Plan would rein in state economic development programs
Lawmakers crafting bill after critical audit
Milwaukee Journal Sentinel, Aug. 29, 2006
Madison - Lawmakers said Tuesday that they will draft a bill to consolidate economic development efforts and to improve monitoring of them, after a state audit found that the programs are poorly tracked and sometimes duplicative.
State Sen. Carol Roessler (R-Oshkosh), co-chairwoman of the Joint Audit Committee, said at a hearing Tuesday that the committee would introduce a bill early next year that would eliminate some of the state's 152 economic development programs. The measure would also create a single point of contact for businesses that want information on grants, loans and tax credits, and require a routine report that details the successes and failures of all of the state's job-creation efforts.
The audit found that it was often difficult to determine whether the state's economic development programs were succeeding. It also said the programs were overseen by eight state agencies, making it difficult for businesses to navigate the bureaucracy.
Lawmakers learned, however, that nothing can be done about the controversial Certified Capital Companies program, also known as CAPCO, which authorized $50 million in tax credits.
Released this month, the audit found that $29 million had already been claimed but that the program had generated just 316 jobs. That's a cost of more than $90,000 a job for the credits claimed so far, significantly more than the expense of other job-creation programs. Auditors on Tuesday said there is no way to prevent the remaining $21 million in tax credits from being cashed.
Among the 32 legislators sponsoring the bipartisan bill to create the program in 1997 were Roessler; Sen. Scott Fitzgerald (R-Juneau), who sits on the Audit Committee and is co-chairman of the Joint Finance Committee; then-Sen. Gwen Moore (D-Milwaukee), now a U.S. representative; and then-Rep. Mark Green (R-Green Bay), who is now in the U.S. House and running for governor.
Green issued an economic development plan Monday that included an expansion of tax credits and the replacement of the Department of Commerce with a board that would be headed by the governor.
Green spokesman Luke Punzenberger said Tuesday that Green supported the certified capital program at the time because he thought it would create jobs in promising fields.
"Obviously, he would have liked to have seen a better performance, but hindsight is 20-20," he said.
First comprehensive audit
The audit is the first comprehensive accounting of the state's economic development programs, which cost $152.8 million from mid-2003 to mid-2005.
Roessler said the committee would introduce legislation to fix some of the problems identified in the audit after a follow-up hearing in February.
Sen. Robert Cowles (R-Green Bay) said the program was a bad deal for taxpayers.
"It seems obvious to me this CAPCO program is just a total waste of money," he said.
The program, which started in 1999, gave $50 million in tax credits to insurance companies that invest in Wisconsin businesses through venture capital firms. All of the credits were awarded early in the program; credits worth $29 million have been claimed, and another $21 million can be claimed through 2009.
While the (CAPCO) audit found the credits generated 316 new jobs at a cost of more than $90,000 apiece, other programs created jobs for $556 to $22,727 each. Critics have called the program inefficient because the investments are funneled through the insurance companies.
The Department of Commerce, which administers the program, is auditing it separately; the audit is expected to be done early next year.
John Neis, managing director of Venture Investors, said the program was successful and that auditors were not taking into account the full effects of the program. His firm is one of three venture capital companies making the investments.
More time sought
More time must pass before the program can be judged because start-up companies often struggle for years before they generate new jobs, he said.
"There's a lag in the explosive job growth," Neis said Tuesday.
In written testimony supplied to the committee, he noted that Madison-based TomoTherapy Inc., a recipient of the investments, had 175 employees when the fieldwork for the audit was completed but that it now has 424 employees and is expected to have more than 1,000 in a few years. Those jobs pay more than twice the statewide average, he added.
But Commerce Secretary Mary Burke said in an interview that TomoTherapy and similar companies likely would have received state aid under other programs.
"I think there are better uses of state funds," she said of the program, which was formed years before she became secretary. " . . . I personally don't support any continuation of it. I think we have other programs that are very effective. That's not to say that money wasn't well-spent."
Burke said she supported consolidating or eliminating some economic development programs, noting that Democratic Gov. Jim Doyle tried unsuccessfully to fold eight programs into one in his last budget. But Burke cautioned the committee not to go too far, saying the state has to offer an array of programs to meet the needs of about 150,000 businesses in the state.
"I would hate to see a knee-jerk reaction," she said.
She noted in an interview that lawmakers created five new programs in the past legislative session alone.