How Madison stole Milwaukee's prosperity

By TOM HEFTY | Sept. 9, 2015

The Twin Cities of Wisconsin are Madison, metro population 633,000, and Milwaukee, metro population 1.57 million. Both cities are dominated by Democratic politics, yet the economies of the two cities have taken decidedly different paths.

Madison is prospering; Milwaukee is not.

Madison has a median family income of $77,700; Milwaukee’s is $40,800. Fifty-three percent of Madison’s population has a bachelor’s degree or higher; it’s 22% in Milwaukee.

In the past 30 years, metro Madison grew 45%; metro Milwaukee grew just 11%.

What caused the difference in outcomes for two cities separated by only 75 miles? The answer lies in Wisconsin politics, particularly the politics of the Democratic Party. The post-World War II Democratic Party revival in Wisconsin was led by Democrats in Madison, not Milwaukee.

Madison was the seat of government; Milwaukee was the commercial capital of Wisconsin. Government won.

Three factors have driven overall growth: the impact of higher education and new technology; entrepreneurship and new businesses; and the expansion of government services since the Great Society and the Obama administration’s stimulus spending. For each factor, Madison won and Milwaukee lost. 

More than 40 years ago, “The History of Wisconsin” noted that Milwaukee Democrats provided the votes to elect Madison Democrats to statewide office. Since WW II, five Democrats have been elected governor. None was from Milwaukee. (Lt. Gov. Martin Schreiber, a Milwaukee Democrat, became governor in 1977 after Patrick Lucey resigned.)

The numbers tell the story: 2014 was a watershed year for Wisconsin’s Twin Cities. For the first time in history, the average wages in Madison’s Dane County exceeded the average wages in Milwaukee County. 

Let’s look at the three factors that drove the two cities apart.

University of Wisconsin budget allocations

UW-Madison is called the flagship of the UW System, and the headquarters of the system is at the top of the tallest building in the center of the Madison campus. UW-Milwaukee, the system’s urban campus, enrolls an almost equal number of Wisconsin undergraduates. Yet the resources for the two campuses are much different.

In total spending per student, UW-Madison spends $59,000, compared to $19,000 at UW-Milwaukee. That difference is largely in research dollars. The Madison research spending per student is $26,000, compared to $2,600 in Milwaukee.

The apples-to-apples comparison of education and related spending shows the same disparity in the national Delta Cost Project reports, which track education spending by campus. Madison spends $18,400 per student; Milwaukee spends $12,200.

That inequity is best illustrated by a comparison of similar universities in Illinois. The state’s flagship Big Ten school is the University of Illinois at Urbana-Champaign. The urban public university is the University of Illinois at Chicago.

Spending per student on education and related expenses at Urbana-Champaign is $19,000, similar to spending at UW-Madison. Spending at the Chicago campus is $29,000, more than double the spending at UW-Milwaukee. 

The UW System appointed a committee to review campus-by-campus allocations of UW dollars. The committee was chaired by an executive from the Madison campus. Not surprisingly, in 2014 the committee recommended no change in the UW budget process. Madison won again, and Milwaukee lost.

There was much debate in the Legislature this year regarding the Wisconsin Idea. That phrase originally described the mission of the UW System: “the boundaries of the university are the boundaries of the state.” In practice, the phrase has been redefined to mean “the boundaries of UW are the boundaries of Wisconsin — except Milwaukee.”

Venture capital and entrepreneurship

Entrepreneurship is the core of 21st-century economic development. It is frequently said that all net job growth comes from new, young businesses.

New business requires capital — venture capital, angel investment and banking support. In 2004, the Doyle administration passed innovative venture capital and angel capital incentives to address those needs.

Once again, the bulk of those incentives went to Madison-area companies. A 2006 Legislative Audit Bureau report asked why the incentives were going to the most prosperous areas of the state, including Madison.

A July 2014 report from the Wisconsin Economic Development Corp. was titled “A Decade of Supporting High-Tech Startups in Wisconsin.” Nothing has changed.

According to the latest report, since the program began in the Doyle administration, two-thirds of the “Qualified New Business Ventures” approved for funding have been metro Madison companies. Only 20% have been in metro Milwaukee.

That is one reason for Milwaukee’s low 2015 ranking of Entrepreneurship in Metro Areas by the Kauffman Foundation — 39th out of the 40 largest metro areas in the country.  

Location of state government employment

For better or worse, government employment since the Great Society has been a powerful engine of job growth. Washington, D.C., now is home to some of the most prosperous communities in the country. So is Madison, as reflected in the $77,000 median family income.

In most states, the largest metro area has a significant portion of the state government employees, reflecting the available workforce and the needs of the population served by government programs. Putting government agencies near the population to be served makes sense.

Not so in Wisconsin. Madison is home to 42,000 state government workers, according to U.S. Commerce Department data. Milwaukee has 6,600.

In a recent national report, Madison has the second-highest percentage of government workers among U.S. cities — second only to Sacramento, Calif. Twenty-five percent of Madison workers are employed by the government.  

How did that happen?

Madison Democrats have long dominated the State Building Commission, which controls the buildings and, therefore, the location of employment of state workers. Much like South Carolina controlled the Armed Services committees in Washington, D.C., to gain military bases and employment, Madison Democrats have jealously guarded the State Building Commission.

That trend of Madison winning and Milwaukee (and the rest of Wisconsin) losing continues. As early as this fall, the state will break ground on the largest state office building in Wisconsin history. It is a 600,000-square-foot building on the prosperous west side of Madison, set to house the Department of Transportation and other agencies.

According to published reports, the Baker Tilly economic impact analysis for the new building found that the redevelopment will generate 1,359 private-sector jobs and 1,943 construction jobs — all in Madison, the city with the lowest unemployment rate in the state.

Madison frequently makes favorable top 10 lists. The Dane County executive recently bragged that his county produced more than 70% of the state’s job growth from 2003 to 2013. Milwaukee achieves less notable rankings. Those include slow job growth, rising murder rates, greatest racial disparities and major public health challenges. 

There is a connection. Madison stole the tools for Milwaukee prosperity — and brags about it. 

Tom Hefty is the retired head of Blue Cross-Blue Shield United of Wisconsin. This column represents his personal opinion.

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