As Wisconsin stays dead last for start-ups, WEDC still giving milions to donors

Forget all the talk about tax cuts and “reforms” that Scott Walker and the Wisconsin GOP have put in place over the last 5 ½ years, a huge economic problem in Wisconsin is that we continue to have too much of the same, and not enough new blood to stir things up. That was shown again in yesterday’s release of the Kaufman Foundation’s Index of Startup Activity for 2016.

You may remember that Wisconsin rated dead last in the nation for business startups in the Kauffman report last year. Well, at least we got consistency.

The new report, which uses data from the U.S. Bureau of Labor Statistics' Current Population Survey and Business Dynamics Statistics from 2015, doesn't rank all 50 states on a comprehensive list — instead, it separate states into a list of "big states" and "small states" based on population. However, Wisconsin comes last in the list of "big states," and based on its Kauffman Index score, it would have been ranked 50th had all the states been listed comprehensively.

Kauffman's entrepreneurial indices are often regarded as a go-to measure of the health of the startup economy by policymakers, although the foundation's reports have been questioned by some academics over their ability to fairly represent a startup business climate….

Troy Vosseller, the co-founder of the major Wisconsin-based startup accelerator gener8tor, takes the new report as a sign that Wisconsin could stand to change certain economic policies that he believes hinders entrepreneurial growth. For example, he said, the state should tighten its regulations regarding noncompete agreements that tech workers may sign with an employer, restricting them from taking on another job in the same field.

"The fact that I can't name more than one venture-backed startup led by a former employee of any of Wisconsin's Fortune 500 companies is troubling," said Vosseller. "Contrast this with robust startup ecosystems like Silicon Valley, where there are no non-competes, and yet we see more innovation and corporate spin outs there than perhaps any other place in the world."

Vosseller also pointed to the state's tax credit policies as a tool that should be used more by the state to "foster the establishment and growth of new firms," instead of going toward more established corporations.

As WisBusiness’s report on the last-place Kauffman rankings pointed out, the Walker/WisGOP economic strategy of favoring campaign contributors established businesses over helping new ones is a big driver behind that lousy performance.

It also needs to continue to ensure it grows the amount of angel and venture capital investments in the state, [Wisconsin Technology Council President Tom] Still said. One way of doing so, several tech leaders noted, is making investments into startups more attractive by expanding the amount of tax credits for investors.

WEDC, some noted, did the opposite when it moved money allocated toward those tax credits to a program aimed at the state’s legacy industries.

“The signal that it sent as a state was that we’re not interested in entrepreneurship,” said Steven Deller, a UW-Madison economist whose research has slammed the state on its aiding of startups.

It seems fitting that on the same day that the last-place ranking from Kauffman came out, Walker and officials from the Wisconsin Economic Development Corporation (WEDC) were attending an event announcing $22.5 million in tax credits to encourage Direct Supply Company in Milwaukee to expand.

Expansion plans call for a five-story, 280,000 square-foot building to be constructed in place of an existing single-story building at its 10-building campus along Industrial Road.

The state certified Direct Supply under the Wisconsin Economic Development Corp. Enterprise Zone Program to generate the income tax credits, which are contingent on creating the 800 jobs over seven years and retaining its current workforce. Direct Supply currently has 1,100 employees at its headquarters campus on Milwaukee far northwest side and 100 employees at its Technology & Innovation Center at the Milwaukee School of Engineering….

Direct Supply has not disclosed the cost of the expansion project, but Bob Klein, chief administrative officer at the company, said a spring groundbreaking is “under consideration.”

“That question is open right now, as to exactly when the groundbreaking will be,” Klein said. “That’s one of the things that’s still got to be finalized.”

Sounds like a sweet project and a great boon for the community…if it ever happens. Why do I say “if”? It isn’t just because the Direct Supply exec couldn't give a date for the groundbreaking for this expansion. Let me take you back to a similar Walker "jobs are coming" event at HUSCO International in Waukesha in 2013.

HUSCO International is embarking on a multi-year $45 million capital expansion project in Wisconsin that is expected to generate over 150 permanent new jobs by 2015.

“I congratulate HUSCO for making this major investment in its operations to grow in Wisconsin,” said Governor Scott Walker. “HUSCO is well-positioned to expand its leadership in automotive engineering efficiency technologies, and I’m pleased the State of Wisconsin is a partner in supporting the company’s growth.”

The Wisconsin Economic Development Corporation has made HUSCO eligible for up to $800,000 in tax credits to support the company’s major investment.

And then flash forward to what happened earlier this Summer.

On Thursday, the boom apparently was a bust. A HUSCO spokeswoman says 100 salaried and hourly positions will be eliminated from its Waukesha plant.

Several police officers were spotted outside as the announcement was made. Waukesha police say they were asked by the company to be there to "keep the peace" in case there was anger over the decision.

And I’m sure this will shock you, but the Ramirez family that runs HUSCO has also given big money to WisGOP candidates over the years. Likewise, the Wisconsin Democracy Campaign pointed out something that Walker and the Wisconsin media didn’t yesterday- that there are deep ties between Direct Supply’s leadership and the Friends of Scott Walker.

Walker failed to mention that he had received $34,000 in campaign contributions from the founder, president, and CEO of the company, Robert Hillis, and his wife, Jennifer, or that their daughter, Genevieve, had given $8,700 to Walker. All the contributions were from January 1, 2009, through the end of 2015.

The total contributions from Direct Supply employees during this period was $47,071.42.

Huh! Imagine that! If I didn't know better, I'd say Walker knew the Kauffmann Foundation was going to rank Wisconsin dead last for start-ups again, and realized he needed to create a photo op to try to trick the public into thinking the top-down, crony capitalism of WEDC is working? And that his buddy Bob Hillis was just the guy to get in contact with to get the WEDC handouts and set up the event to distract from the negative headlines?

NAAAAH! That just me wearing a tinfoil hat. I’m sure it’s all just coincidence. Absolutely.