If It Looks Like A Slush Fund And Acts Like A Slush Fund…

In the economic real world beyond the Capitol in Madison, there has been a fair amount of discussion about government intervention in the economy.   Do tax breaks for some industries but not others, grants to some businesses but not their competitors and direct government loans actually work?   Should political appointees use your tax dollars to pick winners and losers?

The agency charged with steering economic development in our state since 2011, the Wisconsin Economic Development Corporation (WEDC), is at the heart of that debate.  

Launched on the same day as Governor Walker’s first state budget, WEDC has overseen economic development as a quasi-private agency controlling millions of taxpayer dollars in loans, tax credits and grants.  WEDC, we were told, would lead the state’s job creation efforts and help fulfill the Governor’s promise to add 250,000 new private sector jobs.

Instead, under WEDC, Wisconsin has trailed the nation and all of our neighbors in private sector job gains.  Surrounded by states with four very different partisan leaderships and vastly different budget conditions, our failure to match even a single one of them stands out. 

The Governor has washed his hands of the agency he created. He signed a budget that formally removed him as its Chairman.  The CEO of WEDC, who was drawing a taxpayer-funded salary of nearly $200,000, recently announced his resignation.

Now is the time for a serious examination of why this agency failed. The respected and non-partisan Legislative Audit Bureau has completed two audits of the policies, practices and finances of WEDC.  The audits found a disturbing trend of WEDC distributing our families’ tax dollars without required safeguards, reporting and repayment. 

Among the Bureau’s findings, WEDC did not create or follow policies required by law to ensure that businesses seeking tax credits were qualified.  In some cases where state law requires jobs to created or retained, WEDC did not include that requirement in contracts or track the success effectively.   WEDC reduced its balance of potentially uncollectable loans largely by writing them off, at taxpayer expense.   WEDC did not collect or maintain data to reliably show the success of their loans.

For those of us in Northern Wisconsin, WEDC has been an especially poor tool for job creation and retention.  Our communities saw a scant 2% of the agency’s awards. 

One of the audit’s most important findings was the WEDC didn’t require or track job creation in every case required by law. Of the grants and loans WEDC did track, the agency itself says less than half of the job creation targets were met statewide. In our area, the track record is even worse. WEDC itself says its grants and loans resulted in only 8% of the jobs that were supposed to be created in our Northern communities.

Recently I was happy to highlight home-grown companies dedicated to success in Wisconsin.  Unfortunately, the excellence, innovation and industriousness demonstrated by workers and businesses in Northern Wisconsin has not been matched by the agency Gov. Walker put in charge of the state’s economic fortunes. 

Back when this idea was first put forward my colleagues and I proposed numerous changes to the original legislation. We argued for more accountability and transparency to ensure that we weren’t creating a slush fund backed by Wisconsin families’ hard-earned tax dollars.

This lack of accountability and transparency was highlighted by a media investigation that uncovered a loan that WEDC made to one of the Governor’s campaign contributors even though the business was clearly not qualified.  WEDC’s failure to effectively track taxpayer dollars makes it nearly impossible to counter the appearance of favoritism based on campaign support.

The Governor and legislative leaders seem content to leave our state’s economic fortunes in the hands of an ineffective agency that lacks the accountability and oversight to demonstrate that it isn’t a slush fund.  

I serve on the Legislature’s Joint Audit Committee. The committee will be meeting in early September to review the Audit Bureau’s findings. The audits contained well-reasoned recommendations for improvements at WEDC.   Unfortunately, the problems with WEDC may be beyond fixing. I think it’s time to pull the plug on this failed experiment.

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