Uncertain about mission of state economic agency? It’s called competition

During a debate over what to do next about Wisconsin’s lead economic development agency, a Republican member of the Legislature’s budget-writing committee took an openly skeptical stance.

“I don’t really agree with the main mission of (the Wisconsin Economic Development Corp.),” said Rep. Dean Knudson, R-Hudson. “I never did. It’s really not a proper role of government to be doing this.”

“This” to Knudson apparently means all state economic development programs run through WEDC. Those programs include business grants, loans, and other initiatives aimed at encouraging startup companies, attracting new businesses, retaining companies already here, or generally working to improve Wisconsin’s business climate.

It’s a legitimate laissez-faire view, undoubtedly shared by others on both sides of the partisan aisle, but one that is hard to reconcile in an increasingly competitive world.

While some policymakers in Wisconsin have talked of doing away with state business loan programs or WEDC altogether, other states continue to march ahead with their own loan programs — and much more — in the race to create companies and jobs.

In fact, 47 of 50 states directly operate state business loan programs, and the three that don’t — North Dakota, Wyoming, and Alaska — do so through coalitions of cities and other groups. In 45 of 50 states, direct loans, participation loans, and loan guarantees are among the top five economic development programs in those states’ toolkits.

In many cases, state business loan programs are needed to qualify for federal programs that match state and private dollars.

The state-by-state data comes from the State Science and Technology Institute, the Center for Regional Competiveness, the Center for Community and Economic Research, and the Praxis Strategy Group, all organizations with a history of tracking state economic development trends.

“We are not aware of any state of Wisconsin’s size that doesn’t offer (small business) loans,” said Dan Berglund, director of the Ohio-based State Science and Technology Institute.

(Continued)

A recent example of a state going above-and-beyond simple loan programs is Arkansas, where Gov. Asa Hutchinson, a Republican, has called the state’s General Assembly into a May 26 special session to adopt a bond issue to help Lockheed Martin bid on the opportunity to build military vehicles in Arkansas.

The goal in Arkansas is to land a contract to manufacture the Joint Light Tactical Vehicle, the successor to the Humvee. Lockheed Martin is competing with AM General Corp. and Wisconsin’s Oshkosh Corp., which submitted its proposal to build the new Army and Marine Corps vehicle in February.

In other words, while Wisconsin talks about doing away with business loan programs and other incentives because of a few bad apples, other states are doing more to compete against the Badger state.

Unilateral disarmament is not an option in the competition of companies and jobs in the United States or globally. What’s needed from Wisconsin policymakers is a strong debate about the proper mix of economic incentives, which includes three main categories — encouraging entrepreneurial activity, spurring business attraction and retention, and a “green field” approach to setting the right tax, regulatory, and infrastructure climate.

SSTI’s Berglund, who follows state economic development efforts in all 50 states, said it’s more about adopting the right policies than how a state agency is organized. In Wisconsin, the WEDC is a quasi-public agency established in mid-2011 as a successor to the former Department of Commerce, which was public.

“We have long believed that whether an (economic development organization) is a state agency or quasi-public is immaterial to its success,” Berglund said. “It appears to be more about the processes that are in place, and the people leading the organization and implementing those processes. It is most important that any of these organizations be set up with transparency — while protecting confidential business information — and accountability in mind.”

The Legislature and the WEDC board will revisit the agency’s mission and procedures soon enough. While there are many ways to prioritize the state’s economic development efforts, walking away from a competitive world isn’t one of them.

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