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Accountability vital in subsidies for job creation

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Shannon Nelson
January 6, 2011

Gov. Scott Walker takes office having made three chief promises: More transparent government spending, greater accountability to prevent waste, and more jobs. Especially in hard economic times, these undertakings are interconnected.


Every public dollar wasted could have been used to make Wisconsin a more successful place to grow jobs and must otherwise be shouldered by taxpayers. Transparency, meanwhile, remains the best way to make programs more efficient and accountable to the public.


Unfortunately, Walkerís first major job-creation proposal could reduce accountability for spending: replacing the Commerce Department with a quasi-public board that would hand out subsidies. Walker recently announced that his proposed agency would abide by state ethics rules and open records and meetings laws, but without details about how this public-private entity would handle issues such as performance reporting and conflicts of interest, initial plans are causes for concern.


Walkerís proposal is loosely based on Indianaís Economic Development Corp. It would hand out direct grants funded chiefly by the public purse. The corporationís board of directors would be populated primarily by representatives from individual businesses and would have the sole authority to decide which companies would receive subsidies. Board members would be empowered to report themselves on the effectiveness of their programs and to manage use of taxpayer subsidies with limited oversight and accountability.


This is not the way to ensure that Wisconsin gets the best bang for its buck with subsidy dollars. If public dollars are going to be handed out to private entities, there should be the highest standards of public disclosure. Indianaís Economic Development Corp. provides its own cautionary tale. The agency claimed to have helped create 115,000 jobs in the state, but when asked to produce information confirming that figure, the agency declined. Further investigation showed that the agency had inflated those statistics.


The good news for Wisconsin is that some key pieces are already in place to ensure top-level transparency for subsidy programs. A 2007 law requires companies receiving subsidies to report the number of jobs promised and actually created. The Commerce Department posts available information online, enabling taxpayers to evaluate which subsidies might be good investments and which dollars should be spent elsewhere. However, without a mechanism to ensure compliance, some companies fail to report this information.


As Gov. Walker creates a new subsidy board, not only should it abide by ethics guidelines, open-records laws, and current reporting standards, its dealings must have unprecedented openness and strong public protections. Rules should exclude companies from making decisions to hand out taxpayer-financed subsidies for their own related industries or affiliates. All subsidies should require full reporting about the jobs promised and delivered. Regular independent audits should guarantee the accuracy of job-promise reports.


Further, neighboring states including Minnesota and Illinois already have programs to recapture public subsidies when recipients donít deliver on promises. Wisconsin taxpayers deserve the same protections.


Itís good that the new governor is looking to improve how Wisconsin spends economic development dollars. Thereís a lot of room for improvement.


Shannon Nelson is program associate for WISPIRG, the Wisconsin Public Interest Research Group, 122 State St., Suite 309, Madison, WI 53703; phone (608) 268-1656; e-mail snelson@wispirg.org.

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