Gov. Walker originally wanted to give WEDC more than $128 million in the 2013-15 budget, with $73.6 million coming from general taxpayers. But that was shot down as Wisconsin's Legislative Audit Bureau revealed WEDC's shoddy bookkeeping, lack of accountability and questionable (at best) practices of handing out tax credits for job creation. Instead, what the legislature decided to do was to give WEDC $55.55 million for this fiscal year, and held back more than $63 million in the JFC's supplemental fund. The idea behind this was to buy time to see if WEDC could get its act together, and to then fund at an appropriate level at a later point in the two-year biennium. And now, 6 months into the 24-month budget, the JFC is deciding to make some decisions about these extra funds.
It includes $42.8 million in general taxpayer dollars, and $20.3 million from the state's Economic Development Fund. The Econ. Development Fund used to be known as a recycling surcharge, and is described by the LFB in their information paper for tomorrow's meeting as follows.
Prior to 2013 Act 20 [the state budget], the economic development surcharge was imposed on all farm and nonfarm businesses that had more than $4 million in gross receipts. Under Act 20, the economic development surcharge was eliminated for farms, partnerships, and individuals, beginning with tax year 2013. As a result, under current law, the economic development surcharge equals 3% of gross tax liability for corporations (including insurance companies and LLCs taxed as corporations). The minimum economic development surcharge is $25 and the maximum is $9,800. Economic development surcharge payments, including interest and penalties, are deposited into the segregated economic development fund. Economic development fund revenues are appropriated to WEDC and used to fund financial assistance for economic development projects. In addition, annual funding is appropriated to the Department of Revenue for administering the surcharge.The LFB goes on to say that the Economic Development Fund could have a surplus of $21.7 million by the end of this budget, and that gives the JFC a few options on how to fund WEDC. As a newspaper article from this weekend points out, between the projected surplus in the regular Economic Development Fund, and the funds in the Supplemental Fund that have yet to be released to WEDC, there's around $34 or $35 million in extra cash to play with in the Economic Development Fund.
At the end of fiscal year 2012-13, the undesignated fund balance in the economic development fund was $16 million. If current trends continue, including the estimated effect of eliminating the surcharge on farms, partnerships and individuals, annual fund revenues would be an estimated $22.4 million.
Along with those funds, WEDC has some extra general taxpayer money lying around. Strangely, having these left-overs didn't cause the same amount of outrage that similar types of reserves in the UW System caused (I'm sure it's just coincidence).
During the 2012-13 fiscal year closing process, WEDC determined that the unassigned fund balance for the Corporation exceeded the maximum target balance amount (25% of revenues) by $18.4 million. WEDC indicates that the excess balance included the carryover of Department of Commerce funding, and also reflected lower than expected demand for Corporation loan programs. On October 25, 2013, the WEDC Board approved a resolution recommending that WEDC use a portion of the excess unassigned fund balance to offset state funds.The expanded marketing efforts mentioned by the LFB include the silly "open for business" ads that I mentioned yesterday, keeping with the failed, Confederate-state mentality that has landed Wisconsin 37th for job growth.
As noted above, a total of $3,750,000 GPR in 2013-14 and 2014-15 was placed in the JFC supplemental appropriation for potential increased marketing expenses. The Corporation is required to submit a report for Joint Finance approval, specifying the extent to which marketing expenses may be funded with existing funds, rather than requiring additional GPR funding. Also, 2014-15 funding of $35,274,700 GPR was placed in the JFC supplemental GPR appropriation and $20,276,000 SEG [the Economic Development Fund] was placed in the JFC supplemental SEG appropriation. WEDC is required to submit a report indicating compliance with the recommendations of the May, 2013, LAB audit of WEDC, and the CEO of the Corporation is required to testify at the second quarterly meeting of Joint Finance. The Committee is authorized to release the funding based on the CEO's testimony and the information in the report, if the Committee finds that WEDC is complying with the audit recommendations. WEDC submitted a copy of the compliance plan submitted to the Joint Legislative Audit Committee on October 1, 2013. In the plan, WEDC indicates the actions taken and policies modified or developed that respond to each of the audit recommendations. WEDC has submitted a proposal under which the Corporation would not request the $3,750,000 for marketing placed in the Committee's supplemental appropriation in 2013-14 and 2014-15, and would, instead, use $7,500,000 of the $18,400,000 excess unassigned fund balance to fund increased marketing costs. In addition, in its October 28, 2013, submission to Joint Finance the Corporation proposes using the remaining $10,900,000 of excess unassigned balance funds to offset 2013-15 operations and program costs. As a result, while not specified, the WEDC proposal effectively requests transfer of $24,374,700 GPR and $20,276,000 SEG in 2014-15 from the JFC supplemental appropriations to WEDC.
The left-over $18.4 million of general taxpayer funds is being proposed to be sent back to the state, to either be banked or used later to cover some other services. Of course, given that we know there is an estimated $136 million in state deficits for Medicaid and W-2 welfare, maybe the GOP-dominated JFC could use some of that excess money in WEDC to take care of some of those problems (along with taking the expanded Medicaid funding in Obamacare). Nah, why would I expect them to do a sensible thing like that, when they can continue to cling to the delusions that "It's Working" in the Age of Fitzwalkerstan?
Keep your eye on this meeting, and see if there is any hint of the WisGOP's learning anything as 2014 begin. Or do they go the other way, and much like another Dubya would, continue to "Stay the Course", regardless of the changing situation or failing results.
EDIT- Ed Heinzelmann at Blogging Blue comes up with a solid suggestion. Why not use the Economic Development Fund surplus to take care of the so-far unfunded financial aid for the new UW Flex Option? Helping students advance their skills would sure do a lot more for improving business in Wisconsin than anything WEDC's been doing.