Recent federal findings criticizing the lack of openness in Wisconsin’s distribution of federal economic development funds highlights the need for a serious effort by state leaders to ensure these subsidy programs are transparent and accountable. A new WISPIRG Foundation report has found that 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. The report, “Leaving Taxpayers in the Dark: The Urgent Need to Improve Transparency and Accountability in Wisconsin’s Economic Development Subsidy Programs,” finds that online transparency has gotten worse despite promises from state leaders to enhance transparency and accountability in these programs.
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 and achieving meaningful economic goals for Wisconsin.
Despite legislative efforts at improvement since 2007, Wisconsin’s economic development subsidies lack transparency and accountability. The state website shows that over $414 million in business subsidies were dispensed in 2009 and 2010, an amount which exceeds state spending on tourism, aging & long term care, agriculture, trade and consumer protection, and the environmental improvement fund. But very little information is currently available about the goals of these subsidy programs, their outcomes or the benefit to the Wisconsin taxpayers who are paying for them.
State leaders responded to a 2006 audit that found major transparency and accountability problems with Wisconsin’s economic development programs by passing 2007 Act 125. Since then, we’ve seen minor improvements, including the creation of a searchable website with limited information. Again in early 2011, state leaders promised to enhance transparency and accountability along with streamlining these programs when they created the Wisconsin Economic Development Corporation (WEDC). But, transparency appears to be getting worse, and taxpayers have access to almost no online information to judge the outcomes of subsidies from the past four years.
Taxpayers shouldn’t have to be auditors to find out if the economic development subsidies we fund are delivering bang for the buck.
Here is what we found:
- Planned and actual performance results were provided for just 2 recipients, or 0.8 percent, 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 did not provide information needed to evaluate performance represent an awarded amount of $8,244,678; roughly 99% of the $8,330,178 total awarded funds for completed projects during this period.
- When asked how much subsidy money has been recaptured from companies who did not 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.
Gov. Walker and leaders from both parties have promised transparency and accountability in state government, but they have not delivered. 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.
States across the country are leading the way improving accountability in these programs. We reviewed many of these best practices. Based on these findings, we outline nine recommendations for reform in the report, 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. State leaders should come together to give taxpayers the transparency and accountability they deserve.
Bruce Speight is the director of WISPIRG, a statewide nonprofit, non-partisan public interest organization.
