As if the bad news about the Wisconsin Economic Development Corporation we’ve seen over the past year weren’t enough, on May 1 the Legislative Audit Bureau released its first program audit of WEDC – the most scathing review of a state agency I have seen during my tenure in the Legislature.
On numerous occasions, WEDC simply broke the law. The agency is required by statutes to obtain reports from the companies that receive awards grants and loans in order to verify that taxpayer money is used as directed. The Audit Bureau found that WEDC failed to obtain these reports most of the time. WEDC is also legally required to do spot checks of these reports to verify their accuracy, but it never has.
These grants and loans are intended to provide incentives for companies to engage in business expansion to create jobs; but the audit showed that WEDC on four occasions awarded tax credits to companies for activities that had already occurred. In other instances, WEDC made awards to companies that weren't eligible; some awards were for more money than was allowed. In one case, WEDC awarded a Jobs Tax Credit to a company that didn’t create any jobs, as companies are required by statutes to do. This comes on the heels of earlier revelations that WEDC had completely failed to track more than $57 million in loans to businesses, some of which were seriously in arrears.
WEDC staff received new iPhones, performance bonuses, and spending cards they used with little oversight. They accepted gifts from companies and government agencies such as art, jewelry, clothing, gift cards and other personal items. And WEDC paid for foreign travel expenses for staff family members, payments that weren’t reimbursed until the Audit Bureau discovered them.
As the report notes, most of this information was never shared with WEDC’s Board of Directors, of which I am a member. The governor serves as the WEDC chairman, and selects the chief executive officer, who in turn hires all senior managers. The only WEDC staff member currently covered by state ethics law is the CEO. As a result, WEDC management is shielded from oversight and accountability, a situation in which abuse is almost certain to occur.
This is an intolerable violation of the public trust. Wisconsin's taxpayers, unemployed individuals and the business community have already suffered from more than two years of chaos in our state job creation agency. We've seen the results - Wisconsin ranks 44th nationally in job creation and is dead last in the Midwest.
The Legislature’s Joint Finance Committee (JFC) responded to the audit by withholding a large portion of WEDC's funding until the agency shows it is making needed changes. It also imposed additional reporting and ethics requirements on the quasi-private agency; ironically, several of these were amendments I and my Democratic colleagues proposed in 2011 when WEDC was being created, but were voted down by the Republican majority at the time.
The JFC amendment is a good first step but we need to do much more to fix this broken agency. WEDC can no longer be completely dominated by the governor while information is withheld from a toothless board of directors that has little ability to control the agency. Instead, senior management must be held accountable to the board, which must have the financial management and economic development expertise to provide real oversight to the agency.
Until we know the problems are fixed, WEDC should be subject to an annual Legislative Audit Bureau audit. Most of all, WEDC has to finally get serious about verifying how the taxpayers' money it invests in businesses is actually being spent, and how many jobs are really being created as a result.
With so many Wisconsin citizens out of work, we can’t afford to let our main job creation agency continue to fail. This is the last chance. Reform needs to happen at WEDC, and it needs to happen now.