Highlights from Summit III:

Day 2

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State must restructure tax base to sustain Wisconsin's economy, officials say

Wisconsin Economic Summit III panel offers detailed solution to state's fiscal crisis

MILWAUKEE - Wisconsin must restructure its tax base to solve the state's fiscal crisis and set the stage for long-term economic growth, according to a proposal released Tuesday at Wisconsin Economic Summit III by a bipartisan panel of experts.

Fiscal experts present a proposal that would solve Wisconsin's budget deficit and restore fiscal integrity to the state's economy.

By cutting state spending, reducing personal income taxes and raising additional revenue through increased sales taxes and user fees, Wisconsin would generate the $2.8 billion necessary to eliminate the state's budget deficit, said the panel of former state administrators, economic consultants and elected officials.

"We believe our proposal restores fiscal sanity. We don't have a choice in solving the fiscal crisis that we're facing," said panel member Joe Leean. Leean is a former Republican state senator, former chair of the Legislature's Joint Committee on Finance, and a former secretary of the Wisconsin Department of Health and Family Services.

"Spending cuts need to be a part of the solution, but spending cuts alone will not come close to solving the problem," Leean said.

Compared to other states, Wisconsin has low personal incomes, high taxes and above-average government spending, said Jim Morgan, former secretary of the Wisconsin Department of Revenue.

Morgan, current chair of the Wisconsin Ethics Board and a former president of the Wisconsin Taxpayers Alliance, said speculation that the state will have enough funds to solve the deficit through regular revenue growth alone was simply "wishful thinking." Tough decisions, he added, will need to be made to recoup losses from the last four biennial budgets, in which spending outpaced revenues.

"The financial crisis that resulted is bipartisan," Morgan said. "Both Democrats and Republicans participated."

The panel of citizen experts came forward in the spirit of the Wisconsin Idea to present their fiscal solution during Wisconsin Economic Summit III in Milwaukee. The independent commission worked for several months on the proposal, titled "The Fiscal Crisis in Wisconsin: An Analysis of Its Origins, Implications and Solutions."

"This is our proposal, not the University's, nor state government's nor the private sector's," the panelists said in the introduction to their report.

The panel's proposals include:

• Cutting $611 million from K-12 education, shared revenue, the University of Wisconsin System and medical assistance and corrections over the next biennium;
• Creating a Budget Stabilization Fund to prevent a future crisis and restore the state's recently lowered bond rating;
• Raising nearly $1.4 billion in additional revenues over the next biennium. This would be accomplished through a combination of reducing individual income taxes and increasing and expanding the sales tax, cigarette tax, gasoline tax and auto registration fees. The corporate income tax would remain unchanged under the proposal.

Tom Still, president of the Wisconsin Technology Council, served as moderator for several events during Wisconsin Economic Summit III.

The proposal was based on projections that include a 3 percent revenue growth rate per year that when combined with the spending cuts and additional revenue would balance the state's budget.

The proposal also calls for giving the UW System full tuition flexibility so it can manage cuts to its budget, said panelist Mark Bugher, former secretary of the Wisconsin Departments of Administration and Revenue.

"Tuition is artificially low in our state," he said. "It needs to reflect the value to our students."

Overall, panelists said the proposal would solve the fiscal crisis without gimmicks and prepares the state for sustained economic growth, starting by aligning expenditures with personal income. At the heart of the proposal, Bugher said, is an attempt to restore fiscal integrity to the state and stimulate dialogue among stakeholders.

"This is our best effort," Bugher said. "If others have better ideas, let them come forward."

To read the full report, visit:
The Fiscal Crisis in Wisconsin: An Analysis of Its Origins, Implications and Solutions (pdf)

McCallum outlines his plans to boost state economy

Summit attendees listen as Gov. Scott McCallum, the Republican nominee for governor, outlines his plans to improve Wisconsin's economy.

Gov. Scott McCallum offered his own suggestions for solving Wisconsin's budget crisis during a Tuesday morning address.

McCallum, the Republican nominee for governor, said November's election offers voters a clear choice between two different economic approaches. He said his plans include forging new partnerships that will create 400,000 new jobs by the end of the decade.

"Everyone in this room knows that tax hikes will kill jobs," said McCallum. He added that he will press to improve the tax climate in the state, keeping businesses in Wisconsin rather than forcing them to neighboring states such as Illinois or Minnesota.

McCallum also said he would expand the Dairy 2020 program to support agribusiness, reform state policies to meet demand for electricity and continue research partnerships with the UW System, which he praised as one of Wisconsin's greatest strengths.

"We're going to play to that strength and tie it directly to the growth of the economy and creation of jobs in Wisconsin," McCallum said.

McCallum said state employment rates are above the national average, exports and sales are up, personal income is growing and workers benefit from a diverse mix of high-paying jobs.

Jim Doyle, the Democratic candidate for governor, will share his ideas for improving the state's economy at the summit Wednesday morning.

To read the Governor's news release, visit:
http://www.wisgov.state.wi.us/news_detail.asp?prid=1104

 

 

Gigot ties Wisconsin's economic performance to world business and political climate

Keynote speaker Paul Gigot, editorial page editor of The Wall Street Journal, speaks Tuesday about how world affairs affect Wisconsin's economy.

Eventual U.S. actions in domestic and world events, such as escalating tensions with Iraq, will provide an end to current economic uncertainty, said Paul Gigot, editorial page editor of The Wall Street Journal, who gave a Tuesday morning keynote address to summit attendees.

For example, Gigot said the current price for a barrel of oil includes an extra $5 in costs for war uncertainty. But markets will level when it appears U.S. interests will prevail in the conflict, he said. If a new Iraqi government is installed, the United States will likely seize the opportunity to build a government that is sensitive to long-term American interests, Gigot said.

"If we do this right, we really do have the potential to help ourselves, help other countries, help the Iraqi people and make big gains in the war on terror," he said.

Gigot also gave credit to the American public for holding individuals responsible for high-level corruption at U.S. corporations, and for not persecuting businesses as a general class. He also praised business for self-imposed reforms to avoid misconduct, like those discovered at companies like Enron, WorldCom and Tyco.

(from left) Keynote speaker Paul Gigot, UW System President Katharine C. Lyall, Summit co-chair Jay L. Smith and Board of Regents President Guy Gottschalk enjoy a lighthearted moment during a Tuesday summit session.

"We managed to get through this period with a lot less economic damage than expected nine months ago," Gigot said. "I think that one of the great strengths of this country - and Wisconsin - is that we learn from our mistakes. We will clean up, move forward, do more and be stronger in the years ahead."

Gigot, a native of Green Bay, said Wisconsin's reputation nationally is a strong one, based on its excellent K-12 and public higher education systems, its efforts to reform welfare, its advanced economy and its populist citizenry. But he also said the state's high tax climate and relatively high business costs are a downside.

"Wisconsin is recognized nationwide as a success, and it helps your reputation," Gigot said.

 

Federal Reserve official predicts Wisconsin's economy will mirror national trends

Wisconsin's economy will continue to mirror the ups and downs of the national economy and remain resilient in the long-term, according to Gary Stern, president and CEO of the Federal Reserve Bank of Minneapolis.

Gary Stern, president and CEO of the Federal Reserve Bank of Minneapolis, offers his predictions about the direction of the nation's economy.

In a Tuesday morning address, Stern said the recession that began in early 2001 was over by late last year, and the probability of a "double-dip" recession is very low. Stern estimated that the nation's economy will have expanded 3 percent by the end of 2002, and that the national rate of growth will accelerate by the end of next year.

Although Wisconsin appears to channel its resources where demand for them is highest, Stern said, the state is not guaranteed to reap benefits during all economic booms, but nor will it suffer in all economic busts.

But Stern warned that short-term economic forecasting is, at best, an educated guess, and what matters most is long-term economic performance.

"Long-term performance determines living standards and levels of prosperity," Stern said. "We can say things with more confidence about the long-term than the short-term."

Stern said as worker productivity continues on a favorable trend, the economy will follow, bringing up per capita incomes and living standards.

 

Daley praises business-community partnerships

Business executives and state lawmakers listen to a keynote address by former U.S. Secretary of Commerce and SBC Communications President William M. Daley.

Businesses that actively invest resources in the communities they serve can make major contributions toward recovering Wisconsin's economy, said former U.S. Secretary of Commerce William M. Daley, who spoke at a Tuesday summit luncheon for business executives and state lawmakers.

"Business, government and the academic community are truly in this together," Daley said. "It is even more important that we recognize that we're all together in difficult times."

Daley is president of SBC Communications, the parent company of SBC Ameritech/Wisconsin, one of the state's largest telecommunications providers.

"Companies like ours need to be more involved," Daley said. "Our company's roots in the Badger state are deep and they are enduring. We take a strong interest in the communities we serve."

Daley said businesses must not worry only about the bottom line, but also the communities in which they develop their base.

"It cannot be left to the politicians to tell us how to get credibility, we must develop it," he said.

In other summit news:

UW System President Katharine C. Lyall outlines the progress the state has made since the first Wisconsin Economic Summit.

• UW System President Katharine Lyall outlined the state's progress since the first Wisconsin Economic Summit, including positive advances in expanding jobs, venture capital, infrastructure, educating the workforce, branding and differentiating state regions.
  
  Lyall said the second summit was a chance to renew the state's resolve for changes, and the current summit will bring about action plans to meet the state's goals.
  
  
• Summit co-chair Jay Smith outlined the charge for Wisconsin Economic Summit III, highlighting the need to focus efforts on action, results and implementation.
  
  
• More than 800 attendees participated in eight afternoon sessions, which focused on local and regional economic development efforts, entrepreneurship, controlling health care costs, high-tech clusters, pre-college success, "brain gain," the role of media in economic development and workforce development.

--Wednesday's sessions will begin at 8 a.m. with remarks from Attorney General Jim Doyle, Democratic nominee for governor, and include a panel on economic development collaboration.

Summit co-chair Jay L. Smith gives summit attendees a charge to focus on action, results and accountability in economic development efforts.	Stanley Battle, vice chancellor for student affairs at UW-Milwaukee, speaks during a session entitled "Investing in Pre-College Scholarship Programs: Documented Success in Milwaukee."

Photos by Alan Magayne-Roshak, UW-Milwaukee, and Christian Schauf, UW System.