Scott Walker Keeps Wisconsin Jobs Agency at Arm’s Length

Scott Walker, Republican governor of Wisconsin. Photographer: Andrew Harrer/Bloomberg

Governor Scott Walker is distancing himself from a central element of his Wisconsin jobs strategy after nonpartisan auditors criticized it ahead of his expected Republican presidential campaign announcement.

The Wisconsin Economic Development Corp., formed in 2011 by the governor and Republicans who control the legislature, is a quasi-public authority that replaced the Department of Commerce. It was supposed to be fast and flexible in spurring job growth.

This month, Wisconsin’s Legislative Audit Bureau released a report showing the authority failed to follow the law and its own policies in awarding taxpayer-funded incentives. It also didn’t always require grant and loan recipients to document that jobs were created or retained.

The audit was the second critical of the corporation in as many years and released before a Wisconsin State Journal report about an agency loan to a donor for which Walker aides pushed. The 2011 deal for a Milwaukee construction company cost the state $500,000 and created no jobs, the newspaper said.

“It’s been mismanagement and incompetence at every level,” said Peter Barca, Democratic leader in the Wisconsin Assembly and a member of the authority’s board of directors. “We have been so misled about what is going on at WEDC.”

Barca and other Democrats, who mock Walker’s troubles by calling the agency the “Economic Disaster Corporation,” have called for a federal investigation.

‘Crony Capitalism’

National Democrats have also started using the corporation’s troubles against Walker, who has said he will announce his presidential plans after the legislature passes a two-year budget, probably in June. American Bridge 21st Century, a Democratic super-PAC, on Friday released a video featuring Wisconsin media coverage of the agency.

Even conservatives in the state have been critical. Right Wisconsin, a website run by Milwaukee radio host Charlie Sykes, called it an example of “crony capitalism” in a posting last week.

Hours after the audit’s May 8 release, Walker, 47, abandoned his plan to merge the agency with the Wisconsin Housing and Economic Development Authority. A week later, he said he wanted to phase out its $74 million loan portfolio.

His administration acknowledges the need for an overhaul while dismissing criticism as partisan.

“This is clearly political gamesmanship by legislative Democrats and others more interested in playing politics than on helping improve economic development,” said Laurel Patrick, a Walker spokeswoman. “It is vital to move forward with meaningful WEDC reforms to help maintain the focus of the organization on the most impactful economic development tools.”

With Walker’s support, Republican lawmakers voted Thursday to remove him as the agency’s chairman. Walker had proposed removing all elected officials from the board as a way to give it leaders from the private sector and from those with professional economic development backgrounds, Patrick said.

Walker proposed the corporation in 2011, three days after first being sworn in as governor.

“This legislation will create a public-private partnership whose sole mission is to promote economic growth and create jobs,” he said in a statement at the time.

Since then, the agency has been used to attract and retain companies such as Kohl’s Corp., one of the Wisconsin firms Walker talks most about in his speeches. In 2012, Kohl’s received incentives worth as much as $62.5 million, the second-largest ever granted by the state.

Job Turnaround

Yet the agency hasn’t been a panacea. Wisconsin ranked 33rd among U.S. states in economic health improvement during Walker’s first term, from the fourth quarter of 2010 through the same period in 2014, according to the Bloomberg Economic Evaluation of States. The state added a little more than half the 250,000 private-sector jobs that Walker promised during that time, according to estimates released May 21 by the Wisconsin Department of Workforce Development.

Walker received some positive news Thursday when the department reported that the unemployment rate dropped to 4.4 percent in April. That’s down from 7.7 percent when Walker took office in January 2011 and below the 5.4 percent national average.

He isn’t the only potential 2016 Republican presidential candidate to have used subsidies to attract jobs.

Ohio Governor John Kasich also sought to create a private development agency when he took office in 2011. Democrats unsuccessfully sued, saying that shifting public dollars to a private entity was unaccountable “corporate welfare.”

Kasich has said the entity is needed to complete deals more quickly and creatively than a public agency can.

Rick Perry has also faced questions about the Texas Enterprise Fund he created in 2003 as a “deal closing fund.” Like Walker, the former Texas governor also often talks about his desire for limiting the role of government in the private sector.

While private economic-development models often draw attacks, criticism of lax oversight is legitimate, said Donald Jakeway, former director of the Ohio Department of Development and the Michigan Economic Development Corp.

“If somebody’s not doing their job and they’re not making sure the programs are working appropriately, that’s not necessarily a fault with the program as it is with the administration of the program,” he said. “You still have a fiduciary responsibility to make those programs work.”

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