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Bruce Speight,
WISPIRG

New Report: $8.2 Million in Economic Development Subsidies from 2009-2010 Have Unknown Outcomes

In wake of HUD Letter to DOA, Recommendations for Greater Accountability to Wisconsin Taxpayers
For Immediate Release

Madison, WI – Wisconsin taxpayers have access to almost no information about the outcomes from the millions of dollars invested in economic development subsidies from the past four years, according to a new Wisconsin Public Interest Research Group (WISPIRG) Foundation report, Leaving Taxpayers in the Dark: The Urgent Need to Improve Transparency and Accountability in Wisconsin’s Economic Development Subsidy Programs. The report finds that online transparency has gotten worse despite promises from state leaders to enhance transparency and accountability in these programs.

“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 report found that:
• Planned and actual performance results were provided for just 2 recipients, or 0.8%, of 251 completed projects listed on the state’s online database for 2009 and 2010, even though reporting these outcomes is required by law under 2007 Act 125. 
• In dollar terms, the remaining 249 completed awards which failed to provide necessary information to evaluate performance represent $8,244,678 in awards; roughly 99% of the $8,330,178 total awarded funds for completed projects during this period.
• When requested to disclose how much subsidy money has been recaptured from companies who failed to fulfill their contractual goals since 2007, the staff of the Wisconsin Economic Development Corporation (WEDC), the newly formed agency responsible for economic development in Wisconsin, responded that it would take tremendous staff resources to compile this information.
• No information is disclosed online about the state’s enforcement activities for companies who fail to fulfill their contractual obligations.

“Governor Walker and leaders from both parties have promised transparency and accountability in state government, but they have not delivered,” said WISPIRG Director Bruce Speight.  “Given our state budget problems, the last thing we should do is spend hundreds of millions of taxpayer dollars with almost no transparency or accountability.”

Taxpayer-financed economic development programs can help grow Wisconsin’s economy, so long as funds are well-targeted, and monitored to ensure effective job creation or other economic benefits. The ability to access information about subsidy recipient performance is crucial for making informed choices about allocating funds, and to hold subsidy recipients accountable for fulfilling their obligations.

Multiple state legislatures have attempted to improve transparency and accountability in these programs.   2007 Act 125 created a publicly accessible website and took steps towards improvement.  Most recently, state leaders promised to enhance transparency and accountability when the Wisconsin Economic Development Corporation (WEDC) was created. 

But, two Legislative Audit Bureau reports in the past six years have found significant shortcomings in the administration of these programs, and consistent problems that remain unaddressed, even after these reforms were enacted.  The June 2012 Legislative Audit Bureau report found that results were obtainable for only 101 of the 123 programs active during fiscal years 2009-2011; only 66.9% of the 489 contractually required progress reports for the subsidy recipients that they audited were actually submitted; and of the 89 completed contracts reviewed by the bureau, 31 recipients either did not fulfill their contractual goals or their performance was unknown.

A recent letter from the U.S. Housing and Urban Development Department criticizing the state for mishandling federal economic development funds further highlights the urgent need for reform and concrete action from state leaders. 

States across the country are leading the way improving accountability in these programs.  WISPIRG Foundation researchers reviewed many of these best practices.  Based on these findings, the WISPIRG Foundation report outlines nine recommendations for reform, including:
• Standardize and statutorily define the information which economic development subsidy recipients must include in every progress report, submitted at least annually;
• Make all economic development subsidy contracts and related progress reports available online;
• Make the current online website one-stop, user-friendly and easily accessible for taxpayers;
• Include a “Top Performers” section on the online disclosure site;
• Impose automatic penalties on recipients who fail to submit progress reports as required;
• Impose mandatory “clawback” provisions, requiring recipients to repay subsidies if they fail in part of whole to deliver on their promises; and
• Require agencies to report on their enforcement activity online including the names of recipients found to be non-compliant and the penalties levied on recipients for non-performance.

“Wisconsin taxpayers should not be left in the dark” concluded Burt.  “State leaders should come together to give taxpayers the transparency and accountability they deserve.  Comprehensive disclosure of economic development programs is vital for public scrutiny and taxpayer protections against any misuse or inefficient expenditure.” 

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WISPIRG is a statewide membership-based, non-profit, non-partisan public interest organization that stands up to powerful interests.  www.wispirg.org.

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