By Elaine Magliaro
On Monday, Mary Bottari of PRWatch posted an article about Governor Scott Walker of Wisconsin titled Privatization Fail: Scott Walker’s WEDC in Full Meltdown. (FYI: WEDC stands for Wisconsin Economic Development Corporation.)
Bottari said that during his 2010 gubernatorial campaign, Walker “famously promised to create 250,000 jobs in his first term.” She added, “Toward this end, one of his first acts as governor was to privatize the state’s economic development agency.” WEDC opened its doors in July 2011–and Walker named himself Chairman of the Board.
Zachary Roth of MSNBC noted that Walker announced his ambitious plan to turn the “state’s commerce department into a semi-private corporation laser-focused on economic growth and job creation” just three days after he was sworn into office. In a statement announcing the WEDC, Walker said, “Transforming the Department of Commerce will align state government with our most important mission: creating jobs.” Roth said that WEDC’s major role was to “make loans to private companies.”
Unfortunately, Walker’s “semi-private” corporation has not been successful at creating jobs in Wisconsin–and audits of WEDC have shown that the agency was mismanaged and “scandal-plagued.”
After a series of damning audits, which highlighted mismanagement and incompetence, and news reports of special treatment for Walker donors…Democratic state lawmakers called for a federal investigation of the scandal-plagued entity.
Alice Ollstein of ThinkProgress wrote an article about WEDC earlier this month. She said a “damning report” that was released by Wisconsin’s non-partisan Legislative Audit Bureau claimed that the agency had “been routinely violating its own rules and state law.”
Walker set up the Wisconsin Economic Development Corporation in 2011 in order to give taxpayer dollars to private corporations to help them create jobs for Wisconsin workers. But a new audit of more than 100 grants from the agency found that the WEDC failed to follow up on whether the companies were actually using the funds to create and retain jobs.
The group also gave loans and tax credits to companies that did not meet its requirements, and did not even attempt to fact-check claims by the companies about the number of jobs they created. Additionally, the agency forgave, wrote off or deferred more than $4 million in loan payments that the corporations were supposed to pay back to the state.
Ollstein added that WEDC has been plagued by scandals ever since its creation. According to Ollstein, a 2013 audit of WEDC found that the agency had “repeatedly failed to follow state laws regarding the use of public funds.” She added that in 2014, two corporations–Eaton and Plexus–that had received millions of dollars of taxpayers’ money from the WEDC, had “outsourced jobs to Mexico and other foreign countries, and laid off hundreds of Wisconsin workers.”
According to Bottari, “WEDC was in charge of a staggering amount of taxpayer dollars: $519 million in bonds, grants, loans, and tax credits in 2011-2012 alone.” She said that the WEDC board was ultimately responsible for those dollars. Bottari added, “While experts debate the role state government plays in job creation, one set of jobs Walker can more precisely lay claim to are those created by the economic development corporation he governs.”
In 2012, the Milwaukee Journal Sentinel broke the story that WEDC had lost track of $12 million in loans because it never asked businesses to pay…them back. The federal housing authority demanded changes at WEDC after determining it had spent some $10 million in federal funds without authorization. A damning 2013 audit by Wisconsin’s professional, nonpartisan state audit bureau made headlines when it documented dozens of ways in which the new agency was breaking the law. The audit showed that WEDC made awards to ineligible recipients, for ineligible projects, and for amounts that exceeded specified limits.
Bottari said that WEDC had promised “to clean up its act and reported to the legislature and the state audit bureau in October 2013 it had addressed all the concerns raised in the May 2013 audit.” She noted, however, that the new May 2015 state audit showed that the “situation is even worse.”
Bottari reported that the Center for Media and Democracy (CMD) “spent weeks analyzing data in 2014 and “determined that for a two-year period (FY 2012 and FY 2013), WEDC could only lay claim to creating some 5,860 jobs.” She said that WEDC “misled the legislature and the public by claiming to have created 60,000 jobs” during that period of time. She added, “Instead of counting the ‘actual’ jobs created, the agency used the cooked-up phrase ‘impacted.’” Bottari said that the report published by CMD “documented how jobs lost to plant closings in the state over the same period (13,616) trumped the job creation numbers.”
The new audit details a series of damning facts. WEDC failed to demand that jobs be created with each contract. WEDC failed to make sure that projects hit wage targets. And it failed to demand sufficient documentation, such as payroll records, to show that jobs were actually being created or retained.
In one instance, WEDC executed a $4 million contract and allowed $1.6 million of it to be used for debt repayment. WEDC would not answer CMD’s inquiries on the topic. From a check of the WEDC data base, this grantee appears to be SHINE Medical Technologies of Monona, who pled “business sensitive information” and would not comment further on the issue. In another instance, WEDC gave a business $517,000 in tax credits for “retaining” jobs even though it determined that the business employed 307 fewer eligible employees than a year earlier. A check of the WEDC database finds Plexus Corp. of Neenah recording a 307 job drop.
Zachary Roth said that as Walker is laying the groundwork for a 2016 presidential run, “WEDC appears rudderless and deeply troubled.” He added, “Government and press reports have raised serious questions about the agency’s transparency, effectiveness, political independence and compliance with the law. Walker…has twice in recent months announced major shifts to the agency’s structure and mission—and this week he has been forced to deny that he knew about a questionable loan to a political contributor’s company.”
Despite Walker’s claims that he’d create 250,000 jobs in Wisconsin during his first term as governor, his state’s “job growth continues to lag far behind the nation’s—taking a toll on the governor’s popularity at home.”
Public Policy Polling (May 13, 2015):
PPP’s national Republican poll for May continues to find Scott Walker leading the field, but it’s tightly clustered and his support has actually dropped two consecutive surveys now.
Do you think Scott Walker has a chance of being elected president in 2016?
Republican Presidential Primary 2016: Walker Still Leads Nationally, Clinton Over 60% (Public Policy Polling)