Business-Friendliness, Location Fuel Wisconsin’s Rise

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Wisconsin’s rise into the top 10 of Chief Executive’s “2017 Best States for Business” has been the steadiest ascension in the rankings over the past five years—and one of the most deliberate.

Since Gov. Scott Walker took office in 2010, he has pushed and deployed a laundry list of business-friendly policies in large part to persuade CEOs that Wisconsin would be a great place to site or expand their facilities and companies.

At the same time, the biggest boon to the state might not be of Walker’s creation: the accident of its location across borders from two of the Midwest’s most important population centers, Chicago and the Twin Cities.

He’s done a tremendous job of communicating to the world that Wisconsin is open for business.

In any event, Wisconsin has climbed the list to No. 10 this year from No. 41 in 2010, to No. 24 in 2011, to No. 20 in 2012, to No. 17 in 2013, to No. 14 in 2014, to No. 12 in 2015, and to No. 11 last year. And after the addition of thousands of jobs over that span, Wisconsin’s rate of workforce participation is nearly 69 percent, putting it in America’s top 10 states—and at an all-time high for the Badger State.

“He’s done a tremendous job of communicating to the world that Wisconsin is open for business,” Anthony Pratt, CEO of Pratt Industries, which recently decided to place a new box-manufacturing plant in Beloit, Wis., told Chief Executive. “And on a macro level he’s done a great job of bringing down costs in Wisconsin.”

Another recent haul for Wisconsin was the first North American plant for Haribo, the giant German confectioner that chose a site in Pleasant Prairie, Wis., just north of the Illinois border. “This location offers us access to talent, flexible supply opportunities and exceptional community support,” said Keith Danoff, vice president of marketing for Haribo America.

It hasn’t been entirely smooth sailing. Walker opened his first term by waging a titanic battle against public-employee unions and their progressive allies to help close the state’s $3-billion budget gap by cutting pension costs an affront that brought massive Sixties-style sit-ins at the capitol building in Madison and fomented a recall election in 2012 that Walker survived handily. He was re-elected in 2014 and ran briefly for president in 2015.

Backed by most of the Wisconsin electorate to keep going, Walker and the Republican-controlled state legislature instituted $2 billion in tax relief, including tax credits that virtually eliminated the tax burden on manufacturers and agricultural producers. The state eliminated taxes on property-tax bills.

Yet in the wake of the policy changes, Wisconsin still didn’t generate new jobs as quickly as Walker had hoped. Job creation got off to a sluggish start, and even today the state remains nearly 65,000 new jobs short of the 250,000 that Walker promised to create by 2015.

In 2013, Wisconsin became a right-to-work state, joining Michigan, Indiana, Iowa and Kentucky in encircling holdout Illinois over the last few years. Most recently, Walker has pivoted to a crucial emphasis on workforce training, with $110 million in state investments.

“We’ve put in place a series of reforms that have created what I call a reform dividend—something that employers can appreciate because a dividend is something you earn, not a bonus and not unexpected,” Walker told Chief Executive.

Blake Moret, CEO of Rockwell Automation, a long-time industrial stalwart of Milwaukee, underscored that fact that leaders of existing companies are also pleased with Wisconsin’s progress. “The state recognizes its heritage and opportunity for manufacturing,” Moret told Chief Executive.

As the example of Pratt’s new site illustrated, Walker also has been masterful at exploiting Wisconsin’s location to offer CEOs cost-friendly locations conveniently close to huge and strategic markets in two states that have unfriendly reputations with business leaders. Minnesota ranked No. 38 in the new Best States/Worst States list, down four spots from last year, while Illinois probed the bottom, holding at No. 48.

“We’re using our plants in Wisconsin and Indiana,” Pratt said, “as launching pads to fire into the Chicago and Illinois market” where food processors are huge customers for boxes made by Pratt, America’s fifth-largest box maker with 68 factories, mostly in Flyover Country.

Gov. Walker himself noted the contrast between Wisconsin’s now-fully funded state pension system and that of fiscally troubled Illinois. The five largest publicly funded Illinois pensions now are $130 billion underwater and only 38-percent funded. CEOs “have choices” about where to put plants,” he said, and “they see Wisconsin as a stable state.”

Walker also impressed Pratt in part by being “hands on” about winning his company’s plant location and as he identified Pratt’s Wisconsin-based customers when looking at a stack of boxes on a plant tour. “He was able to point to all sorts of companies that he’d either brought to the state or that had grown since he was governor,” Pratt said.

Eric Stavriotis pointed out another advantage that Wisconsin has built, beginning even before Walker’s tenure began: the continuity and expertise of its economic-development staff. “They’ve been doing it for several years, and now they’re able to leverage all of the great work they’ve done,” said the senior vice president of CBRE, a Chicago-based site consultancy.

But what’s most important is the biggest picture. Walker said the main lesson for other states from Wisconsin’s success is “to go big and bold and push real reform and not just focus on cuts.”

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Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.

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