Late Homework

I crunched these numbers last October, but I never bothered to blog them. I had my memory jogged by this Charlie Sykes podcast on the consequences of the Wisconsin Supreme Court race on the business climate in the state. I believe this information is still relevant and is still disturbing.

In June 2006, Sykes wrote about business expansion data published by Site Selection magazine comparing business expansions in Wisconsin with four neighboring states.

Last year, there were 55 announcements of new manufacturing plants in Illinois; there were 72 in Michigan, 35 in Minnesota, and 34 in Iowa.

In Wisconsin, there was a grand total of five.

According to a report for Competitive Wisconsin released last month, Wisconsin lagged behind the rest of the Midwest across the board.

In 2005, there were 75 announcements by companies that they were expanding their manufacturing operations in Illinois; 180 expansions announced in Michigan, 36 in Minnesota, and 64 in Iowa.

In Wisconsin? Six.

It actually gets worse. When announcements of other business investments and expansions are also included, Illinois saw 510 announcements of business expansion; Michigan 505; Minnesota 176, Iowa 135, and Wisconsin…a mere 15.

What’s wrong with this picture?

The answer is that more is wrong than Sykes thinks.

The raw data from Site Selection fails to tell the whole story. To do that, the data needs to be normalized by population to better compare the performance of large states like Illinois, with smaller states such as Iowa; and the 2005 numbers needs to be separated from 2003 & 2004. The results look like this.

When the data is processed, it shows that Wisconsin lagged it's neighboring states in business announcements in 2003 and 2004, with only about half the number of the four state average and about two-thirds of the next worst state.

But in 2005, the wheels fell off for Wisconsin business. While the neighboring states showed modest growth for both the average, plus 6%, and worst case, plus 9%; Wisconsin had a 90% reduction of business announcements. Wisconsin went from 56% of the four state growth average to 6% of that average in just one year.

What changed? We are much the same tax hell and have the same regulatory and environmental disincentives for business expansions as before. The difference is the Wisconsin Supreme Court's rulings lifting liability limits and lowering the bar to prove liability.

In siting a new or expanding business, the risks and consequences of being sued apparently do matter.