Scott Walker’s Jobs Program Didn’t Work
Scott Walker, Wisconsin’s conservative governor, is reputed to be one of the most divisive politicians in America. But in one complicated situation, he’s brought people together: Wisconsinites of every political stripe agree that his cumbersomely named Wisconsin Economic Development Corporation, or WEDC, is a big mess.
Here’s the thing, though: WEDC has a complex history, and its short saga is a helpful example of the challenges governors face when looking to distill their records for non-wonky national audiences.
First, some quick background. In 2011, newly elected Governor Walker replaced the Wisconsin Department of Commerce with a public-private partnership called (you guessed it!) the Wisconsin Economic Development Corporation, or WEDC. Walker had won the gubernatorial race a few months prior by campaigning on a promise to create 250,000 jobs in the state over the course of his first term. WEDC (commonly pronounced “weed-ick”) was supposed to help the state reach that goal and to trim some of the bureaucratic fat that existed in the commerce department.
But Wisconsin only got about 147,000 of those 250,000 promised jobs. And WEDC had serious growing pains, to say the least. A May 2013 audit from the Legislative Audit Bureau had troublesome findings, including that between 2011 and 2013, WEDC gave out $124.4 million in awards without formal staff reviews.
WEDC didn’t mandate staff reviews at the time, and the awards were all approved by the agency’s bipartisan board. Still, some of those awards went to companies that didn’t exactly handle them responsibly. For example, the Wisconsin State Journal reported that Building Committee Inc. got a $500,000 loan after falsely saying it hadn’t been sued for five years. It later defaulted on that loan and dissolved. And, as it turned out, the company’s owner had given $10,000 to Walker’s first gubernatorial campaign.
“According to WEDC, the 27 awards were tied to the creation of 6,165 jobs, but so far only 2,106 have materialized,” the State Journal said. “Many of the awards are tax credits contingent on certain job-creation goals being met.” (The biggest beneficiary of those awards was none other than Walker’s beloved Kohl’s Department Stores, which got a $62.5 million tax credit.)
Critics argue that WEDC over-promised and under-delivered, and they emphasize that some of the companies that benefited from those awards (like Building Committee Inc.) are, as the Chicago Tribune reported, affiliated with or owned by Walker donors.
So Democrats are crying foul. State Representataive Pete Barca, who is a member of WEDC’s board, called on the Department of Justice to investigate the agency because “they have the ability to probe more deeply into whether or not criminal activity went on.” (The DOJ’s press office told The Daily Beast that they don’t confirm or deny the existence of investigations.)
Democratic State Senator Dave Hansen went even further, calling for the agency—which he said is an “unmitigated disaster”—to be shut down. And on June 24, Barca and his fellow Democratic member of the board, State Senator Julie Lassa, said WEDC’s secretary and CEO Reed Hall should resign.
Walker’s defenders, meanwhile, say that WEDC’s critics don’t have much to go on. Dale Knapp, of the Wisconsin Taxpayers Alliance, said he didn’t think it was unusual that so many companies affiliated with Walker donors benefited from WEDC awards.
“These kind of companies often give to both parties, but they tend to support whoever’s in power,” he told the Beast. “The Republicans are completely in power right now, so it’s not surprising that you would see those kinds of numbers.”
Meanwhile, Mark Maley, WEDC’s public information manager, said that campaign contributions don’t impact award disbursement.
“Regarding the recipients of WEDC awards, there is no way to make this any clearer: Political affiliation and campaign contributions absolutely play no role in determining which companies receive awards from WEDC,” he told the Beast.
And it’s important to remember that the biggest problems Democrats highlight happened between 2011 and 2013. Laurel Patrick, a spokeswoman for the governor, noted that WEDC responded to bad report cards by making dozens of policy changes, including replacing outdated software, hiring a vice president of credit and risk, and implementing employee ethics policies (among a host of other changes). Maley said that since the implementation of these changes, WEDC has given out more than 760 awards, all of which were first reviewed by staff.
And Walker’s team argues that these changes paid off. Patrick noted via email that WEDC’s loan delinquency rate dropped dramatically between 2013 and 2014, from 2.7 percent to 0.2 percent.
“The improvements did not go unnoticed,” Patrick continued. “In April 2014, WEDC received the Certificate of Achievement for Excellence in Financial Reporting from the Government Finance Officers Association of the United States and Canada, the highest form of recognition in governmental financial reporting.”
But another audit last month unearthed yet more room for improvement. In response, Walker called for WEDC to stop loaning cash to businesses, and instead to bankroll tax incentives with those funds. And Patrick emailed that additional changes are on the way.
But, regardless of what reforms are made, WEDC also has its fair share of conservative critics who object to the agency’s very existence. “[I] suspect Gov. Walker is starting to realize just how big a liability WEDC could be on the presidential campaign trail and is attempting to tie up loose ends ahead of his announcement this summer,” wrote Collin Roth of Right Wisconsin, a conservative website, in response to Walker’s latest round of changes to the agency.
“[P]hilosophically, if we believe in free markets and limited government, how important is a state agency that essentially tries to create jobs?” he added.
And Brett Healy, the president of the right-leaning MacIver Institute (which typically defends Walker’s policy moves), shared Roth’s opposition to government entities giving monetary incentives to individual businesses.
“The simple truth is that government should not play a role in direct economic development,” he told the Beast. “Corporate welfare is still welfare.”
“Any time the government gets involved in this type of corporate welfare—picking winners and losers—all kinds of problems seem to crop up,” he continued. “Government should instead get out of the way and let the free market function the way it is intended.”
These charges of corporate welfare-mongering could be particularly politically troublesome for Walker, given that the Koch Brothers have made opposition to cronyism a key requirement for any candidates they consider supporting.
So Walker hasn’t gotten much cover from conservatives on the WEDC question. And, naturally, his progressive foes have been even more pointed in their criticism.
“The bottom line is that Scott Walker said when he came into office, this is my blueprint for making good on my promise to create 250,000 jobs,” said Scot Ross, who helms the progressive group One Wisconsin Now. “And there were a lot of voices out there at the time—mostly on the Democratic or liberal side—saying, this is going to be transparent, and it’s just going to be a slush fund for Walker’s donors. Not only has been that, but it hasn’t created jobs either.”
“It’s an ATM machine if you’re a Walker donor,” he added.
Walker and his team have stood firmly behind WEDC. This month, the governor traveled to Canada with WEDC officials to pitch industry leaders on doing more business with Wisconsin. Maley, the agency’s spokesman, provided The Daily Beast with a list of its current initiatives, including a $300,000 grant for veteran-owned tech startups; $200,000 each to the African-American, Hmong, Native American, and Hispanic Chambers of Commerce; and community grants of up to $1 million to revitalize abandoned industrial sites. And, most importantly, Walker’s team argues that WEDC is a major improvement over the state’s now-defunct Department of Commerce.
But WEDC still might be the trickiest thing for Walker to explain on the campaign trail. Walker discusses “big, bold reforms” whenever he talks with Republican primary voters, but incremental changes—like the kind that WEDC has brought about—are tougher to sell and easier to get in trouble over, especially when your ideological allies object to them.