Wisconsin Public Television University Place Wisconsin Bankers Association  "Wisconsin Economic Forecast 2011: Scott Walker"  January 11, 2011 UP538    cc >> Jeff Mayers: This is the sixth year for this event, and it's the third year in a row for a sell out crowd. That's attributed to all of you of course and to the high profile guest speakers and the organizers who help make this happen. They are primarily the Wisconsin Bankers Association, the Wisconsin Realtors Association and the Greater Madison Chamber of Commerce. Now before I introduce our special guest, allow me to recognize our presenters for this year, the Wisconsin Bankers Association. And Kurt Bauer, the president, is over here to the right. Wave, Kurt. [APPLAUSE]  We also want to thank all the other sponsors. In addition to the Greater Madison Chamber of Commerce, the Realtors Association, the Boardman Law Firm, News/Talk 1310 WIBA, WisBusiness.com, American Family Insurance, the Capital Region Business Journal, RSM McGladrey, MG&E and Wisconsin Business Development. [APPLAUSE]  Now you may already know this, but just last week our first speaker was sworn in as Wisconsin's 45th governor. In his inauguration speech, Scott Walker proclaimed once again that Wisconsin is open for business. 

I think you're going to hear that phrase every once in a while. And he's here to tell us about his plans to grow the state economy. So welcome Governor Scott walker. [APPLAUSE]  >> Governor Scott Walker: Thank you. [APPLAUSE]  Thank you, Jeff, for that introduction. It's good to be back here. Last time I was at Monona Terrace you might have saw, at least one of the papers had Tonette and I on the front page dancing. I had to laugh, that night Alberta Darling, my good friend state senator, sent me a text, and she said, where in the world did you find time to learn how to dance? I said, it was Monday nights at 8:30 on the way back from budget briefings. So you can squeeze just about anything in. And thank you to the Wisconsin Bankers Association not only for being the lead sponsor and putting this on and all the other groups that are here today, but thank you for Kurt and the team and the board's leadership. 

We're pleased today, I know we've got a wide representation of business interest, but particularly from a banking standpoint, I'm proud to have selected a great cabinet but particularly when it comes to the Department of Financial Institutions and the Department of Revenue, two outstanding secretaries who I think are going to be a great asset to our financial institutions here in the state of Wisconsin. I appreciate your recognizing them as well. We know that when it comes to financial institutions in this state, Peter and I were talking about this before he came and joined our team, but if we're going to help businesses grow in this state, if we're going to truly show that Wisconsin is open for business, one of most important things is to have a healthy financial environment so that our banks and other institutions can loan to our small businesses, to our family farmers, to others who want to expand in this state. And so we're going to be working very hard through both DFI and making sure the Department of Revenue as well works hand-in-hand with our financial institutions to make sure our state can grow. Jeff alluded to this, I said it last Monday, many of you saw it the night of election, but I had a plaque up on the front of the podium, kind of like the one up here right now, and I said to my staff in the days leading up to it, they said should we put a brown bag plaque up there, should we put a Scott Walker believe in Wisconsin again sign? I said, no, the election will be over as of November 2nd, we need to start sending a clear message. So I literally asked them to make up a sign that you saw that night, November 2nd, that said Wisconsin is open for business. Now that was a symbolic change but starting last Monday, and you've seen it even today with some of the hearings that are being held in the state assembly and the state Senate, we're showing that that was more than a symbolic change, that is a substantive change to show all the people and all the employers in this state, and even more so these days all the employers and people in other states, that Wisconsin is indeed open for business. And I want to talk to you about that because we've got some great plans to get Wisconsin working again. It starts with our special session jobs plan, and it continues in about a month as we introduce our budget for the next biennium and then we continue working on with our friends and colleagues in the state assembly and the state senate, with all of you across the state helping us get that message out. When it comes to special session, now couldn't be a better time than ever. 

You look at what they're doing in Springfield in contrast to what we're doing here in Madison, and there couldn't be a better contrast. I mean think about it. They're talking about a 75% increase. At first I thought I was reading "The Onion" the other day when I saw that. I thought a 7.5% would be a pretty bad increase. They're talking about a 75% increase at a time when even in facing tough, difficult challenges we're trying to show that we're going the opposite direction. We're going to start sending a message, a slow but steady message that we're lowering the tax burden. As times get better in terms of this budget process we're going to be even more aggressive in terms of changing the tax climate here in the state. But right off the bat, particularly for small businesses, we're working with our allies in the legislature to move forward a series of changes, not the least of which is lowering the tax burden on small businesses, improving adding an incentive so that as we go to Rockford and Chicago and Springfield and other places and tell employers to come up to Wisconsin we're also going to have a tax incentive for them to bring their corporate interest out of Illinois and other states and into the state of Wisconsin to put more people to work here. We're talking about working with the legislature to put in place a change that says that to those employers looking to grow that are here as well as others coming in from other states that we're going to send a message that not just in this current administration but into the future there's some degree of protection against tax increases with the super-majority requirement for future tax increases so we can keep a steady keel on where taxes are in this state. 

And we're looking to enhance our economic development tax credit program so we can attract even more businesses to grow in this state. A good example, I won't mention their name because the deal is not done, but I had a significant employer, a good mid-sized manufacturer here in the state of Wisconsin come and meet with us yesterday. She was so excited after the election and after the inauguration last week. They've got a facility with about 135,000 square feet. They've got a good customer base out there that wants them to grow, and so they're going to more than double the size of their operations. They want to add another 200,000 square feet facility next to the one they have right now. And they're facing the same sorts of challenges. They want to know the state is going to be a partner with them and that long-term it's going to be stable to do business here. They also mention as an aside, they're probably looking at a number of you here, they want to have a good bank partner with them to help them finance the deal along with the state and with their local community and the bid that they're looking to have in place. But that's part of the excitement out there. 

So one of the things I mentioned last week in the inauguration is that while there are certainly plenty of people and plenty of employers in this state hurting, and we by no mean overlook that, but the reality is that there's an awful lot of employers like the ones I met with yesterday who would like to add more jobs in the state. They just needed a clear and consistent message that things were going in the right direction. You see, up and before the election they were worried seeing these numbers about the budget deficit that we faced, over $3 billion. They were worried about some of the regulations and standards that were being imposed on them that it would be more difficult to do business in this state. And instead, even in this past week, they've seen it's just the contrary, that we're moving in the right direction. So we want to cut the tax burden, particularly for small businesses. Secondly, today we introduce the official legislation that's part of this special session package, but it's about specifically reforming the regulatory climate here in the state of Wisconsin. One of the things I hear repeatedly from small businesses, from many of you here, as well as for those of you in the financial industry know from many of your clients, as much as the tax burden, it's the cost of regulations, compliance with regulations and litigation costs in this state that are having a devastating impact, particularly in our small businesses. We're putting forth legislation today, we've talked about but the actual draft comes out today, that will change the administrative code process in the state. We have one of the broadest in the country. 

It needs to be reigned in. We need to make sure it not only empowers the executive branch of the governor but the members of the legislature to say if they pass laws, the administration should be administering those laws. The bureaucracy shouldn't be expanding beyond what those laws were in the first place. Instead it should be honed in on fulfilling the legislative intent of the statutes as they were defined through the legislative process. And to make sure that happens, before anything gets through its final phase it's going to have to come to the governor's office under our proposal. To me that's one of those insurers that you don't get administrative rules that really have not had the ability to have the elected branch, both in the executive and the legislative branch, the elected officials of this state ultimately responsible to all of you to make sure there's a balance. A balance between protecting public safety and public health but also making sure we protect the economy and the people of this state, and that's exactly what these changes in the administrative code process are going to be about. We also added another element that's maybe a little foreign or at least has been foreign in Madison and the capitol for some time, we put in place a cost benefit analysis. We actually believe there should be an analysis to how much this is actually going to cost the private sector and whether that outweighs whatever other public safety, public health interest there is out there so that we're only putting forward things that have a vested interest for the entire state, not just for the state government. So we're making changes in the tax burden, we're making changes in the regulatory burden, we're making changes, today there was a hearing held on our proposed changes in the litigation, the lawsuit abuse burden in this state. 

We want to pass aggressive tort reform that says if somebody does wrong, certainly they should be held liable for that. But there shouldn't be this situation where our small businesses across this state under a position where they're constantly playing defense against frivolous lawsuits. If this legislation passes, we're going to change, remember five years ago when the "Wall Street Journal" ran an editorial that called us "Alabama North." We're going to be the opposite. We're going to show that we got  the message, we woke up and it's about time we start sending a clear message that you can afford to do business in Wisconsin. To me, passing this legislation is one of the clearest ways we can send a message that's better than just a sign board but a message to employers, about two-thirds of whom when surveyed said the litigation environment in a state has a significant impact as to whether or not they're going to place their jobs there or not. We want to be one of the states where we say through our legislation, through our administrative code and through our litigation environment that Wisconsin is indeed open for business. On top of that, a couple other quick changes. We want to change and make it more affordable for workers and for family farmers and others to afford access to quality healthcare. And so one of those options amongst others we'll pursue in the budget, but one of those options in the special session package is to change, right now we're one of about four states in the country that still taxes health savings accounts. We need to change that. 

We need to get in line with where nearly everybody else is at. We need to say it's affordable for you to access health savings accounts. If you want to control your own destiny, if you want to do that for your employees and others you work with, you should be able to have that option without the burden of the state income tax imposing an added burden on you doing that. So we're going to change that as well. And finally in this special session package we're going to repeal what's currently in place as the Department of Commerce, and take the Department of Commerce, which now spends a fair amount of its time regulating commerce, and instead transform that into the Wisconsin Economic Development Corporation, an entity whose sole purpose is to promote commerce in the state of Wisconsin. We're going to do that in a public/private partnership that still has accountability to the legislature and to the governor and still has accountability to the taxpayers of this state but is nimble enough to act on economic development interests as they devolve and not months and years down the way after it's happened. We need to be more aggressive in pursuing economic development interests right here in this state as well as attracting those in from other states out there. We do that, the first step is passing this legislation to create the corporation in the budget will fully enact the changes, and then you'll see as part of that one of the things we're looking to do is take the regulatory elements that are left in the Department of Commerce and put them into what's now the Department of Regulation and Licensing. We put a new secretary in place who's devoted to customer service to actually working with the consumers of this state. We're working with the businesses and professionals of this state to make sure we've got an agency that actually responds to your needs and interests and doesn't stand in the way of progress there as well, but to take commerce and make it solely focused to this economic development corporation on pushing the creation of more jobs in the private sector, not in the public sector but in the private sector, for the years to come. 

That's an exciting agenda that it's hard to believe just a weekend I was talking with John Fund from the "Wall Street Journal" the other day and he said, wow, how do you get that all going in one week? Well we didn't start doing it last week, we started doing it the day after the election. And many of you here have helped us throughout the process and we thank you. We're going to need your help to continue to push for that. The good news is our friends in the Assembly and the Senate are eager to act on that. They're eager to move forward. We've been talking with them even in this past week about some tweaks and a few adjustments out there, but I think if everything works out right we might even have the majority, if not all the package by the time we give our State of the State address at the end of this month. That would be a compelling time to send a clear message here and to other parts of this country and around the globe that Wisconsin is indeed open for business. The other thing we need to do to get Wisconsin working again is not only in the creation of jobs in the private sector but to get the state government working again. Because stability in our government will help us move forward as well. And that's something, I'll give you just a little preview of some of the things we're working on for the state budget and I'll be working on it again this afternoon. 

We're facing a little over a $3 billion deficit going into the next two-year budget starting July 1 of this year. Now that's a pretty formidable obstacle. We talked about that in the past. We're not going to use raids on things like the transportation fund or the patient compensation fund. We're certainly not going to rely on a federal stimulus package because that certainly is not there nor do I think that's good prudent policy from a fiscal standpoint. So we're going to move forward on doing things the old fashioned way. We're going to adjust things just like you do in your businesses and your homes. We're going to make some tough but compassionate decisions about moving this state forward not only to balance the current budget but to ensure that we don't just keep kicking the can down in the future and pushing those decisions off to future governors and future legislatures. That's why we're facing the trouble we face today. Frankly that's why not only Wisconsin but the vast majority of states across this country are facing these same sorts of challenges. 

In case you missed it yesterday, Jerry Brown, the new governor, well new again, I guess you would say, governor. He was governor back when I was in kindergarten in California. Don't laugh you probably think that was just a couple years ago, right? But he's back again. Well Jerry Brown actually went ahead and if you didn't notice it yesterday, he ended up passing or proposing a budget that cuts spending in California by $12.5 billion. $12.5 billion. He cut about $1.4 billion out of the University of California system out there. Social services, other programs, he took and imposed for just about every state employee in the state of California about a 10% net reduction in terms of take-home pay. They're in trouble. They and Illinois are in a whole different stratosphere when you look at their bond rating, when you look at the chart and they're off on their own category over there. But they have to make some significant reductions. 

You look at New York state where Andrew Cuomo, another guy whose father was governor when I was in kindergarten I think, Mario Cuomo, but another Cuomo is governor there. He's talking over a billion dollar cut when it comes to Medicaid in that state. In fact, Jason Helgerson, the former Wisconsin Medicaid director, is now the leader of that initiative in the state of New York as well. There are going to be governors in nearly every state, over than maybe the Dakotas where they have the value of some natural resources that are helping them balance their budget, but short of that we're going to be in the same boat as everybody else. The difference is we're not going to punt it into the future. We're going to resolve it now so that we don't have to keep coming back and facing the same sorts of challenge from the next budget and the next budget and the next budget after that. That really means honing in on three core areas. One you've already heard me talk about quite a bit. This last month when the legislature, the lame duck session of legislature talked about voting on a package for state employees, we asked them, and thankfully were successful in the fact that they did not pass them, because we have to be given flexibility when it comes to wage and benefit reform. What I mention as an example is if every state employee were to make a 5% contribution to the pension system. 

Not exactly a radical concept. That's still less than what the average is out there for employees. But a 5% contribution to the retirement system and a 12% premium contribution for their healthcare. Again, not exactly an out of line proposal. That would save us for the first six months of 2011 $154 million. You compound that by four over the two years, the four halves that I'm talking about of the next biennial budget, and you can see that quickly adds up to a lot of money. That's just state employees. Imagine if local governments were able to do the same sorts of things with county, city, town, school district employees, what the kind of impact that could have. That means, in turn, we also have to partner with local governments because a good chunk, the majority portion of discretionary budgeting from the state standpoint is money that goes back to local government, particularly to school districts but to others as well. If we're going to make any adjustments there we've got to make we sure we do so in a way that frees up those local governments through age and benefit reforms there as well so that in the end the product, whether it's classrooms, whether it's plowing, whether it's police service or other things like that, the core services that we all expect and demand out of our local governments is something that can continue even after the state budget is put in place as well. 

And then finally, we've got to tackle big issues like Medicaid and others and make sure that those elements of our budget don't grow out of control. Now we're committed to doing that. I literally started the afternoon of November 3rd. We've been in just about every day and every weekend since talking about that with the budget. Again, so many of you from across this room and across this state have been helping us throughout this budget process. We're going to be aggressive about that. We're going to be very ambitious in how much we push the edge of the envelope when it comes to this budget because we have to. But the good news is when we do, we set a steady standard for, I think not only years, but decades to come that Wisconsin's budget is going to be back in control, and we're not just going to cut things, we're looking to make things work better. To me it's not just acceptable enough to balance a budget just by cutting things. We've got to have a pro-growth agenda that pushes us forward and puts more people to work which long-term will bring more revenue into the state. 

At the same time in the other areas where we make cuts that reduce the size and scope of the government, we've got to make sure the things that we do we do well and we do effectively and that's our charge and that's my promise to you as part of our administration. You can tell, and I spoke quickly because they gave me about 15 minutes, so I apologize if you had a hard time digesting that last of your dinner. There's a lot to go through here today. I get pretty excited about it. But for us, I feel positive about the future of this state. There's no doubt, don't confuse that for one minute that I don't recognize that people and employers in this state are hurting. But I know that the basis for our recovery is in place. Our plan for renewal is based on not just some theory out there but based on the fact that touring this state for nearly two years leading up to this election, I've seen that kind of will power out there and I've seen the fact that what is failing us has not been our people or our places in this state. What has been failing us, I believe, for the last many years I can think of has been the expanse of our government. We get that under control, we move that state forward, we start focusing on creating jobs not in the government but within the private sector and we're going to get this state moving in the right direction. 

The last thing I want to ask you and then I'll open it up to Jeff moderating some questions is just this: remember nothing else today, I've got one last request for you, and that is take a bit of what we talked about here, take the contrast with Illinois, take the contrast with California and other states out there, take the agenda that we've talked about that we're moving forward to send a very clear message about this state being open for business and putting people back to work again and share it. I look around the room and I see a lot of business leaders, I see a lot of civic leaders in this state and you might think okay you're preaching to the choir. My father was a pastor and I  heard not too long ago somebody, a pastor, say, when asked why do you preach to the choir, he said, it's real simple, I preach to the choir because I want the choir to the sing. I'm asking all of you to sing. I'm asking you to go back to your own communities, I'm asking you to go back to the rotary and the Kiwanis and to your chambers and anywhere else where you can spread that message and start singing about the changes even in this past week that are happening here in the state of Wisconsin and the impact that's going to have on employers like yours and others that you represent all across the state and then spread it to other friends that you have outside of our state's borders. That Wisconsin is indeed open for business. When we do that I have no doubt we can get this state working again both when it comes to jobs and when it comes to our state government, and I look forward to your help in doing it each and every day. With that, Jeff, I can take some questions if you like. [APPLAUSE] >> Stay right there. Okay, we have time for a few questions. 

So Mike and few others are going to have a microphone here. If you have a question, raise your hand and they'll come over to you and you can ask a question of the governor. Don't be shy. Raise your hand if you've got a question. I don't see any out there. >> They're just so happy with what I've said, they're ready to go sing. That's it. >> They're tuning up right now. >> There's one over here. >> We got a question right over here. 

Mike, over here. >> Right over here. >> David, stand up. >> I'll repeat it for you too if you want. >> All right, David Locke of McFarland Bank. >> Governor, welcome. Thanks for being here today. >> My honor. >> I just read recently in one of the periodicals that there's a bill idea being floated around in the capitol to over time eliminate capital gains tax. And Wisconsin, of course, having to compete with other states on the tax issue, I'd like your comments on that. 

>> Yeah, I think it's a great idea. I believe that Senator Randy Hopper is talking about repealing the changes that were made in the past budget. I support that. Figuring out the right way and the right method to do that. He's got the bill, we'll have to look at other ways of doing that but I think that makes sense. And frankly long-term, I don't know if this component could be done right away in this budget but I'd love to eliminate it outright for investments made here in the state of Wisconsin. >> Right, another question?  >> Governor, I'd like to also congratulate you on the election. >> Thank you. >> I'd like to know your position on the voter ID. I've read about it. 

I'd like to ask you elaborate on it a little bit and the E-Verify for the illegal immigrants situation. >> Sure. Two different parts. One, it's pretty simple on voter ID. I was the author of the bill 10 years ago when I was in the legislature so no great surprise I'd sign that presuming it gets to our desk. And my guess would be it will come up relatively soon through the legislature just because I think there's a fair number of people that would like to have that in place by the spring elections of this year having an impact on a number of key local races as well as the State Supreme Court. The other part is on immigration. To me, I've said in the past I would support an Arizona type law in terms of immigration and believe, short of that as well, that in terms of enforcing immigration we shouldn't be providing public assistance or other things that encourage those individuals who are not here legally in the state of Wisconsin. Now having said that, and I support both of those, my focal point right off the bat has been and will continue to be on jobs. Those other issues are important. 

They'll come up as part of the spring session, but the reason I honed in on a special session right off the bat on jobs was I think we need to send a clear message on the economic issues of this state, the others will come along shortly there after early on in the spring session and we'll be willing to act on those as well. >> My name is Matt Younkle. I'm a start-up technology entrepreneur here in Madison. I, in the last couple of months, have actually added about 10 people. So I've been hiring, which is great. One of the things that's allowed me to do that has been the angel investor tax credits, and I know you're looking to make some changes to the Department of Commerce, that's the part of the department that I really like. What are you going to do with respect to that and helping bring investment to start-up companies? >> We're going to continue that. Former Senator Ted Kanavas is very active in that, and I supported him in the past when he did that. We'd like to take that a step further and not only continue those credits as part of the new economic development corporation but work, as you saw the other day, SWIB, in terms of state investment board, potentially working with our partners with WARF and with others, as well as helping private sector venture capital firms evolve in this state and continue to hone in. A lot of the investment up until now has been focused largely in California and places like Boston. 

We want to make sure more of that is in the Midwest and particularly here in the state of Wisconsin, and we can help build a fund that partners with those other elements to make sure businesses like yours can continue to not only start up but grow here in the state of Wisconsin. >> It's a shy group. >> We covered all the bases. >> You told them everything they wanted to hear. >> I went so rapid-fire through everything. Don't forget to sing. We'll hand out hymnals on the way out. Thanks, everybody. [APPLAUSE]