Wisconsin’s economic development programs are intended to create jobs, attract and retain businesses, or
otherwise encourage economic growth. The Department of Commerce is the State’s lead agency, but
seven other state agencies also administer economic development programs to assist businesses,
local governments, and organizations.
In the 2003-05 biennium, state spending on economic development was an estimated $152.8 million. That
amount includes funding for grants and loans, as well as spending for direct program services and
administrative costs. In addition, $109.3 million was provided in bonding authorization, as well as
$36.0 million in loan guarantees and $27.9 million in tax credits claimed by businesses.
As both the number and types of economic development programs have grown, some policymakers have
raised concerns about their scope, effectiveness, and coordination. Therefore, at the
direction of the Joint Legislative Audit Committee, we:
compiled a program inventory, including each program’s purpose, award criteria, and sources of funding;
analyzed the type and distribution of financial assistance and program services provided;
reviewed information collected by state agencies to evaluate program effectiveness; and
reviewed other states’ efforts to enhance accountability in their economic development programs.
Scope of Efforts
We identified 152 economic development
programs. From fiscal year
(FY) 2001-02 through FY 2004-05,
78 of these programs primarily
offered grants or loans; 58 primarily
offered direct services such as
consulting, regulatory assistance,
and planning; and 16 offered loan
guarantees, bonding authorization,
and targeted tax credits. We estimate
that as of June 30, 2005, state
agencies were authorized at least
247.9 full-time equivalent staff for
administering these economic
development programs.
We identified a large number of
programs that provide similar
services. For example, 34 programs
assist businesses in purchasing fixed
assets such as land, buildings, or
equipment, and 26 programs assist
with business planning.
Some programs target specific types
of businesses or encourage the
growth of particular industries.
For example, 46 programs target
small businesses, including 35 that
provide financial assistance and
11 that provide services such as
business planning or technical
assistance.
Some program duplication may be
desirable to ensure that services are
available statewide or that they
can be provided locally. However,
duplication increases administrative
costs and may confuse those seeking
assistance or hinder the Legislature’s
ability to assess program accomplishments
and provide adequate
oversight.
We identified 23 programs that were
inactive during some or all of our
audit period. Six have already been
repealed, but the remaining 17 have
not. Consolidation or elimination of
some of these programs could simplify
both program administration
and oversight.
Distribution of Financial Assistance
We analyzed the $180.9 million
in grants and loans for economic
development that state agencies
awarded to businesses, individuals,
local governments, and other organizations
from FY 2001-02 through
FY 2004-05. Projects in Milwaukee,
Dane, and Rock counties received
nearly one-third of all funds awarded
during that period, but at least
one project in every county was
awarded a grant or loan.
Although economic development
projects in Milwaukee County
received more funding than those in
other counties, on a per capita basis
Milwaukee County’s grant and loan
awards were $2.71 below the
statewide average of $30.38. From
FY 2001-02 through FY 2004-05,
per capita grant and loan funding
ranged from $1.63 in Menominee
County to $120.09 in Green County
Some economic development
programs also assist Wisconsin
businesses by facilitating access to
capital. State agencies authorized
$240.4 million in bonding for
economic development during
the past two biennia, including
$239.6 million in industrial revenue
bonds and $770,100 in bonds to raise
capital for farm loans. In addition,
six economic development programs
guaranteed $64.4 million in
loan principal payments if borrowers
default.
Tax policies are also an important
component of the State’s economic
development efforts. To encourage
economic development in specific
geographic areas, businesses located
in designated development zones
have been eligible for income tax
credits since 1988. Statutes currently
allow for the designation of as
many as 135 development zones
under five programs, and every part
of the state is included in at least
one development zone.
Through June 30, 2005, the Legislature
authorized up to $406.6 million
in development zone tax credits, and
Commerce awarded $122.6 million
in credits to eligible businesses.
Businesses in Milwaukee County
received 26.5 percent of the
$56.3 million in income tax credits
awarded during the four-year
period we reviewed.
Improving Coordination and Accountability
To make informed decisions about
economic development programs,
policymakers need accurate and
reliable information about their costs
and effectiveness. However, agency
responsibility for administering
economic development programs is
fragmented, efforts to measure and
report results are limited, and no
single entity is responsible for ensuring
that the programs are working
toward common policy goals. For
example, we identified 26 councils,
task forces, or other bodies that
are responsible for overseeing and
coordinating various aspects of
the State’s economic development
programs.
We believe accountability could be
enhanced by improving coordination,
reducing the number of
programs with similar purposes,
consolidating agency reporting
requirements, and disclosing project
costs and benefits to the public.
Recommendations
We include recommendations for
the Department of Commerce to
report to the Joint Legislative Audit
Committee by February 15, 2007,
on its efforts to:
identify duplicative and outdated programs
(p. 40);
improve procedures for tracking and reporting actual project results
(p. 77);
improve procedures for monitoring the long-term success of projects
(p. 79);
improve tracking and reporting of tax credits claimed by businesses located within development zones
(p. 96); and
provide additional information on the effectiveness of the Certified Capital Companies program
(p. 101).
We also include a recommendation
that the University of Wisconsin
System and the Wisconsin Technical
College System designate an
economic development liaison at
each campus, publish directories
of their business assistance
programs, and report to the Joint
Legislative Audit Committee by
February 15, 2007 (p. 49).
Finally, we include recommendations for the Legislature to consider:
specifying criteria for designating future development zones
(p. 90);
encouraging the establishment of clear and measurable goals to ensure that programs are coordinated effectively
(p. 113);
reducing the number of programs by consolidating statutory requirements and standardizing eligibility criteria for similar programs
(p. 115);
consolidating reporting requirements for state agencies
(p. 116); and
enacting public disclosure requirements to improve the transparency in the use of state funds for economic development
(p. 117).