As another budget season looms for Wisconsin local governments, we are prepared for just how hard a season it will be. With deflation in home values, the recession eroding incomes, and struggles with massive state budget deficits, we know this will be a very difficult budget season indeed.

As expenditure requests pile up and revenue capacity dwindles, it is worthwhile to poke our heads above the paperwork and see where we are heading in Wisconsin. Is this just a temporary condition or should we be lowering our expectations for the future?

Local government’s ability to provide services to its citizens over the long term is directly tied to our ability to create wealth. If the fruits of our work create value that people around the world are willing to buy, then incomes rise, investment flows, property tax base increases and local government can afford to provide the services demanded by its citizens. This is what happened between 1940 and 1980. Wisconsin was a major manufacturing center providing quality products to the world and fueling our ability to invest in public infrastructure and services. We had the best roads, the best education system, good parks and we took care of our own.

Unfortunately, Wisconsin seems to be in a cycle of declining economic capacity. Terry Ludeman, retired Chief Economist for the Wisconsin Department of Workforce Development gave a presentation to the Local Government Institute a few months ago. Terry made the following points:

  • Wisconsin currently ranks 31st in average wages – our neighbors Illinois and Minnesota rank in the top quartile of states. Wisconsin has lost ground over the past several decades while Minnesota has gained ground.
  • Worforce productivity - the amount of economic value we create per job - places us 42nd among states. In 1978 we ranked 31st and Minnesota was a close 29th. Today Minnesota is 21st – rising 8 rungs while we have slipped 11.
  • Educational attainment is an indicator of future wage potential. Here again, Wisconsin is not doing so well, ranking 33rd in terms of post-secondary educational attainment. Again, Minnesota outperforms Wisconsin in this measure as well, placing 10th in the nation.
  • Demographics are working against us. Our workforce is aging at a faster pace than the nation with 31% of our workforce recently retired or quickly approaching retirement, compared to 26% for the nation.

These trends do not bode well for future local government budgets. If these key indicators of future economic capacity – wages, worker productivity, educational attainment, and age of workforce – are slipping relative to other states, we are in a downward economic spiral that will be difficult to stop.

So, what can we do? Wisconsin has assets that can be and are being developed to form the basis for our future economy. Our strong manufacturing base is evolving to incorporate new technologies, whole new industries are being formed in partnership with our research institutions and business community, strategic investments are being made to boost the availability of capital and an entrepreneur support network has evolved to become the envy of the nation.

Local government has an important role to play as well. Despite the tough budget environment, our local governments are managing to provide quality public services that are critical to a functioning economy – public safety, courts, clean water, and safe roads.

But, in order to keep our young people here and attract new residents to our communities – the young blood we need to be the backbone of our future economy - local government must continue to invest in both economic infrastructure and quality of life. Environmental protection, recreational opportunities, vibrant downtowns, and good schools go hand-in-hand with jobs, career opportunities and good wages to keep/attract our next generation workforce.

And, particularly in the situation we are faced with today, local government must increase its investment in economic development. Economic development is where the private sector and the public sector come together to create the conditions that cause our economy to grow. Economic development today requires skilled professionals working the public/private interface to successfully translate local economic assets into economic growth.

In the past Wisconsin has not seen the need to invest in economic development. Other states, particularly in the South, have not been as economically fortunate as Wisconsin and so they made significant investment in their economic development capacity. As a result, they have tremendous capacity to leverage their assets to attract both people and jobs.

Wisconsin has made some progress in this regard. We now have regional economic development organizations in place in most areas of the state. Our economic development professionals have made a concerted effort to improve our level of professionalism and provide basic training for public officials (see http://www.uwex.edu/CES/cced/economies/bedc.cfm). But we do not yet have the level of investment by state and local government needed to turn our current situation around.

If we want our current circumstances to be temporary and not just a preview of things to come, then our budget decisions today must be made with the long view in mind. We must be looking at efficiencies, shared services, regional cooperation, and improved productivity to balance our local government budgets instead of cutting those investments that are the foundation for a better future.

This article was prepared for the August 2009 issue of the Wisconsin Counties Association magazine. A pdf of the article is available by clicking here.

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