Despite New Concerns about State’s Economic Development Arm, WEDC Gets Budget Boost

Thursday, May 2, 2013 at 1:05 PM by

It’s clear that the Wisconsin Economic Development Corporation faces challenges in properly administering the state’s economic development programs. What’s less clear is what, if anything, state policymakers are going to do about that.

Numerous problems at WEDC came to light this week, with the publication of a scathing new audit of WEDC. The WEDC is a public-private corporation that replaced the state’s Department of Commerce. The Milwaukee Journal Sentinel’s article summed up the audit’s findings:

The Wisconsin Economic Development Corp. didn’t require financial statements from companies receiving incentives; gave awards to ineligible businesses and ineligible projects; and awarded nearly $1 million in tax credits to companies for actions taken before they had signed their contracts with the state. The agency lacked strong policies and oversight on awarding taxpayer money and then did a poor job following up to see if jobs were truly being created and other goals met, the audit found.

Staff used agency credit cards to buy alcohol and football tickets, and WEDC had to be reimbursed for travel and meals for family of the agency’s head. In addition, WEDC did not always engage in competitive bidding on contracts and in two cases hired firms with conflicts of interest.

This description of WEDC’s shortcomings comes on the heels of a fall 2012 audit, which determined that WEDC had lost track of $8 million in past due loans.

Legislators from both parties have voiced frustrations this week with WEDC’s missteps. Sen. Robert Cowles (R-Allouez) called WEDC’s performance “pretty darn bad.” Sen. Peter Barca (D-Kenosha), had stronger words for WEDC, calling the organization “a complete failure.”

Policymakers may be dissatisfied with WEDC’s performance, but that hasn’t translated into big budget cuts for the troubled agency. In fact, just the opposite. The Governor’s proposed budget boosts the amount of General Purpose Revenue (GPR) devoted to WEDC by $8.0 million over two years, or 12.3%. Most of the additional funding would go towards marketing Wisconsin as a favorable place to start or expand a business, and towards a “seed accelerator” program that provides grants to communities and organizations to provide mentoring and financial assistance to entrepreneurs.

Although the Governor proposes shifting to the Department of Revenue the responsibility WEDC now has for administering one investment tax break, Walker has also recommended expanding or extending two tax credit programs under WEDC, including:

  • Lifting the current cap on the total amounts of credits available under the angel investment tax credit program, a move that would reduce state tax revenue by $5 million in 2015. Individuals may receive these credits for investing in certain new business ventures.
  • Providing an additional $75 million in available credits under the economic development tax credit program. This move would reduce tax revenue by $9.9 million over the two-year budget period.

Given the wide range of problems that has been revealed at WEDC, legislators might want to think twice about approving the expanded role for the agency that is included in the Governor’s proposed budget. The WEDC has potential to help Wisconsin businesses grow and create jobs — an especially important role for the agency given how poorly Wisconsin has fared in job growth compared to other states. But until the performance issues at WEDC are adequately addressed, we should be cautious about devoting additional dollars to programs administered by that agency.

Wisconsin’s Joint Finance Committee will be meeting on May 9th to vote on budget issues related to the WEDC, as well as a number of other state agencies.  The committee will consider two Legislative Fiscal Bureau papers on WEDC issues: Increased Funding for Marketing (Paper #710), and Increased Funding for Seed Capital (Paper #711).

Tamarine Cornelius

Categories: 2013-15 biennial budget, Blog, economic development, JOBS & THE ECONOMY | Comments Off on Despite New Concerns about State’s Economic Development Arm, WEDC Gets Budget Boost

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