How Should State Spend $6.6 Billion Surplus

There are countless ways to spend the $6.6 billion surplus accumulated by the state of Wisconsin. I have several ideas for the best ways to move the state forward with that unprecedented pile of cash; you have yours, and each legislator and the governor have theirs.

The use of the surplus has been stunted in the last four years because the Republicans who control the Legislature and the Democratic governor Tony Evers seldom agree and refused to let their opponents make points with the voters. It was pig-headed at its best and childish at its worst. There are endless causes and initiatives that would move the state strategically with those unused funds.

Fortunately, there have been some early signals from Assembly Speaker Robin Vos and Senate Majority Leader Devin LeMahieu that some compromise on intelligent spending/investment may be possible.

Vos cryptically commented they and the governor had a five-minute conversation, the longest in the last two years. LeMahieu said that he didn’t favor a gridlock over the next four years of Evers’ second term, which could result in $30 billion sitting on the books by then.

There is clearly some common ground on tax issues. They compromised two years ago on $2 billion in tax cuts that went mainly to the middle-income taxpayers. The compromise resulted in the top bracket of 7.65% staying at the same level. Tax cuts at the bottom of the income spectrum are not possible because poor households of Wisconsinites pay no income taxes.

Gov. Evers proposed another tax cut out of the surplus for middle-income earners by 10% during his recent campaign.

There’s more to civic and economic life in Wisconsin, though, than tax cuts. LeMahieu indicated he could support more K-12 funding and Evers has always pushed for higher K-12 funding. His career has been in public education prior to becoming governor.

Republicans in return will want to open the doors for more funding and access to choice schools.

At present less than 5% of Wisconsin parents receive vouchers for private schools of their choice.

Beyond tax cuts and funding for primary and secondary schools, there are a host of other intelligent priorities for spending. Here are several that I deem to be strategic and hope politicos agree:

• The Stewardship Fund that provides matching dollars for the preservation of precious lands, and thereby waters as well, has never been properly funded since it was approved by the Legislature under the leadership of Republican Gov. Warren Knowles and Democrat Gaylord Nelson. It relies on debt funding that is always politicly vulnerable.

The current stewardship bonding debt is $546 million, with an additional $168 million in accrued interest. Evers and the Republican leaders could pay off that debt with the surplus and put $1 billion into a permanent endowment from which the earnings could be used for the preservation mission in perpetuity. There would be no more debt.

• The Wisconsin economy has lagged the national averages for a half century, and it is still lagging. Wage levels in Wisconsin have dropped to 83% of the national average. Our brilliant entrepreneurs like Robert Kern, the founder of Generac, who died last month, have kept Wisconsin’s economy somewhat stable and growing at a modest pace. Without him and other highly successful entrepreneurs, like Judith Faulkner of Epic Systems and Diane Hendricks of ABC Supply, we would have little or no growth.

To stimulate more startup companies, Wisconsin could expand upon its Act 255 that gives a 25% tax credit to investors in entrepreneurial companies. There is a short-term loss of tax revenues, but it comes back in spades when the new companies take off, start paying business taxes and employ people who also pay taxes. What’s not to like?

How about 40%? This strategy is relatively unique to Wisconsin, giving us a strategic advantage as an oasis for new ventures.

• Wisconsin has been slipping in business-sponsored research at our universities. The surplus could be used to greatly increase tax breaks for corporate-sponsored research. There will be a payback down the road as entrepreneurs use R&D breakthroughs to propel company growth.
• Two-year colleges across the state are in trouble. The 13 University of Wisconsin colleges across the state have lost more than a third of their enrollment in the last 10 years. As a dramatic punctuation point, UW president Jay Rothman just closed the Richland Center two-year campus. A satellite of UW-Platteville, it has fallen below 100 students. The two-year Wisconsin technical college system has also suffered enrollment decline in its 16 districts across the state.

With a declining number of high school graduates every year and very little in-migration, Wisconsin needs extraordinary measures to keep our young people here. Some states have made community colleges free of tuition. Why not use some of the surplus for that here? An endowment of several billion could be set up out of the surplus, so there is not an ongoing annual drain on general purpose revenues.

Other citizens will have other strategic ideas for the use of the growing surplus, which is projected to keep growing despite a soft economy.

It’s fun to spend money on great causes. Evers, Vos and LeMahieu could have a lot of fun putting together a game plan that will propel Wisconsin forward for the next decade and beyond.

John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.