How do we know taxpayer dollars really create jobs? How do we decide where to send limited state dollars to grow jobs? How can we recoup tax dollars when a company doesn’t do what it promises? Or takes the money and runs to Mexico? A few years ago my colleagues and I grappled with these questions.
We came together in a bipartisan work group following the release of an audit by the Legislative Audit Bureau that pointed to the need to tighten up rules for grants and loans to companies. Given to businesses in the name of “jobs”, these grants and loans often had the look of gifts made to friends.
State record keeping was so lax, the audit showed, the state did not know if those awarded planning grants actually launched their businesses; whether the businesses created expected jobs; or whether the new business development zone actually helped create new businesses.
One of every five grants for distressed areas was given to an area that was not distressed; twenty percent of all grants and loans went to only ten companies and help for small businesses went to companies that were not small. While small business is the engine that drives our economy and accounts for nearly two thirds of all jobs created, less than $3 of every $10 went to help small businesses.
My colleagues and I spent a year fixing these problems and setting up ways to shine light on programs using state dollars to create jobs. Following systems in other states we set rules requiring goals, benchmarks and evaluation to make sure the business did what was promised and the people’s dollars were wisely invested.
All this work is about to be thrown out the window. And to be replaced by a dark pantry with a sign on the door reading Just Trust Us .
Moving at break neck speed through the Legislature is a bill to abolish the state commerce department and create a private corporation. The bill gives this private corporation unlimited state bonding (or borrowing) privileges and makes it exempt from many state laws including employment law.
As Representative Peter Barca, my former co-chair of the Audit Committee and current Assembly Minority Leader testified recently, “This is the taxpayers turning over an $82 million blank check to the leaders of the new authority with no oversight.”
The idea of privatizing economic development programs is not new. Other states have been heralded as models by our Governor; the experience of many of these states should also provide pause to lawmakers and taxpayers.
The Governor has modeled the legislation after Indiana, a state troubled with scandal and the over-reporting of jobs created. Investigations showed a padlocked factory where 1400 jobs were supposed to be created; estimates are only 40% of promised jobs were created . Michigan, also a state with a privatized job creation corporation, awarded questionable contracts and saw one third fewer jobs actually created than promised.
Fewer jobs created than promised was one of the problems that led to the new accountability measures we created three years ago. With Wisconsin’s recent negative experience of passing out cookies in the dark, it would be outrageous if we slip back to handing out public money with no public oversight.
Most people would agree dollars are best invested in projects based on merit and expected return on investment. Most jobs are created by local entrepreneurs and existing Wisconsin-based businesses. Growing our own can help assure a long-term commitment to our state; making an investment now helps return dividends our children can reap.
But all of us lose when cookies are passed out in the dark.
The non-partisan Legislative Fiscal Bureau analysis states, “uniform economic development activities, goals, accountability measures and reporting requirements... would not apply” to the new Wisconsin Economic Development Corporation. Memo from Lang, Bob to Rep. Tamara Grigsby, January 12, 2011, p. 5.