Over the course of the last month, Wisconsin Gov. Scott Walker has been scrambling to do damage control in the wake of revelations about one of his signature economic programs.
In the name of creating jobs, this trademark initiative of the potential Republican presidential candidate handed hundreds of millions of dollars in taxpayer money to businesses across the state. But Walker’s administration apparently neglected to check if these companies actually hired any new employees as a result.
Wisconsinites have been understandably roiled — but this is not a problem that’s confined to their state.
Across the country, “economic development” programs in states such as Texas, Florida, Michigan and New York are handing out public resources to private hands in the name of spurring “job creators.” Astoundingly, they often fail to uphold even the most minimal level of accountability and oversight over how this public money is used.
The solution to this problem is simple: When corporations fail to deliver on job creation promises, they should be forced to pay back the money.
Elected officials need to enforce rules that not only track whether private beneficiaries of subsidies and tax abatements follow through on their end of the deal, but allow the public to reclaim funds that have been misused.
In 2011, under the direction of Walker, Wisconsin created a new economic development agency called the Wisconsin Economic Development Corporation (WEDC). Within its first year, it awarded $41.3 million in grants, $20.5 million in loansand $110.8 million in tax credits to private entities, all for the purpose of “nurtur[ing] … business growth and job creation.”
Walker’s WEDC set job creation targets — but did little to ensure that they were met. Far short of the 250,000 jobs that he promised to create, Walker could only report 5,840 new jobs from the WEDC after its first two years, according to the Center for Media and Democracy.
Wisconsin mandates that companies receiving public funds must disclose payroll records and other information proving they have met certain wage, healthcare and job-creation requirements. But according to the non-partisan Legislative Audit Bureau, that didn’t stop Walker from transferring public resources to private coffers with little more than a wink and a nod to ensure that the state’s residents actually got anything out of it.
When a business fails to live up to its obligations, the public should get their money back.
What is more, the amount of cash available for the WEDC to carelessly dispense has grown. By the end of 2013, the state had awarded over $970 million in tax credits, loans and grants, according to the watchdog group One Wisconsin Now. That same year, the Wisconsin State Journal found that “employees of the Wisconsin Economic Development Corp … made a number of questionable and unexplained purchases, including season tickets to UW-Madison football games and iTunes gift cards, and contracted for services without conducting open and competitive selection processes.”
It will shock no one to learn that some of the leaders who have been top recipients of WEDC funds were major donors to Walker’s reelection campaign.
Though Walker’s handling of state funds is particularly egregious, throughout the country — and across party lines — the preferred economic development strategy of many local and state leaders has been to hand over public money to private corporations on the grounds that these groups will create jobs. And a startling number of these initiatives fail to follow the most basic procedures of accountability and oversight.
In Detroit, for example, the City Council granted petroleum conglomerate Marathon Oil a $175 million tax break in 2007 in exchange for locating an expansion project in town. Seven years later, the company had hired just 15 people.
Democrats are culpable as well as Republicans. In New York under Gov. Andrew Cuomo, $7 billion has been spent each year on low- to no-accountability job creation programs, according to the Alliance for a Greater New York, a labor-community partnership.
One such program sponsors New York’s Industrial Development Agencies (IDAs). According to watchdogs, New York’s IDAs have consistently failed to produce new jobs: “[o]f the 4,486 current IDA projects, 1,161 of them do not promise to create a single job,” read one report.
“For the projects that do aim to create jobs,” the report continued, “56% of these IDA projects failed to meet their job creation targets in 2011.” Even worse, businesses subsidized through many of New York’s other programs do not have to disclose similar data, making evaluations of their effectiveness impossible.
A first step to solving this problem is requiring employers to submit evidence that they have actually created jobs — and, if so, disclose whether these jobs provide decent wages and benefits. States awarding subsidies should then make that information available to the public. According to the watchdog group Good Jobs First, “Only about one in four major state development programs reports on the number of jobs actually created or workers trained, and only one in eleven reports on wages actually paid.”
Reporting is not enough. When a business fails to live up to its obligations, the public should get their money back. These so-called “clawback” provisions provide a legal mechanism by which companies who fail to produce returns on public investments are required to return that money to the state.
The good news for Wisconsin is that it already has clawback provisions on the books. Now it’s time for them to be enforced. Walker might wince at the prospect of having to ask his friends in the business world to return taxpayers’ money, but his role as a public steward demands it. As long as Walker continues to view accountability as optional, his state has little hope of putting an end to a scam that, sadly, is all too common throughout the country.