What is more, the amount of cash available for the WEDC to carelessly dispense has grown. By the end of 2013, the state had awarded over $970 million in tax credits, loans and grants, according to the watchdog group One Wisconsin Now. That same year, the Wisconsin State Journal found that “employees of the Wisconsin Economic Development Corp … made a number of questionable and unexplained purchases, including season tickets to UW-Madison football games and iTunes gift cards, and contracted for services without conducting open and competitive selection processes.”
It will shock no one to learn that some of the leaders who have been top recipients of WEDC funds were major donors to Walker’s reelection campaign.
Though Walker’s handling of state funds is particularly egregious, throughout the country — and across party lines — the preferred economic development strategy of many local and state leaders has been to hand over public money to private corporations on the grounds that these groups will create jobs. And a startling number of these initiatives fail to follow the most basic procedures of accountability and oversight.
In Detroit, for example, the City Council granted petroleum conglomerate Marathon Oil a $175 million tax break in 2007 in exchange for locating an expansion project in town. Seven years later, the company had hired just 15 people.
Democrats are culpable as well as Republicans. In New York under Gov. Andrew Cuomo, $7 billion has been spent each year on low- to no-accountability job creation programs, according to the Alliance for a Greater New York, a labor-community partnership.
One such program sponsors New York’s Industrial Development Agencies (IDAs). According to watchdogs, New York’s IDAs have consistently failed to produce new jobs: “[o]f the 4,486 current IDA projects, 1,161 of them do not promise to create a single job,” read one report.
“For the projects that do aim to create jobs,” the report continued, “56% of these IDA projects failed to meet their job creation targets in 2011.” Even worse, businesses subsidized through many of New York’s other programs do not have to disclose similar data, making evaluations of their effectiveness impossible.
A first step to solving this problem is requiring employers to submit evidence that they have actually created jobs — and, if so, disclose whether these jobs provide decent wages and benefits. States awarding subsidies should then make that information available to the public. According to the watchdog group Good Jobs First, “Only about one in four major state development programs reports on the number of jobs actually created or workers trained, and only one in eleven reports on wages actually paid.”
Reporting is not enough. When a business fails to live up to its obligations, the public should get their money back. These so-called “clawback” provisions provide a legal mechanism by which companies who fail to produce returns on public investments are required to return that money to the state.
The good news for Wisconsin is that it already has clawback provisions on the books. Now it’s time for them to be enforced. Walker might wince at the prospect of having to ask his friends in the business world to return taxpayers’ money, but his role as a public steward demands it. As long as Walker continues to view accountability as optional, his state has little hope of putting an end to a scam that, sadly, is all too common throughout the country.