per capita personal income (PCPI). In a single measure, it captures how the state is faring compared to surrounding states and the nation. Since 1929, Wisconsin PCPI has trailed the country with only three exceptions (1951-53, 1959, and 1979).

While PCPI here remained below the national average in 2011, it rose to within 3.8% of the U.S. Last year’s increase in PCPI was the largest in five years and marked the third consecutive year that Wisconsin moved closer to the national norm. …

For example, both earnings and agricultural income rose faster here than nationally during 2008-11. Earnings were up 4.9% during that time vs. 3.4% for the U.S.; agricultural income rose 56% compared to 10%.

More people entering the workforce is also driving incomes higher here. The number of jobs in Wisconsin (measured annually) rose 0.4% in 2011, the first increase in three years. The Badger State’s average annual unemployment rate also declined in 2010 and 2011, falling to 8.5% and 7.5%, respectively.

There is good news …

• Manufacturing. Manufacturing has historically been the engine driving the state economy. Manufacturing jobs are particularly important because they typically pay above-average wages. In 2011, manufacturing accounted for 16.1% of total state employment, its highest share in three years (see graph, page two).

• Workforce. Wisconsin workers continue to be a great asset for the state. High school ACT scores and graduation rates here continue to exceed most surrounding states and the nation. And, while Wisconsin’s population has a smaller share of college graduates than the U.S. and neighboring Minnesota, the state has reduced the Wis./Minn. gap from 5.8 percentage points in 2008 to 5.5 points in 2010.

• Quality of Life. Wisconsin is often recognized as offering a high quality of life because of its high health insurance coverage and homeownership rates, and its low poverty and crime rates. The state’s violent crime here dropped for the third consecutive year in 2010 to 249 crimes per 100,000 people. The state’s poverty rate (10.3%) also remains below the U.S. (14.7%).

… and not-so-good news:

• Firm Creation. New firms play a fundamental role in creating jobs. The number of new private businesses in Wisconsin dropped for the fourth time in the last five years, falling 0.8% in 2010. Nationally, the number of private businesses declined 0.2% in 2010.

• Venture Capital. Growing companies with great potential often turn to venture capital firms, rather than traditional lenders, for money. However, the availability of venture capital has long been a weakness for the Badger State. In 2011, venture capital per worker dropped from $43.87 to $26.11. Wisconsin lags the U.S. average ($216.39) and neighbors Illinois ($120.47) and Minnesota ($103.02).

• Public Sector. State-local tax burden is a publicized shortcoming of the state. Relative to personal income, taxes here (2009) were above the national average and ninth highest nationally. After falling to 11.3% of state personal income in recessionary 2009, the tax burden rose to 11.7% in 2010 and 11.9% in 2011 due to a combination of tax increases in the 2009-11 state budget and renewed revenue growth. … The state’s comparatively high tax burden is due primarily to individual income and property taxes, both of which are about 25% above the U.S. average. …

An independent measure of fiscal health is state bond ratings. In early 2012, 32 states had higher ratings from Moody’s. Wisconsin’s $2.9 billion deficit – as measured by generally accepted accounting principles (GAAP) – contributes to the state’s low bond ratings. In 2010, only California, Illinois, and New York had larger GAAP deficits than Wisconsin.

Governmental fiscal health is, or should be, a nonpartisan issue. Those who criticized Gov. Scott Walker for the state’s not having a GAAP-balanced budget were correct. I eagerly await the Wisconsin Democratic Party’s calling for a change to state law to require GAAP-balanced state budgets, just as the state requires GAAP-balanced budgets for every level of government below the state. (No, I’m not holding my breath.)

For that matter, the state’s economy should be a nonpartisan issue. The recall campaign we just survived focused on numbers that don’t give a complete picture of the state’s economy by any means. Personal income and personal income growth affect everyone, and we heard nothing about that from either Gov. Scott Walker or Milwaukee Mayor Tom Barrett. (It’s kind of weird, isn’t it, for a Republican to proudly announce tax revenue increases, as Walker did when announcing the state’s switch from deficit to surplus after first-quarter revenue estimates. Almost as weird as a Democrat announcing he’s going to cut state employee compensation.)

Democrats almost never want to talk about business climate, because the state’s business climate seems to be the exact opposite of whatever Democrats enact or are touting. (See Wisconsin Legislature, 2009-10.) The state in 2011 continued to trail the nation in business creation and in venture capital, and that probably has a lot to do with the state’s having income and property taxes one-quarter more than the national average. You didn’t hear about cutting income taxes during the recall campaign either.

The next time you run into a state representative or senator or a candidate for the Legislature between now and Nov. 6, ask him or her what he or she thinks should be done about the state’s economy, specifically the areas the Legislature and the governor control.

Sign up for the free In Business Wisconsin Report – your weekly resource for local business news, analysis, voices, and the names you need to know. Click hereIf you are not already a subscriber to In Business magazine, be sure to sign up for our monthly print edition here.