Questions Arise about State Money for Job Creation

“Why is Wisconsin giving money to apparently profitable companies?” the reporter asked me. “Why are we apparently paying companies to move jobs 30 miles east so a bunch of Eagan residents can work in Hudson?” he wondered.

The journalist also wanted to know about nearly $240,000 in gubernatorial campaign contributions made by owners of a company expanding in western Wisconsin. He wondered about what appeared to be a less than random relationship between contributions and tax credits.

The story he was following involved a packaging company moving its operations from Eagan, Minnesota to Hudson. Details of the deal are not known but the Hudson Patch quoted the Hudson Mayor, speaking about the company: “they drive a hard bargain, but I think we were fair”.

The Vice President of the family-owned company credited the “tremendous cooperation” of the state as part of the reason the company moved.

This is the second time the company “hopped the border” into Wisconsin.

The first was a 2008 move from Illinois. Lured by reports of up to $23 million in state and local business subsidies, the company moved its headquarters to Kenosha County.

The reporter also mentioned news that Kohl’s department store chain was recently awarded up to $62.5 million in tax credits to keep its headquarters in Menomonee Falls.  The Wisconsin Economic Development Corporation (WEDC) announced the money would help Kohl’s retain and grow thousands of jobs.

“Why are we giving $62 million to a seemingly profitable company?” the reporter asked.

The Wall Street Journal reported in May that Kohl’s first quarter sales were $4.24 billion; up 1.9% from the past quarter. The paper noted this was lower than expected. Originally the company projected first quarter sales increases at three percent.

Either way, the company seems to be doing rather well in a sluggish economy.

Local people detest bad deals made by state government. They want tax dollars to be well spent. Working with the Legislative Audit Bureau is one way I can help my constituents scrutinize the decisions made by government officials.

I was recently again named Co-Chair of the Joint Committee on Audit. Part of the committee’s work this summer involves an audit detailing several problems with the state’s economic development programs.

Money spent on job creation is extensive. Between 2007 and 2011 more than one billion dollars was awarded in grants, loans, loan guarantees or newly authorized bonds. Millions more were awarded in tax credits.

The audit showed all state agencies are not tracking the accomplishments of all companies. Almost 90% of the state’s 139 economic development programs did not report both the expected and the actual number of jobs created.

When asked by reporters where the money was going, I said we don’t know if the programs are really delivering what companies promised. We don’t know if the jobs promised are created.

I found the lack of information astonishing; particularly after an earlier audit showed similar problems. To remedy the lack of information, my colleagues and I crafted a new law to make public how job creation money was spent and what actual jobs were created.

In apparent defiance of the law, state agencies were not collecting all required information and could not answer questions about actual job creation numbers.

The state law that created WEDC, the agency now responsible for job creation, abolished certain reporting requirements that would help answer these questions. Auditors recommended reinstatement of those reporting requirements. I strongly agree.

In the coming weeks I, and my Co-Chair Samantha Kerkman, plan to schedule a public hearing on details of the economic development audit. The hearing will provide an opportunity to speak with WEDC officials and ask the questions on the minds of many people including my local reporter.

People want to know who is getting what money and what they are doing with the money. Agencies must be held accountable. The flaws in state law should be corrected. I look forward to working with my Audit Committee colleagues to make sure this happens.