A new national report is harshly critical of the Wisconsin Economic Development Corp., using WEDC as an example of the inherent risks with so-called “public-private partnerships” being used in a growing number of states.
WEDC was created by Gov. Scott Walker to replace the economic development duties of the former Department of Commerce, including offering loans, grants and tax credits to private business. But the agency has been fraught with problems, the report charges, including misuse of taxpayer funds, exaggerated jobs claims, conflicts of interest, excessive executive pay and lack of basic oversight.
"Privatizing a state development agency is an inherently corrupting move that states should avoid or repeal," says Greg LeRoy, executive director of Good Jobs First and lead author of the study in a statement. "Taxpayers are best served by experienced public-agency employees who are fully covered by ethics and conflicts laws, open records acts, and oversight by auditors and legislators."
Good Jobs First, a non-partisan Washington, D.C. research group that tracks government subsidies, on Wednesday released "Creating Scandals Instead of Jobs: The Failures of Privatized State Economic Development Agencies" as a follow-up to a 2011 report that warned of problems with the public-private partnerships or “PPPs.”
The report analyzes problems with PPPs in Arizona, Florida, Indiana, Michigan, North Carolina, Ohio, Rhode Island, Texas and Wisconsin in offering a roadmap for other states to avoid.
The section on Wisconsin doesn’t break much new ground but rather recounts the problems with WEDC which have been well publicized: spending millions of dollars from the U.S. Department of Housing and Urban Development without legal authority, the failure to track loans, the revolving door of top management, the hiring of a communications director with tax debts and the $185,000 salary of director Reed Hall, who now makes more than the governor.
Good Jobs First also highlights the June 2013 report from the advocacy group One Wisconsin Now showing that executives at companies receiving subsidies from WEDC had contributed $429,060 to Gov. Scott Walker. It claims that Walker in July then signed a reform bill because he was “apparently worried about the conflict appearances” within the agency.
State Sen. Mark Miller, D-Monona, joined Good Jobs First in criticizing WEDC, noting that in 2007, Wisconsin terminated the largely ineffective state-backed private economic development entity “Forward Wisconsin” in order to reduce political favoritism and misuse of public funds.
"Unfortunately we reverted to old-style cronyism in 2011 with the creation of the Wisconsin Economic Development Corporation, which has been plagued with predictable ethics improprieties and gross mismanagement,” he said in a statement.
WEDC officials took issue with the report, however, saying the agency has made significant progress after an admittedly rocky start.
“Frankly, the concerns raised in this report are old news,” says spokesman Mark Maley. “The organization’s leadership has acknowledged there have been problems in the past, but they have been addressed, a fact that Good Jobs First appears to be ignoring in its report of recycled headlines about WEDC.”
Maley said the report failed to mention the significant reforms in the July bill, including changes to awards, collections, financial management and ethics. He said the agency is more transparent than ever and invited critics to visit the website.
“It can’t be forgotten that WEDC replaced a state agency that wasn’t working when it came to quickly meeting the needs of Wisconsin’s business community,” he said, referencing to a legislative audit of the old Commerce Department that showed 152 different economic incentive programs that were so disjointed they couldn't be properly tracked.
Wisconsin wasn’t the only state singled out by Good Jobs First. Other findings:
- Enterprise Florida faced controversies over a performance bonus paid to its CEO and subsidies awarded to companies represented on its board.
- The CEO of the Arizona Commerce Authority was given a three-year compensation package worth $1 million, then a $60,000 privately-funded bonus when he stepped down after one year.
- JobsOhio received a large transfer of state monies without the legislature being informed, intermingled public and private monies, refused to name its private donors and then won legal exemption from review of its finances.
- The Indiana Economic Development Corporation has faced continuing criticism over its job creation claims, including a state audit showing more than 40 percent of the jobs promised had never materialized.
- The Rhode Island Economic Development Corporation is still litigating the biggest economic development scandal in Rhode Island history: its $75 million loan to the now-bankrupt 38 Studios.
"Public dollars should be controlled by accountable and transparent public agencies, not handed off to private interests with looser standards and less oversight," said Donald Cohen, executive director of In the Public Interest in a statement released with the report.