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Economic development agency funding may be held in reserve

May 9, 2013
 

MADISON — Gov. Scott Walker’s beleaguered jobs-creation agency would have to meet several tough new requirements, including subjecting all of its employees to ethics and financial disclosure laws, under provisions that Republicans proposed adding to the state budget on Thursday.

The Wisconsin Economic Development Corp. also could not spend any money in the second year of the state budget until it showed lawmakers that improvements had been made.

The Joint Finance Committee planned to vote on the new requirements in response to a scathing audit released last week that said WEDC did not follow state law or adequately track loans it awarded. The audit also said the agency sometimes gave money to companies that didn’t qualify for tax breaks.

Creating the WEDC, a public-private partnership that was intended to be Wisconsin’s lead economic development agency, was one of Walker’s top priorities when he took office in 2011. It replaced the Department of Commerce that July, but has been beset with numerous high-profile troubles since then.

Leaders of WEDC told the Legislature’s Audit Committee earlier Thursday that they were working on numerous improvements. Still, the blistering audit released last week proved to be a tipping point for many legislators, including Republicans who control the budget committee. Republicans and Democrats have called for WEDC to make drastic improvements in light of the audit.

The changes being considered Thursday would require the WEDC to submit a report showing it’s in compliance with the audit’s recommendations and have its chief executive officer appear before the Joint Finance Committee in December, before getting $59.3 million in funding for the 2014 fiscal year.

The agency also would have to follow state law setting requirements for making purchases and entering into contracts. The audit found that WEDC provided some vendors with no-bid contracts, which it could do because it’s not currently subject to state purchasing rules.

The plan also would require the agency to make a written request and appear before the committee before starting a new nonprofit to solicit donations from regional economic development associations, businesses and individuals. An annual audit would be required, and the WEDC would need to include specifics in its annual report about the number, location and type of jobs created under its various tax break programs.

But even if those new requirements are approved by the budget committee, the plan would have to pass the Senate and the Assembly and be approved by Walker before it could become law.

During the hearing earlier Thursday before the Audit Committee, Democrats slammed WEDC leaders, saying there was no way to know whether the agency had done anything to help create jobs.

Sen. Kathleen Vinehout, D-Alma, pointed out that the audit said WEDC claimed its efforts created or saved around 5,000 jobs. But the audit said WEDC received only 45 percent of required progress reports from award recipients and didn’t verify any of the information. That made it difficult to assess the accuracy of WEDC’s numbers, the audit said.

“How can I tell my constituents this money was well spent?” Vinehout said. “Do we know if any of the jobs were actually created?”

WEDC officials reiterated that they were working on a host of improvements, including developing firmer policies and installing a new computer system to better track loan payments. The agency also has hired a banking expert to improve loan administration policies and verify businesses’ job creation and retention data using payrolls and unemployment compensation data.

Reed Hall, the agency’s director, said sometimes businesses simply forget to file their data.

“This (report) does not reflect what we are today or what we want to be in the future,” Hall told the committee. “But I do believe the report gives us another element to the roadmap to make our organization better.”

Democrats pressed Hall on why the agency broke the law, as the audit detailed. But Hall refused to concede that point, saying many requirements under the law are open to interpretation.

“Reasonable people can sometimes disagree about what’s required by statute,” Hall said. “I assure you our entire organization from top to bottom intends to comply with the law.”

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