08 Nov Behind the scenes of the state budget: Some actual progress
Madison, Wis. – You’ve read or heard most of the political stories surrounding the passage of the Wisconsin state budget – the nearly four-month delay, the partisan bickering, and the occasional gamesmanship when statesmanship would have better served everyone.
But how much do you know about what this $57 billion tax-and-spending plan will actually accomplish over the next two years? Perhaps a lot less, because the closing rush to passage focused more on the process of putting together the budget than the policies it contained.
One relatively small area in the budget – economic development – demonstrates that amid all the noise, there was genuine action. Republicans and Democrats managed to agree on initiatives designed to move the state forward, even if the trip took 115 days longer than planned.
The renewal and expansion of the state’s angel investment and early stage-seed investment tax credits is a prime example. This program was created nearly three years ago with one goal in mind: Encourage Wisconsin investors to invest in homegrown start-up companies. The state Department of Commerce set up a system to screen “qualified new business ventures” and investors who put money into one of those promising companies could get a state tax credit of 25 percent over two years.
The program proved very attractive, especially for so-called “angel investors,” who are wealthy individuals – often entrepreneurs themselves – who invest money (and often time) in helping young companies get on their feet. It’s not an altruistic exercise, because angel investors hope to reap 20 to 30 times their investment if the company succeeds. But it’s good for the Wisconsin economy because it’s usually easier to grow new companies at home than lure them across the border.
With angel investing booming in Wisconsin, the program was deemed a success. Gov. Jim Doyle proposed an expansion, and the Legislature’s Joint Finance Committee agreed. The process hit a speed bump in the Senate, but the Assembly stood firm for an expansion and the final bill increased available tax credits by $5 million per year beginning Jan. 1, 2008.
Under the current law, known as Act 255, Wisconsin taxpayers can claim a total of $3 million per calendar year in angel investment credits and $3.5 million in early stage seed investment credits – category that could include venture capital. The new law will increase the total tax credits available each year to $5.5 million and $6 million, respectively.
That’s enough to help entice another $20 million in private investment per year, so long as the actual investment is worth making. The bill also made other changes designed to increase the law’s flexibility and to remove some unintended tax penalties on investors.
Assembly Speaker Mike Huebsch, R-La Crosse, said the investor tax credits were popular among Republican lawmakers in the lower house because they were working as intended and encouraging private investment in Wisconsin companies.
“This is one area where we were looking at our neighbors, such as Minnesota and Illinois, as competitors,” Huebsch said. “They are outpacing Wisconsin in general when it comes to attracting investment dollars. The angel and early stage investor tax credits are really just a baby step in the right direction, but they’re still an important step.”
There are other examples where Doyle and lawmakers reached solid agreements.
• A new grant and loan program for biofuels and other alternative energies will receive $15 million in the second year of the budget. That’s about half of what Doyle wanted, but still enough to leverage Wisconsin’s recent award of a $125-million federal research grant tied to production of ethanol from wood waste, plants and other non-food sources.
• The University of Wisconsin System received an increase in funding that will advance plans by the UW-Milwaukee to build an engineering campus and research park, as well as improve the Great Lakes Water Institute. A tech-based initiative involving UW-Stout, UW-Eau Claire and Chippewa Valley Technical College was also approved.
• The budget creates a new tax credit for 50 percent of the costs to maintain medical records in an electronic form. Total credits would be capped at $10 million per year, beginning in 2010. The budget also creates a state income tax exemption in 2009 for Wisconsin Hospital and Educational Facilities Authority bonds issued to pay for information technology hardware or software in a health facility. The net effect of these proposals will be to encourage 21st century patient records – which will improve health care through more accurate, error-free diagnosis and treatment.
It took too long and there was often more smoke than fire. In the end, however, the 2007-2009 state budget included some ideas that were worth the wait.
Recent articles by Tom Still
• Tom Still: Shirting the issue: Lessons from a college entrepreneur
• Tom Still: Early-stage activity is a good sign for Wisconsin’s economy
• Tom Still: Tools for fighting wildfires include incentives to manage neglected forests
• Tom Still: A post-deal tally: Winners and losers in state budget debate
• Sounding the alarm: Universities must be catalysts for growth
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