Audit: Evidence Lacking on Job Creation Programs

People want jobs. Lawmakers respond with state programs to assist businesses in creating jobs. But do businesses that receive state money actually create the jobs?

A recent audit by the nonpartisan Legislative Audit Bureau casts doubt on the state’s ability to actually deliver jobs using tax dollars invested in economic development programs.

The audit showed some agencies failed to comply with a law requiring they report on actual jobs created – or other program outcomes. Of files sampled, auditors found not all businesses submitted required reports and only half of those reporting achieved promised results.

The audit resulted from work done by myself and other legislators back in 2007. I served on a bipartisan working group formed to answer the question, “where are the jobs?” or, put another way, “how effective are Wisconsin’s economic development programs?”

We discovered, from an earlier audit, that Wisconsin spent millions of dollars to assist businesses in job creation but little was known about whether or not the promised jobs were ever created.

I joined colleagues to draft legislation to improve accountability. The new law required officials to establish clear and measureable goals, set benchmarks for the goals and evaluate the actual – not promised -results.

Each business receiving an award to create jobs was to report actual jobs created. All reported data was to be independently verified.

The law required details posted on a public website including money given to businesses and jobs. Disclosure would make it easy for neighboring businesses, the press and taxpayers to know about money and performance.

Here are a few of the audit results:

Auditors found the state did not comply with the law to require and report information on the actual results of the investment of tax dollars for job creation. In fact, 88% of all the state’s 139 programs did not report both the expected and the actual results.

No information at all was reported on 44 programs. Commerce, the agency charged with job creation, did not report on 14 of its own programs. In all, state officials did not report on 30% of the state’s economic development programs.

Without adequate reporting, auditors had no way of knowing whether the tax dollars invested in these programs actually accomplished the promised job creation.

The money and the reach of these programs are extensive. Between 2007 and 2011 more than a billion dollars was awarded in grants, loans, loan guarantees or new bonds authorized. Millions more were awarded in tax credits.

The awards can mean a great deal to a company. For example, Mercury Marine, owned by the Brunswick Corporation, was awarded $10 million in grants and loans and allocated another $65 million in tax credits.

But does the state provide the proper oversight and do taxpayers reap a return on the investment made?

To provide proper oversight, at key points during the life of the grant or loan, appropriate reports must be made by the business to the state. Auditors checked records of a sample of awards and found that 3 out of every 10 required reports were not submitted by businesses that received awards. When reports are not made, agencies cannot monitor progress and offer needed support or correction.

Working from a sample of the more than 3,500 grants and loans made during the four year study period, auditors found only about half of businesses receiving grants and loans actually achieved the results they contracted to accomplish. This is deeply disturbing.

Imagine if a school district educated only half of the children the state paid to educate? Or a road builder paved only half the miles it contacted to pave?

The audit looked at what happened before the formation of the Wisconsin Economic Development Corporation. Created with almost $162 million in tax dollars this new agency is now charged with job creation for the state.

It is incumbent on state leaders to comply with the law and report the actual jobs created by the substantial investment already made by taxpayers. Instead of rushing to initiate additional job creation programs, officials should ensure the existing programs are actually delivering what was promised.