Saturday, May 16, 2015

"Unitnimidated" Guv pulls plug on own WEDC jobs programs

Another Friday, and another drastic and intriguing difference of direction from our fair Governor regarding the Wisconsin Economic Development Corporation (WEDC). One week after an LAB audit came out hammering WEDC for its lax oversight and loss of taxpayer funds, causing Walker to abandon his plans to merge WEDC with the Wisconsin Housing and Economic Development Authority (WHEDA), Scotty’s got a new idea for what WEDC should do.
Over the last week, we have had an opportunity to discuss the future of WEDC and the proper role of economic development at the state level with legislators and stakeholders.

Together, we must evaluate WEDC’s strategic priorities, structure, programming, and operations. While the organization has faced its share of challenges, it has also achieved great success in developing Wisconsin’s first strategic approach to using taxpayer money as a kickback for campaign donations economic development. However, it is clear that changes are needed to focus on priorities and maximize the effectiveness of the agency. Those changes include:
•Transitioning the state away from providing direct loans to businesses.
Instead, we have asked that the Legislature put the money towards tax incentives that have clear deliverables and expected outcomes and are earned as a company meets those defined performance metrics. Governor Walker already included in his budget proposal a consolidation of two tax credit programs into one Business Development Tax Credit, in order to simplify the process and make it easier to understand, both for the businesses and WEDC.
• Working with the Legislature to utilize the $55 million, which was set aside in the Governor’s original budget proposal for a Regional Revolving Loan Fund, for education and/or worker training that will help further grow our economy and connect workers in our state with the necessary skills to compete.

Oh really now? That whole “loaning money without consequence” thing wasn’t the right way to do it? You don’t say?

I’m sure the timing of the Governor’s announcement had nothing to do with the WEDC items that were going to come up in next week’s Joint Finance Committee meeting, which includes this little nugget.
The budget bill would increase from $100,000 to $500,000 the threshold for when a grant or loan recipient must engage a CPA to determine whether the funds were expended in accordance with the grant or loan contract. WEDC has stated that the current threshold can be costly for persons receiving awards of less than $500,000 as compared to the benefit received by the recipient. According to WEDC, the typical cost of obtaining a schedule of expenditures from a CPA is $5,000, which would represent 5% of a $100,000 grant or loan award….

9. As compared to current law, the bill generally relaxes the reporting requirements for recipients of economic development grants and loans. The Committee could choose to modify the Governor's proposal to restore one or more of the current law requirements.

10. It should be noted that, on May 8, 2015, the Legislative Audit Bureau (LAB) released a financial audit of WEDC and a program evaluation audit of the Corporation's economic development programs. According to the LAB, WEDC did not comply with the statutory requirements under current law described above. In 2013-14, 11 of 25 contracts examined by the LAB for grants or loans of $100,000 or more that were executed by WEDC did not include a requirement that the recipient provide the statutorily required schedule of expenditures. Instead, the 11 contracts required recipients to provide verified financial statements. The LAB also noted that WEDC generally had not sent past due notice to, or taken any action against, two-thirds of grant and loan recipients who had not timely filed a schedule of expenditures as of December of 2014 (for a total contracted value of $8.4 million), and the Corporation has not consistently collected statutorily required financial information from grant recipients since WEDC became fully operational in July of 2011. The LAB did not recommend any statutory changes to WEDC's grant reporting requirements. Instead, the LAB recommended that the Board comply with its current statutes by: (a) requiring all recipients of grants and loans of at least $100,000 to submit schedules of expenditures; and (b) ensuring its staff comply with WEDC's own policies by sending notices in a timely manner to all grant and loan recipients that do not submit contractually required schedules of expenditures on time.
In other words, WEDC wasn’t following its own rules on reporting, so Walker figured he’d “solve” that problem by getting rid of most of the reporting requirements for the smaller loans. Gee, no sketchiness or potential abuse in that move, is there?

As for the $55 million in funds that Walker now wants to turn into incentives related to education and job training? That was going to be debated next week as well, and it was setting up to be a shitshow, because that program was slated to give away three times what the current loan program does. You know, the same loan program that has had so many of its funds past-due and/or written off at taxpayer expense because the state never went after the businesses that got the loans to, you know, PAY THEM BACK?
My comments are in italics, and are not part of the LFB’s write-up of the $55 million proposal for WEDC.
In 2013-14, WEDC contracted 141 grant awards totaling $17.2 million. The proposed $55 million grant program would represent more than three times as much in grant awards (assuming the grants were all made in one fiscal year) in support of the proposed program as compared to the total amount of grant awards WEDC made in the most recently completed fiscal year. WEDC also entered into 36 loan contracts totaling $19.4 million in loan awards in 2013-14. It should be noted that the proposed program would be considered a grant program, awarding grants to regional organizations for the purpose of entering into loans with businesses in a specified multicounty geographic area. These monies would not be loans receivable on WEDC's balance sheet. (Can’t have LAB track em if you can’t count them)

3. According to WEDC, details of the new program are not developed beyond the scope of the budget language. The administration indicates that details regarding how the program would be designed, structured, and administered would be as directed by WEDC's Board. Because the program has not been approved, specific details of the program have not been developed by the Board [and] are not available. (Just give us the money and we’ll figure it out. You can trust the Scott Walker-chaired WEDC Board, right?) ….

7. As noted, details of the program have not been developed and it is unknown what the structure or composition of the regional organizations would be under the program or how specifically those dollars would have to be disbursed in the region. The bill would require WEDC to approve the structure, regional investment strategy, and administrative guidelines of the regional loan funds for each regional organization. In addition, each regional organization would have to make a report to WEDC, as would be required by the Corporation. Whether you ever get to find out what went into WEDC’s decision-making on where to send the money, or what’s in that report from the organization? That’s another matter).
No, nothing corrupt or sketchy would ever happen in that scenario, especially given WEDC’s upstanding reputation and hawk's eye over taxpayer funds over the 4 years it’s been in existence.

I think a certain Twitter commentator is correct as to the real reason for this “Unintimidated” Governor is doing this reversal on the WEDC programs.

And how much you wanna bet that they show Walker below the 41% approval he was at a month ago, before the news of the latest WEDC audit hit and revenue flatlined?

These guys can feel the ground shaking and the house of cards getting ready to fall down, which explains Walker’s panic move of doing a complete 180 in strategy and programming. Which also means it’s time to get the Feds to do a full investigation of this slush fund. NOW.

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