The Legislature's audit committee held a hearing yesterday on a report released in May that found problems at Gov. Scott Walker's job creation agency continue to persist.
The report was the third in which the Legislative Audit Bureau discovered serious deficiencies in the operations of the Wisconsin Economic Development Corporation. LAB is a non-partisan agency charged with “conducting objective audits and evaluations of state agency operations.”
Republicans have sought to abolish the LAB in the past.
WEDC is in the spotlight again due to concerns about the deal it struck with Foxconn. WEDC negotiated a secret agreement that gives $3 billion to the Taiwanese-based manufacturer of LCD displays to build a plant in southeastern Wisconsin
Despite efforts to reform WEDC in the wake of the first two blistering audits, as well as numerous scandals, the LAB found in May that the agency is still failing to accurately track the number of jobs that its awards are supposed to create and retain. According to the report, WEDC handed out nearly $10 million in bad loans over the last two years and failed to turn over millions in tax credit repayments to the state.
Potentially uncollectable loans with repayments more than 90 days past due increased nearly tenfold between 2015 and 2017, from $1.3 million to $11 million, according to Senate Democratic Leader Jennifer Shilling.
“Democratic efforts to increase transparency, accountability and oversight of the troubled agency continue to be blocked by Republican lawmakers,” she said in a statement to the press.
Angry and worried
The Foxconn deal is the largest giveaway that Wisconsin has ever made to a foreign corporation, but details of the arrangement have not been released. That has Democrats angry and worried.
“How can the Legislature, as stewards of Wisconsin taxpayer dollars, honestly entrust executing a $3 billion contract like Foxconn with tax credits hinging upon—of all things—verified job creation, when WEDC has demonstrated not once, not twice, but three times that they are not capable of adequately executing contracts, verifying job creation, and even simply complying with state statutes?” asked state Rep. Melissa Sargent (D-48th District) in a prepared statement.
During yesterday’s hearing, WEDC’s CEO Mark Hogan said the agency is trying to implement auditors’ recommendations to track award applicants’ job numbers using unemployment insurance data from the state Department of Workforce Development.
“(We have) great confidence ... that WEDC has made significant progress in addressing administrative issues,” Hogan said.
But state Sen. Kathleen Vinehout, a Democratic gubernatorial candidate, pressed Hogan on how the Foxconn contract will be any different than an agreement WEDC reached with Kestrel Aircraft. The WEDC gave that company $4 million in low-interest loans and $18 million in tax credits in exchange for promises it would create 665 jobs.
The company has defaulted on its loan payments after creating only 25 jobs and still owes the state $3.4 million, according to the Wisconsin State Journal.
Hogan replied that WEDC’s board adopted guidelines just last week for administering the Foxconn deal. Included in the guidelines is a provision that a third-party accountant would verify Foxconn’s job creation numbers.
But Hogan refused to supply the audit committee with a copy of the Foxconn contract because it hasn’t been approved yet, according to The Associated Press.
Democrats have demanded the Legislature’s approval for the Foxconn deal, but the state’s Republican leaders have turned a deaf ear to that request.
“The WEDC has been as transparent with their contracts as President Trump with his tax returns,” said state Rep. Jimmy Anderson (D-47th District) in a statement to the press. “The public will not be able to see the details of the Foxconn contract until after the deal has been signed. … We cannot condone the secrecy or irresponsibility with our tax dollars. We must hold Gov. Walker and his slush fund accountable.”
WEDC has stirred controversy since Walker formed it in 2011. The agency has failed to recover loans to troubled companies, some of them owned by or affiliated with Walker campaign donors. In its first two years of operation alone, WEDC handed out $124 million in loans without conducting formal reviews or following up to assess whether jobs were created.
In 2015, Republican lawmakers on the Legislature’s finance committee removed Walker as chairman of WEDC, dramatically reduced the agency’s reserves and eliminated a program that would fund regional loans. After that, chronic staff turnover became a major problem.