Wisconsin Leaves Taxpayers in the Dark

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A new report released by WISPIRG details the failure of the state of Wisconsin to properly disclose whether its lucrative corporate subsidies are providing the promised benefits. Among WISPIRG’s findings:

  • Just 2 out of 251 entries listed in the state’s subsidy database detailed the projected and actual outcomes for the 2009-2010 reporting period
  • $8.2 million of those subsidies had no reported benefits to Wisconsin taxpayers
  • The newly created public-private partnership, the Wisconsin Economic Development Corporation (WEDC), couldn’t account for how much the privatized state agency has recaptured from recipients failing to meet performance requirements. In their response to WISPIRG, the WEDC claimed that it lacked the staff resources to compile that information.

This isn’t the first time WISPIRG has weighed in on subsidy accountability. In 2007, the group successfully led an effort to improve the state’s subsidy reporting. The resulting Public Act 125 requires the state to disclose corporate subsidy data in a searchable database. Prior to the creation of WEDC, that information was published by the Department of Commerce. The WEDC has not posted Act 125 data on its new website. Instead, that site has a hard-to-find link to the now defunct Commerce agency’s website. The old database is obviously outdated compared to standard practices in other states such as Maryland.

WISPIRG recommends the state do a better job implementing reforms that would ensure taxpayers know which companies are getting a subsidy and whether the state did anything to verify job creation claims. “Taxpayers shouldn’t have to be auditors to find out if the economic development subsidies we fund are delivering bang for the buck,” said Alysha Burt, WISPIRG Program Associate and co-author of the report.  “Even state auditors couldn’t quantify the outcomes of these programs because the information isn’t there.  For all we know, millions of our tax dollars could be funding junkets to the Caribbean.” The WEDC could start by putting a better Act 125 database on its website and featuring it prominently on the main page.

All of this comes on the heels of a deeply disturbing letter sent to the WEDC by the U.S. Department of Housing and Urban Development accusing the state of mishandling federal economic development funds. Shortly thereafter, the head of the WEDC resigned. And a June 2012 report by the state auditing agency, the Legislative Audit Bureau, found that state agencies were regularly failing to submit required compliance reports. Worse, the audit found that the newly created WEDC is required to disclose less information to the public than the old Department of Commerce did.

As our January 2011 report showed, the risks of privatizing a state economic development agency can lead to less transparency and accountability for taxpayers. In many respects, Wisconsin appears to be making the same blunders as other states that have gone down the path of privatization: resistance to accountability, questionable claims about the effectiveness of the privatized agency and misuse of taxpayer funds. Better data could ease those concerns.

And there are also conflict of interest issues. The new private-public agency has past recipients of lucrative subsidies deciding how the agency should operate. Companies represented on the board of directors include Logistics Health and FluGen. Logistics Health received at least $3.25 million in tax credits and loans, while FluGen collected at least $2.25 million. Logistics Health didn’t meet its projected job creation thresholds. According to the Act 125 database, FluGen didn’t even have job creation requirements.

We hope that WISPIRG’s report will serve as a wake-up call to taxpayers and legislators in Wisconsin and elsewhere. Without adequately disclosing subsidies, their purported benefits and outcomes, taxpayers will be left wondering why they have fewer services and/or higher taxes.

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