Walker, WisGOP have done plenty to prevent Evers from cutting off WEDC slush fund

If you thought that the Lame Duck bills couldn’t get worse after they were introduced, you underestimate the abilities of the WisGOP Legislature. I found out about one of these add-ons yesterday from Wisconsin State Journal editor (and former statehouse reporter) Matt DeFour.

Looks like there are some previously undisclosed changes in the lame-duck bills, including one that repeals the requirement that WEDC verify job creation for all tax credit recipients. Instead they would verify a sample. https://t.co/zWylrlDEnc

— Matthew DeFour (@WSJMattD4) December 7, 2018

DeFour is referencing an article from Kelly Meyerhoffer in Friday’s State Journal, which says the following.

The summaries [of the bill] include at least one provision not previously disclosed. It would remove a statutory requirement that the Wisconsin Economic Development Corp. annually verify information submitted by tax credit recipients before a company can obtain the tax credit. Under the new bill, WEDC would annually verify only a sample of tax credit claimant information and rely on signed statements from other companies that they had created the required jobs.

The agency has previously had trouble complying with the state requirement that it verify job numbers.

So because WEDC was having a problem taking the steps needed to make sure handout recipients were following the law and making sure taxpayer dollars aren't being wasted, the WisGOP Legislature simply got rid of the requirement that WEDC would verify that the companies were creating the jobs. PROBLEM SOLVED!

Absurd enough, but add in this information from Meyerhoffer that complements the Lame Duck bills' moves to give the WisGOP Legislature more control over the WEDC Board, instead of incoming Dem Governor Evers.

Another provision specifies that the WEDC board has the power to appoint and supervise the point person acting on behalf of the state for the $10 billion Foxconn Technology Group manufacturing campus being built in Racine County. Currently, the person works within the Department of Administration.

ARE YOU KIDDING ME? Vos and Fitz(through their control of the WEDC Board) can put a GOP flunky in charge of making sure Foxconn is fulfilling their terms of the bargain that they struck with the state? You can be sure that person won’t ask too many questions that might make the Fox-con look even worse than the boondoggle it’s already appearing to be, just like you can be sure that WEDC won't be looking too hard at how many jobs were actually created through their taxpayer-backed slush fund.

WEDC used all day to mull how to react to the State Journal's report, and decided to push back on it.

2/2 That's not true. WEDC already internally verifies job #s on every tax credit award; that's not changing. Instead, we're adding another layer of scrutiny by having a thorough independent audit of a sample of awards. In addition to continuing to verify ALL tax credit awards.

— WEDCNews (@WEDCNews) December 7, 2018

Nice weasel words. In no way does WEDC deny that they now AREN"T REQUIRED to verify all of those tax credit rewards. And given their horrid track record, they WON'T verify all of those records, especially if they go to some GOP donor's company.

This leads to an obvious question- "Why couldn’t Tony Evers put $0 for WEDC funding in his budget for the next 2 years and have it go away by that method?" Because it’s not that simple, as WEDC gets money for its handouts from a variety of sources beyond general taxpayer dollars (aka “GPR”). The Legislative Fiscal Bureau’s summary of WEDC’s budget for 2017-19 talks about two of these sources, which come directly from other segregated funds.

Brownfield site assessment grants (SEG). Under current law, WEDC has a biennial SEG appropriation from the environmental fund of $1,000,000 annually for brownfield site assessment grants. The Governor recommends maintaining base funding for this appropriation.

Economic development fund; operations and programs (SEG). Under current law, WEDC has a continuing SEG appropriation from the economic development fund equal to the amounts identified in the appropriation schedule ($21,776,000 annually), which funds its operations and economic development programs. The revenue source for the economic development fund is the WISCONSIN ECONOMIC DEVELOPMENT CORPORATION economic development surcharge imposed on C-corporations and S-corporations. (Basically a fee that ranges from $25 to $9,800, depending on the size of the business). The Governor recommends converting this appropriation to an all moneys received appropriation equal to deposits of economic development surcharge revenues, interest, and penalties collected in the economic development fund after (as under current law) deducting amounts appropriated to the Department of Revenue for administration of the surcharge. Under the Governor's recommendation, WEDC could use all monies received from the economic development fund and would not be limited to the amounts provided in the appropriation schedule.

And then there is also this change in the last budget, which converted the general tax amount from a limited total to a “sum-sufficient” one, which means the amount that could be used for these type of tax credits could be higher than what is budgeted.

The Governor recommends converting this appropriation to a sum sufficient appropriation equal to the amount obtained by subtracting from $35,250,700 in 2017-18 and $41,550,700 in 2018-19 the amounts expended from WEDC's two SEG appropriations described above. However, this appropriation would also be limited to no more than $12,747,000 in 2017-18 and $18,774,000 in 2018-19 and annually thereafter. In addition, no monies could be expended from the GPR appropriation unless the balance in the SEG appropriation for operations and programs is zero.

In addition, the LFB noted in a different part of its summary of the 2017-19 budget that WEDC may continue giving back tax dollars for jobs created under contracts that already exist.

As previously noted, the refundable jobs tax credit and the nonrefundable economic development tax credit were consolidated into the refundable business development tax credit beginning in tax year 2016. Pursuant to 2015 Wisconsin Act 55, WEDC may allocate business development tax credits of $17 million in 2016 and $22 million in 2017 and annually thereafter. Any unused allocation authority during a calendar year may be carried forward for use in future years. In addition, WEDC may reallocate any nonrefundable angel and early stage seed tax credits that are unused in a calendar year to the business development tax credit under a 14-day passive review of the Joint Committee on Finance (JFC). JFC approved such a request from WEDC on June 13, 2016, to reallocate $8 million in angel and early stage seed investment tax credits. The increase of $37.75 million GPR over the base amount during the 2017-19 biennium reflects estimated increases in state expenditures associated with the phasing in of the new credit, as well as actions by JFC to increase WEDC's allocation authority for 2016.

That certainly opens the door for the current Walker/WEDC Administration to hand out a lot of tax credits to their buddies on their way out the door (including a deal for Kimberly-Clark now that the Foxconn 2 package imploded?), which will tie the hands of Evers in future budgets.

So the Evers Administration would have to take many steps beyond merely cutting off the WEDC slush fund of money in 2019. They would have to also adjust where this Economic Development surcharge goes, deal with the Brownfields money in some way (maybe toward something like cleanup?), and start limiting how much can be handed out for tax credits on already-signed contracts for a given year. Given how the GOP Legislature just went out of their way to shield Foxconn and the WEDC Board from Evers' control in order to keep the gravy train moving, it seems difficult to believe that a lot of this could get through into law over the next 2 years.

So it looks like public embarrassment and heavier oversight is going to be the best option left for Evers to deal with the WEDC slush fund in the short term. And Evers must his bully pulpit to draw attention to WEDC mishaps and cronyism at every step, to ramp up the pressure on others to stop this wasteful policies that give handouts for Wisconsin's lazy corporations and kickbacks to the crooked puppet politicians that front for them, while the rest of us get an underperforming economy that's last in the USA for entrepreneurship. Which is the intelligence of WEDC' design, when you think of it.