The Wisconsin Economic Summit is being held to open a dialog concerning the economic future of Wisconsin and to solicit input from government, business, education and citizens about Wisconsin's economic future. From this input, the Economic Summit will create a set of realistic goals and a "road map" of Wisconsin's path into the 21st century.

Case Statement

Earlier this year, a group comprised of University of Wisconsin System and community leaders began an informal discussion on the changing nature of Wisconsin's economy, the role of the University in helping to shape short-term and long-term policies, and initiatives that could promote Wisconsin's future competitiveness.

Meeting monthly since February, the group has heard from two distinguished national leaders on economic development in the technology-based "New Economy." Their unparalleled experience and national perspective have affirmed our commitment to take our conversation to the next level.

• John Morgridge, a UW-Madison alumnus and chair of the board of directors of Cisco Systems, the technology and Internet superstar, told our group: "The states to succeed in the 21st century economy will have a comprehensive, statewide, visionary, long-term plan in place with stated goals and outcomes."
• Charles Hamner, director of the North Carolina Biotechnology Center, noted that at the root of his state's successful strategy for building phenomenal economic growth is "… an absolutely essential energetic partnership between education, government, business, and the general public."

There is growing interest around the state in having the UW System serve as a catalyst and partner in planning and developing Wisconsin's strategic plan for its future economic success.

The accompanying materials provide greater detail on the work of the Summit Group. We invite your comments and feedback, and thank you for your interest.

Executive Summary

The globalization of markets, the influence and penetration of technology, projected trends in worker availability, and significant shifts in the growth and composition of income are significantly changing Wisconsin's economic landscape.

• Is Wisconsin prepared to capture its share of quality jobs that are touted for rapid growth in the 21st century?
• What opportunities are there to grow the Wisconsin economy?
• What are the impediments to creating, nurturing and growing the technology and fast-growing jobs necessary to sustain and build a high-income workforce?
• Why is only four-tenths of one percent of the venture capital invested in the country making its way to Wisconsin?

These questions and many more point to the need for a strategic vision for capitalizing on the opportunities of the new economy.

The University of Wisconsin System and its Board of Regents, in partnership with business and other interested parties across Wisconsin, are dedicated to facilitating a statewide conversation on this very important topic. Through the spring and summer, representatives of a planning committee will be contacting business leaders, citizens, education leaders, labor officials, statewide organizations and others, to seek -- firsthand -- their opinions on seven key topics:

1. Building Quality Jobs.
2. Enlarging Venture Capital Investment.
3. Improving the Regulatory Climate.
4. Educating the Workforce.
5. Improving Wisconsin's Fiscal Future & Entrepreneurial Climate.
6. Enhancing Key Infrastructures.
7. Building a Distinctive Brand/Image to Position Wisconsin as a Technology & Fast-Growing Jobs Leader.

In addition, experts in each of these subjects will be asked to prepare discussion papers and the general public will be provided access to share their ideas and comments. A high-level, statewide Economic Summit on these issues will then be held later in the year. The final outcome of these efforts will be the creation of a public policy and economic development strategic vision for Wisconsin. With a depth of insight, quality and long-term view, it will serve as THE public policy blueprint for the state's economic future. This blueprint will resonate far into the 21^st century.

Introduction

Economic and demographic changes over the last few decades as well as forecasts of continued change signal potentially stressful times for Wisconsin's economy in the not-too-distant future. Trends in the growth and composition of income, consumption, employment, business creation and population raise important questions for the Badger State that demand a closer look. They offer, as well, guidance for crafting a strategic vision that can capitalize on the opportunities of the New Economy.

Wisconsin has come a long way since the economic downturn of the 1980s. Much credit goes to the Governor and legislature for making strategic investments in business, industry, and communities. That leadership, coupled with the hard work of many others, has resulted in the rebuilding and diversification of local economies. But for as far as we have come as a state, we have an even longer journey before us.

The successful economies of the 21st century -- whether in Wisconsin, Illinois, Minnesota, Texas, or North Carolina -- will be knowledge-based, and they will depend on a constant and growing infusion of innovative ideas and processes into the marketplace. Wisconsin's reliance on manufacturing and agriculture will continue; however, jobs in these traditional sectors will be balanced by significant new opportunities that are knowledge-based, global in scope, electronically interwoven and entrepreneurial in spirit.

Tough Questions

The implications of this fact are far reaching -- and raise several important questions:

• Is Wisconsin prepared to capture its share of quality jobs that will shape the 21st century economy?
• What opportunities are there to grow the Wisconsin economy?
• How do we compare with neighboring states in educating our workforce, retaining our college graduates, and attracting knowledge workers to Wisconsin?
• What are the impediments to creating, nurturing and growing the technology and fast-growing jobs necessary to sustain and build a high-income workforce?
• What does the future hold for Wisconsin's traditional industries?
• What economic benefits could be exploited by our unique location along the Chicago-to-Minneapolis corridor?

These questions are all the more urgent in light of the fact that Wisconsin has won the jobs battle, but is losing the incomes war:

Despite nearly a decade of the lowest unemployment rates in the nation, the per-capita income in Wisconsin of $25,079 remains below the national average of $26,412. Moreover, the gap between Wisconsin's per-capita income and the national average has actually grown in recent years. To understand what this means, consider that if the per-capita income of Wisconsinites simply equaled the national per-capita income, there would be $7 billion more buying power in our state.

But that's not all:

We also know that future income growth for Wisconsin cannot just come from creating new jobs in existing industries. Wisconsin has the highest labor participation rate in the U.S. This means we have a very small pool of potential new workers. In Wisconsin, nearly everyone who can work is now working and at the end of the next decade, the labor force will actually start shrinking. Economic growth for Wisconsin's future can only come by growing incomes through "brain gain" jobs -- higher paying, knowledge-based jobs.

As Wisconsin makes its push for new footing on the global economic stage, it is not alone. Other states likewise are developing strategic plans that incorporate private- and public-sector partnerships and initiatives. They are investing in education. They are raising venture capital to support new businesses. They are examining tax and regulatory issues. They are building distinctive state identities to position themselves strategically as the nation's biotechnology and high-tech leaders. And they are pursuing this course rigorously and efficiently.

This has two implications for Wisconsin. First, its current strong economic position could erode in the future as other states position themselves for growing knowledge-based jobs. Second, even if Wisconsin launches a knowledge-driven economic plan, it must build a smart and energetic strategy to ensure that its efforts are not outflanked by other aggressive states.

Michigan, Georgia, Illinois, Utah, California, North Carolina, Minnesota and many other states are moving aggressively to support high-technology research development initiatives, and other strategies for keeping competitive in the world economy. Large municipalities are also recognizing the need to implement new policies based on the needs of a rapidly evolving economy:

• As New York City's Center for an Urban Future points out: "At the moment, things are going so well in New York City, it may seem an odd time to suggest major changes in the way the city frames its economic development policy. In fact, it's the perfect time for a change. It will require that we open our minds to a new economic order. With no real economic plan the city leaves itself vulnerable to a perennial cycle of boom and bust that other states have prepared against." ¹

Here in Wisconsin, the state's largest newspaper urges us to consider that "…what worked fine in the past may not work well in the future, particularly in an economy as dynamic as ours."²

As this decade begins to unfold, "economy under construction signs" will begin to show up along several key roads to growth in Wisconsin. Potentially the largest of these will go up on the UW-Madison campus, where Governor Tommy Thompson has proposed a $317 million initiative to improve biotechnology research. Building four new cutting-edge research centers on campus will fuel UW-Madison's national leadership in the biosciences. The campus attracts more bioscience research funding than nearly any public university in the country, and advances in the lab at UW-Madison have already produced scores of new companies and high-paying jobs for Wisconsin citizens.

Biotechnology, however huge its economic payoff might be, is but one of many pieces to the puzzle. A recent study by the Wisconsin Taxpayers Alliance checked the pulse of Wisconsin as a competitor in the race to build a successful economy for the 21st century. The good news is that Wisconsin boasts some clear economic and educational advantages. The bad news is that Wisconsin has substantial room for improvement on key benchmarks.

A new study released by Competitive Wisconsin reveals that Wisconsin businesses are not penetrating the Internet world as aggressively as their competitors, and the state is far short of the venture capital needed to spawn cutting-edge firms.3 Specifically, the study shows 1998 venture capital investment in Wisconsin of $14 per capita -- far behind the national average of $72 per capita, and overshadowed by two key neighboring states (Illinois at $37 per capita, and Minnesota at $137 per capita). This is significant, because the amount of venture capital per capita is an important indicator of a state's entrepreneurial activity. The Competitive Wisconsin study also revealed that Wisconsin's share of national farm income is sliding and our share of national exports has dropped in recent years.

Equally important are the findings of a new study of Wisconsin's economy in the year 2010, prepared at the request of Governor Thompson. The study identified the need to improve our "technology profile" if Wisconsin is to succeed in growing incomes and creating the economic opportunities that will retain and attract workers.

Source: Wisconsin's Economy in the Year 2010⁴
Source: Cyberstates 4.0: A State-By-State Overview of the High-Technology Industry⁵
* Based on 4-year average, 1995-98. Wisconsin share of U.S. total = 0.4%

• To be sure, Wisconsin has some catching up to do. Of the average $47 billion in venture capitol invested nationwide in (each of) the last three years, Wisconsin only received about one-half of 1 percent.⁶
• Minnesota and Wisconsin are as alike as any two states. But while 31 percent of Minnesotans age 25 and older have a four-year college degree, 23.3 percent of Wisconsinites have a degree, below the national average of 24 percent. In a knowledge-based economy, brain power equals earning power.⁷
• Biotechnology is nothing less than the cornerstone of Wisconsin's economic strategy for this century. It will require venture capital, a highly educated labor force and visionary land use and transportation planning. it will require discipline, integrity and courage. It will require cooperative planning by state government, business and the UW that will basically make education and research a state industry.⁸
• Clearly, keeping Wisconsin's well-educated young people from leaving is a huge task and not something that will be solved in a month or a year. It will take time and effort. Attention must be focused on creating more better-paying jobs and social opportunities for young people while keeping the quality of life high.⁹
• Fast forward to the year 2020. What will Wisconsin look like, economically? What will be the state's leading industries? Who will be the area's largest employers? What will be our major occupations? If you guessed the economy will still be tied to dairy farming, beer making, manufacturing and machinery, you're … a generation removed from reality. Try biotechnology and biomedicine. Unless the state -- and southeastern Wisconsin, in particular -- can shed its reputation as risk-averse and financially conservative, it will fail to seize a rare opportunity to build a thriving commercial business and industrial base from the well-planned infrastructure the state and its universities have provided.¹⁰

Leaders and experts in the private sector also have stepped forward to offer their ideas and concerns. Consider this commentary by the president/CEO of a Madison-based brand marketing firm serving Fortune 100 companies:

• When it comes to attracting the kind of business we want in our state, Wisconsin has a long history of hiding our strengths and accomplishments under our cheesehead hats. Maybe its our Midwestern modesty, but we always seem to let others define who we are. Wisconsin has become a powerhouse in biotechnology. But if you were a California entrepreneur looking for a place to launch a biotechnology company, or a New York venture capitalist who wanted to invest $10 million in such a firm, Wisconsin wouldn't even be on your radar screen. If we don't pull together to build a distinctive Wisconsin brand soon, we may lose our chance.¹¹

And there are many additional voices weighing in with perspectives on how to help build Wisconsin's future economy -- with ideas ranging from reducing the tax burden on individuals, to bringing corporate taxes more in line with those of neighboring states, to improving the graduation rates in Milwaukee public high schools, to improving access to air and rail transportation. Business, labor, local and regional economic development groups, educational institutions, elected officials, state government agencies, private consortia -- all of these have an important contributing role to play in the creation and implementation of Wisconsin's response to the challenges and opportunities of the New Economy.

Building a Wisconsin Economic Growth Strategy

Fundamental to this process is the creation of a vehicle for drawing together the concerns, ideas and energies of the many and varied experts, constituencies and interested parties. What is needed is a statewide, high-level "conversation" on strategies for building Wisconsin's future economic success.
States with a leg up on Wisconsin discovered early in the game that economic growth in the dynamic, global, highly competitive New Economy first requires a common vision of the future, a strategic plan of action, and cooperative leadership in three key arenas -- education, the public sector, and the private sector.

John Morgridge, a UW-Madison alumnus and chairman of the board of Cisco Systems, discussed this very approach in a special meeting with the Wisconsin Economic Summit Group. Cisco, the technology and Internet superstar, has grown to more than $1.2 billion in annual sales and today has a market capitalization of $492 billion. Said Morgridge: "I cannot overstate the importance of establishing a successful and ongoing relationship between education, business, and state and local government. This consortia is essential to your success as a state." Morgridge outlined these critical elements:

• Leadership by the business community can help to advance necessary policy to improve Wisconsin's tax and regulatory climate in the highly competitive, global, knowledge-based economy.
• Leadership by the educational system can help to advance needed improvements and investments, from K-12 through the UW System, for citizens of all ages and employment status.
• Leadership by the legislature and governor can enact public policy that leads to implementation of short-, medium- and long-term strategies to build Wisconsin's economy through quality jobs.

In Wisconsin, the University of Wisconsin System is uniquely equipped to serve as the launching pad for a statewide conversation on strategies for building Wisconsin's future economy. The UW is a neutral, yet essential partner. Throughout its history, the University has been a catalyst in the growth and development of the state and in meeting the needs of Wisconsin. The tradition of the "Wisconsin Idea" has long sought to put the University's resources to work in solving the needs of the state. Today, this role is even more critical in shaping Wisconsin's strategy for dealing with the changing economy. Indeed, the UW and the state have evolved together: the vitality of one is inextricably linked to the other.

The University of Wisconsin System and its Board of Regents, in partnership with business, community leaders and other interested parties across Wisconsin, wish to facilitate a statewide conversation on seven important topics:

• BUILDING QUALITY JOBS. This conversation will identify the challenges and opportunities Wisconsin faces. How can we "grow our own" New Economy businesses and workers through: technology transfer, research parks, college graduate and worker retention/recruitment strategies, business recruitment, state investment, incentives for technology-based companies, private-public partnerships, support services for new business start-ups, university policies that encourage research and development and build intellectual infrastructure?
• EDUCATING THE WORKFORCE. This conversation will examine strategies for strengthening the current workforce and developing New Economy jobs, through education. Likely topics include: improved training and educational opportunities for workers of all ages, the seamless delivery of educational resources, access to international education, specially tailored coursework, on-site and distance education programs, public-private educational partnerships that address educational needs identified by labor and management.
• INCREASING SEED AND VENTURE CAPITAL INVESTMENT. This conversation will focus on strategies for improving the investment -- from both within and outside Wisconsin -- of funds required to finance the birth of new technologies and businesses.
• IMPROVING THE REGULATORY CLIMATE. This conversation will focus on state and local governmental rules and regulations that deal with quality of life and the state's economic vitality, such as: environmental standards, land-use planning, business siting, energy and telecommunication policy, e-commerce policy, efficient delivery of state services, providing timely decisions.
• IMPROVING WISCONSIN'S FISCAL FUTURE. This conversation will consider the role of government and the fiscal policies that shape economic growth, workforce development, financial health and the quality of life for Wisconsin citizens. Key topics include: taxes and spending, investments in education, and incentives/disincentives for revenue growth.
• ENHANCING KEY INFRASTRUCTURES & ENTREPRENEURIAL CLIMATE. This conversation will examine strengths and weaknesses relating to Wisconsin's economic potential, in terms of key infrastructures: transportation, utilities, telecommunications, Internet, electronic commerce.
• BUILDING A DISTINCTIVE BRAND/IMAGE TO POSITION WISCONSIN AS A TECHNOLOGY & FAST-GROWING JOBS LEADER. This conversation will consider the development of a statewide brand, or image, for Wisconsin as a "business-growth state" -- as well as strategies for advancing the Wisconsin brand in the national and global marketplaces.

Launching a Statewide Conversation

Through the spring and summer, representatives of the planning committee will contact business leaders, education leaders, statewide organizations and others, to solicit their ideas and opinions on the seven topics. In addition, experts in each of these subjects will be asked to prepare discussion papers. The planning committee will seek the public's views as well.

A high-level, statewide Economic Summit on these issues will then be held later in the year. Its product will be a public policy and economic development strategic vision for Wisconsin. With a depth of insight, quality and long-term view, it will serve as THE public policy blueprint for the state's economic future. This blueprint will resonate far into the 21st century.

This approach will accomplish three essential goals:

1. To provide a forum for information sharing inclusive of all citizens.
2. To create a feeling of statewide unity and ownership in the development of economic strategies for the future of our state.
3. To demonstrate the benefits of a collaborative, partnership approach to action.

Working together, we can help Wisconsin respond to the forces of economic change and ensure a brighter future for all citizens and businesses. Now it's time to begin the conversation.

Quoted Materials:

1. Building a Broad Base for the New Economy, The Center for an Urban Future: January 2000
2. Editorial, Just Call Him Dr. Yes, Milwaukee Journal Sentinel: April 16, 2000
3. Measuring Success: Benchmarks for a Competitive Wisconsin, Wisconsin Taxpayers Alliance for Competitive Wisconsin, March 2000
4. Wisconsin's Economy in the Year 2010, Dennis Winters (Relevant Economic Analysis Limited) for Governor Tommy Thompson, May 2000. Co-authors: Bill Strang, emeritus professor, UW-Madison School of Business; John Klus, emeritus professor, UW-Madison College of Engineering
5. Cyberstates 4.0: A State-By-State Overview of the High-Technology Industry, American Electronics Association (AEA) & the Nasdaq Stock Market, May 2000.
6. Editorial, Venture Capital Will Plug State's Brain Drain, Milwaukee Business Journal: February 21, 2000
7. Editorial, Turn Brain Drain to Gain, Wausau Daily Herald: March 20, 2000
8. Editorial, Agenda 2000: Biotech, WISC TV, Madison: January 24, 2000
9. Editorial, Wisconsin Must Work to Keep Its Well-Educated from Leaving the State, Fond du Lac Reporter: March 22, 2000
10. Editorial, Wanted: Seed Capital for Wisconsin's Future, Milwaukee Journal Sentinel: May 8, 2000.
11. Building a Distinctive Brand is Key for State, Wisconsin State Journal: May 12, 2000. Author: Marsha Lindsay, president/CEO, Lindsay, Stone & Briggs.