WEDC: Walker’s Expensive Corporate Welfare Failure

Eaton Corporation, a company awarded money by Scott Walker’s Wisconsin Economic Development Corporation (WEDC), has announced the upcoming layoff of 93 workers at it’s Watertown plant. The company previously faced criticism when it outsourced jobs to foreign countries shortly after receiving millions from WEDC.

Eaton is just one example of the failures that have plagued Walker’s WEDC — including the governor’s beloved Kohl’s — since its start. Here’s a look at the worst hits of Walker’s flagship program:

WEDC: Walker’s Expensive Corporate Welfare Failure

Walker campaigned on a platform that included transitioning the state’s commerce department to a privatized Wisconsin Economic Development Corporation (WEDC), which he argued would allow the state’s job creation efforts to be “more nimble,” helping achieve his goal of creating 250,000 jobs in his first term – a goal at which he ultimately failed. Instead, the program under-performed on all fronts, managing to create a large number of controversies and embarrassing public failures.

  • By its own metrics, WEDC failed to achieve its own goals for job creation, impacting only 37,313 of its 50,000 jobs goal. WEDC only created 10,363 jobs by 2015.
  • An external auditing firm found that WEDC failed to keep track of millions of dollars in taxpayer money it loaned to corporations. WEDC reduced its bad loans by writing them off, providing giveaways to these corporations at taxpayers’ expense.
  • WEDC provided incentives to at least three companies that then outsourced Wisconsin jobs. WEDC also provided benefits to a company that helps other businesses outsource.
  • WEDC was found to have spent $9.6 million in federal block grants in violation of federal law. When the organization was informed of the impropriety, Walker’s administration waited eight months to inform WEDC’s oversight board.
  • WEDC’s job creation efforts were concentrated in Republican areas, with Republican assembly districts seeing twice the projected job growth as Democratic districts.

WEDC Was An Expensive Failure

Failed at job Creation

Between FY2012 And Q1 2015 WEDC Actual Job Creation Was 10,363 Jobs. [WEDC, Q1 2015]

Capital Times: In Fiscal Year 2012, The WEDC Set A Goal Of Creating Or Retaining 50,000 Jobs. According to The Capital Times, “In October 2011 the WEDC governing board chaired by Walker approved an operations plan that set the agency a goal of creating or retaining 50,000 jobs in Fiscal Year 2012. The number was bold, but at 50,000 a year, WEDC would be on track to creating a robust number of jobs as Walker stood for re-election in 2014.” [Capital Times, 6/11/14]

Capital Times: In 2013, The WEDC “Told The Legislature And The Public It Had ‘Impacted’ 37,313 Jobs.” According to The Capital Times, “Nowhere in its 2012 annual report does WEDC say how many jobs were actually created that year, but its official database documents only 1,044 ‘actual’ jobs reported by companies that year. (Note: For 2012 and 2013, CMD excluded jobs that were reported to be created before financial aid was received from WEDC.) At the end of 2013, WEDC told the Legislature and the public it had ‘impacted’ 37,313 jobs. No actuals were included in the report to the Legislature, but its official database includes documentation for 4,796 ‘actual’ jobs.” [Capital Times, 6/11/14]

Incentives To Outsourcers

WEDC Provided Incentives To “Global Outsourcing Leader” RR Donnelley

December 12, 2013: WEDC Awarded RR Donnelley  $140,000 In Incentives. According to WEDC, on December 122013, RR Donnelley was awarded $140,000 in incentives from WEDC. The amount was awarded for the creation of 75 jobs in Monroe, WI. Only seven jobs were actually created. [WEDC, April 2014]

RR Donnelley Was A Global Leader In Offshore Outsourcing Services For United States Companies

RR Donnelley Press Release: “RR Donnelley Again Ranked Among Leaders In The Global Outsourcing 100” [Benzinga.Com, 8/13/12]

Eaton And Plexus

“At Least Two Companies That Received Money From Gov. Scott Walker’s Chief Economic Development Agency Later Outsourced Jobs To Foreign Countries.” According to the Daily Jefferson County Union, “At least two companies that received money from Gov. Scott Walker’s chief economic development agency later outsourced jobs to foreign countries. WKOW-TV reported Wednesday that one of the companies received a second award from the Wisconsin Economic Development Corporation after the fact. Both Eaton Corporation and Plexus Corporation received millions of dollars in financial awards from WEDC, only to later lay off workers whose jobs were taken by employees at the companies’ foreign facilities.” [Daily Jefferson County Union, 7/10/14]

“Eaton Corporation And Plexus Corporation Received Millions Of Dollars In Financial Awards From WEDC, Only To Later Lay Off Workers Whose Jobs Were Taken By Employees At The Companies’ Foreign Facilities.” According to the Daily Jefferson County Union, “At least two companies that received money from Gov. Scott Walker’s chief economic development agency later outsourced jobs to foreign countries. WKOW-TV reportedWednesday that one of the companies received a second award from the Wisconsin Economic Development Corporation after the fact. Both Eaton Corporation and Plexus Corporation received millions of dollars in financial awards from WEDC, only to later lay off workers whose jobs were taken by employees at the companies’ foreign facilities.” [Daily Jefferson County Union, 7/10/14]

Kohl’s

In July 2012, Kohl’s Secured Up To $62.5 Million In State Tax Credits To Keep Its Headquarters In Menomonee Falls, And Then In August, Notified The Federal Government It Would Cut 67 Jobs And Outsource Its Milwaukee-Based Accounts Payable And Sales Audit Functions To India. According to the Chippewa Herald, “In July 2012, Kohl ‘s Department Stores secured up to $62.5 million in state tax credits to keep its headquarters in Menomonee Falls. Three weeks later, the company began threatening layoffs, according to the U.S. Labor Department. Then in August 2013, the company notified the federal government it would be cutting 67 jobs and outsourcing its Milwaukee-based accounts payable and sales audit functions to India.” [Chippewa Herald, 8/3/14]

HUD Funds

WEDC Was Accused By The U.S. Department Of Housing And Urban Development Of Failing To Follow Federal Law And Its Own Controls In The Awarding Of Development Aid. According to Wisconsin State Journal, “A federal agency ordered the state to improve the way it handles economic development money from the U.S. Department of Housing and Urban Development. In a strongly worded Aug. 12 letter to Department of Administration Secretary Mike Huebsch, federal officials said two state agencies failed to follow federal law and their own policies in issuing economic development grants. […] The criticism targets both the Department of Administration, which oversees the CDBG economic development program, and the public-private Wisconsin Economic Development Corporation, created by Gov. Scott Walker, that runs it.” [Wisconsin State Journal, 9/26/12]

WEDC Distributed $9.6 Million In Federal Block Grants, Despite Not Having Authority To Do So.  According to the Milwaukee Journal Sentinel, “From the time it was created in July 2011 until March, the economic development corporation administered $9.6 million in federal block grants in violation of federal law because the WEDC didn’t have the right agreement in place with the state.” [Milwaukee Journal Sentinel, 6/26/12]

Walker And WEDC Officials Did Not Reveal The Letter To The WEDC Board

Walker And WEDC Did Not Reveal The Allegations To The WEDC Board For Eight Months. According to Milwaukee Journal Sentinel, “Gov. Scott Walker did not tell the state’s economic development board about concerns raised by federal officials that for eight months the state’s flagship jobs agency spent nearly $10 million without legal authority. A director for the U.S. Housing and Urban Development Department detailed the mishandling of public funds in May and August letters to the governor’s administration secretary, Mike Huebsch. Huebsch responded in a Sept. 12 letter, but the matter was not broached with the board of the Wisconsin Economic Development Corp. when it met eight days later.” [Milwaukee Journal Sentinel, 9/27/12]

Job Creation Programs Favored Republican Areas

Citizen Action: WEDC Job Impact Almost Twice As High In Republican Districts Compared To Democratic Districts.  According to an opinion by Kevin Kane and Robert Kraig of Citizen Action in the La Crosse Tribune, “However, this data reveals patterns of unfairness in the distribution of job creation efforts. There are large geographic variations in the jobs impact WEDC claims, and Republican legislative districts have almost twice as many jobs projected as Democratic districts. WEDC is claiming three times as many jobs impacted per person in wealthy and heavily Republican Waukesha County as in Milwaukee County, or in the entire regions surrounding La Crosse, Eau Claire and Wausau.” [Kevin Kane and Robert Kraig – La Crosse Tribune 4/24/14]

Citizen Action Report: Two Times More WEDC Jobs In Republican Assembly And Assembly Leadership Districts.  According to the Capitol Times, “The February report from Citizen Action says that WEDC projections show nearly two times more WEDC-supported jobs in Republican Assembly districts than in Democratic districts. In addition, Assembly districts of GOP leaders saw even more job creation efforts than average Republican districts. For instance, (now former) Assembly Majority Leader Bill Kramer’s Waukesha district had eight times as many jobs projected by WEDC than the average Republican district. The districts of Assembly Speaker Robin Vos and Joint Finance Committee Co-Chair John Nygren also saw projected jobs at more than the Republican average — 2,469 in Vos’ district and 2,874 in Nygren’s.” [Capitol Times, 3/4/12]

State Senate Districts Were Even More Slanted Towards Republicans. According to the Capitol Times, ““After adjusting for underlying districts, the average number of jobs projected in Republican Senate districts is more than twice that of Democratic districts,” the report states.” [Capitol Times, 3/4/12]

Walker Said That The Discrepancy Was Due To More Republicans Than Democrats Being Business Leaders.  According to WXPR, Walker said “completely biased and partisan reports.. what you find are similar reports from the Department of Commerce under(former Governor) Jim Doyle. Just because you have a significant number of business leaders more often than not happen to be Republicans vs. Democrats. We measure success not by party affiliation. We measure success by whether those employers are creating jobs…” [WXPR, 2/28/14]

WEDC Failed to Properly Track Loans

No One Had Been Put In Charge Of Tracking $69 Million In Department Of Commerce Loans When WEDC Was Created. According to The Associated Press State & Local Wire, “The state’s quasi-public economic development agency lost track of $69 million in loans to businesses because no one was in charge of keeping tabs on that money, members of the board that oversees the agency were told Friday. Somehow, when the Wisconsin Economic Development Corp. was created last year, no one was put in charge of keeping track of the loans that had been issued by its predecessor agency the Commerce Department, said WEDC’s second-in-command Ryan Murray.” [The Associated Press State & Local Wire, 10/19/12]

For More Than A Year, WEDC  Failed To Track Whether Businesses Were Repaying Taxpayer Backed Loans; Was Owed $8 Million Past Due By 99 Businesses.  According to The Milwaukee Journal Sentinel, “For more than a year, the state’s flagship jobs agency failed to track whether businesses are repaying loans from state taxpayers – leaving the public in the dark about how much they are owed on a total of $8 million in past-due loans to 99 businesses. The blunder – only the latest in a whole series of problems at the Wisconsin Economic Development Corp. – began at nearly the same time as the quasi-public authority championed by Gov. Scott Walker took over for the state’s previous jobs agency.” [Milwaukee Journal Sentinel, 10/18/12]

WEDC Sent A Memo To The Board Claiming “Serious” But “Fixable” Problems Had Been Found In Failing To Track $56 Million In Loans. According to The Associated Press State & Local Wire, “Serious but fixable problems have been uncovered in Wisconsin’s 17-month-old quasi-public economic development agency that failed to carefully track $56 million in loans to businesses, leaders of the agency said in a Friday memo. The memo to Wisconsin Economic Development Corp. board members was a status update on the agency’s efforts to address problems that led to not systematically tracking the loans. Borrowers have fallen behind on payments on loans now worth $12.1 million, the agency said Friday. While no evidence of any misconduct has been uncovered, interim WEDC Secretary Reed Hall and deputy secretary Ryan Murray said they did find isolated problems related to internal documentation and reporting processes. ‘While serious, these problems are fixable and should not discredit the many successes WEDC has achieved,’ Hall and Murray said in the memo.” [The Associated Press State & Local Wire, 11/30/12]

Wedc Wrote Off Bad Loans Providing No Benefit To Taxpayers

Audit Of WEDC Showed That Decline In Number Of Bad Loans Was Due To Being Written Off Rather Than Salvaged. According to the Milwaukee Journal Sentinel, “The bad loans held by the state’s top jobs agency have declined in value by nearly $8 million, though much of the decrease was from loans being written off rather than salvaged, a new audit shows. The report released Friday by the Legislative Audit Bureau looked at the loans held by the Wisconsin Economic Development Corp. that taxpayers made to Wisconsin companies in an effort to create jobs.” [Milwaukee Journal Sentinel, 9/19/14]

  • Writing-Off Was Just A “Bureaucratic Shift,”  Not A Gain For Taxpayers. According to the Milwaukee Journal Sentinel, “So by itself that change is just a bureaucratic shuffle, not a gain for taxpayers..” [Milwaukee Journal Sentinel, 9/20/14]
  • Of $7.7 Million Decrease, $3.2 Million Came From Written Off Loans. According to the Milwaukee Journal Sentinel, “Of the $7.7 million decrease in troubled loans held by WEDC, the biggest chunk — $3.2 million — came from loans that were written off by WEDC because they were 90 days past due.” 9/19/14]