Progressive Thinking

There are at least four different deficits in the state budget that is working its way through Wisconsin's legislature. Wisconsin is lagging the nation in so many respects. All these deficits certainly aren’t going to help matters any.

MADISON - Wisconsin lawmakers started the process of building a new state budget in a substantial hole. They insisted their predecessors dug it, but in truth the hole was of their own making. When they are done, the books will be made to appear balanced on the surface for the time being, even though a sizeable underlying “structural deficit” will remain.

The ongoing inability or unwillingness of budget writers to truly put our state government in the position of taking in as much as it spends is a significant problem, but it represents only one of the budget deficits we will have in Wisconsin.

In addition to leaving a financial deficit, the proposed budget as it stands now suffers from a common sense deficit as well. It not only continues to fund state programs that are not working, it throws good money after bad by expanding those failing programs. The private school voucher program has been around for a quarter-century now, and has never delivered on its promises. After more than two decades the program has not boosted student achievement as its supporters said it would. Voucher students do no better than public school students, and by some measures they do worse. Yet this budget takes more money away from public schools to fund further expansion of the voucher program.

The Wisconsin Economic Development Corporation established back in 2011 has been a train wreck since its inception. But despite fresh evidence that WEDC is playing fast and loose with taxpayer money but is unable to document that its actions produce much of any actual economic development, the budget includes a $55 million increase in state funding for the agency.

There also is a pronounced common good deficit in this budget. It seeks to privatize pretty much everything, from human services and state parks to local schools and the state university system. It does this despite the fact that human services experts in other states and local communities across the country “are finding that turning over these programs to private contractors not only fails to achieve projected cost savings but also decreases access to these important services,” according to the watchdog group In the Public Interest. If approved as written, the budget will make parks more expensive to the public and will likely discourage tourism. Top business leaders warn the planned cuts to the university system will hurt Wisconsin’s economy.

Among the many deficits in this budget is a distinct vision deficit. Instead of working to make higher education as affordable for future generations as past generations made it for us, lawmakers have confined themselves to debating only whether college spending should be cut by a little or a lot and whether student tuition should be kept at its stratospherically high current levels or allowed to go up even more. No thought is being given to closing the digital divide, which is critical especially to rural development and a key to dealing with growing inequality. Lawmakers aren’t even showing any interest in thinking creatively about how to avoid deep cuts without raising taxes.

Wisconsin is lagging the nation in so many respects, as our neighbors to the west never hesitate to remind us. All these deficits certainly aren’t going to help matters any.

MADISON - Imagine you took a pay cut each of the last four years. Now suppose you were pulled into your boss’s office and told that you wouldn’t get a raise this year, even though the company is growing and seeing record profits. Would that seem fair?

Well, that’s the position our local schools are in after years of historic cuts. Despite spending billions more, the current Republican budget continues to roll back state funding for our schools to 2010 levels.

While avoiding another round of cuts is certainly important, is that really a victory? Should we be satisfied with the broken status quo of school funding that forces communities across our state to go to referendum year after year?

Democrats believe that education must be our top budget priority. That means putting the needs of children and our schools ahead of tax breaks for the wealthy and giveaways to special interests.

We know the funding is available. It has been for years. But Republicans made the decision to prioritize tax breaks for special interests and the wealthy while forcing our schools to do more with less.

To fully restore the cuts our schools have seen over the past four years, we need to invest an additional $200 per student above what Gov. Walker and Republicans have proposed. In the grand scheme of multi-billion dollar special interest tax giveaways, surely we can find $200 per student.

If budgets are about priorities, it’s time we invest in our children first and give them the same shot at the American Dream that our parents handed down to us.

Let’s not settle for the broken status quo. Let’s invest in our state and make our schools a shining beacon of opportunity for Wisconsin’s children once again.

On Tuesday, the Legislature will be voting on whether or not to restore the historic funding cuts to our local schools. I encourage everyone to contact your legislative representatives toll-free at 1-800-362-9472 and urge them to support our children by voting for a $200 per pupil increase in school funding.

Anything less than that amount continues the troubling trend of chronic underfunding that has forced larger class sizes, more local referendums and higher property taxes.

800,000 Wisconsin residents carry on average nearly $30,000 in student loans. Republicans more concerned with helping their corporate friends than average families.

MADISON - Republicans who control the Legislature’s Joint Finance Committee blocked passage of an amendment that would have made it possible for thousands of Wisconsin residents to refinance their student loans at lower interest rates.

“It is unfortunate that Republicans controlling the Joint Finance Committee chose to protect the profits of big banks on Wall Street than the financial health of thousands of Wisconsinites who could save real money if they were able to refinance their student loans at lower interest rates,” said senator Dave Hansen (D-Green Bay), author of the Higher Ed/Lower Debt bill that would create a student loan refinancing program.

Currently 815,000 Wisconsin residents carry nearly $20 billion in student loan debt with an average student loan debt of $28,000. Research shows that young people with student loan debt are less likely to buy a home or new car while older people with student loan debt are less likely to be able to send their children to college or save for their own retirement.

“We had a chance today to help thousands of people refinance their student loans to lower their cost like you can already do for a home or auto loan. Helping them lower their interest rates makes it possible for them to buy new homes and cars and help grow our economy. And by doing that we can help stop the “brain drain” too by giving college graduates a very strong incentive to stay here rather than move to another state.”

“Unfortunately, the Republican members of the Joint Finance Committee appear more concerned with helping their corporate friends rather than helping average families.”

Sen. Kathleen Vinehout writes about the latest audit of the Wisconsin Economic Development Corporation (WEDC). The Legislative Audit Bureau reports again on the failure of WEDC to follow state law and its own policies when awarding grants, loans and tax credits to businesses and to verify whether or not promised jobs were actually created.

MADISON - “When do we return the economic development initiative and the checkbook to the control of a state agency” John Dunn of Mauston asked in a letter to Legislators. “The WEDC has again failed to follow state law and its own policies in awarding taxpayer-funded incentives to state companies. We need accountability to taxpayers.”

Not following the law, and not acting in a transparent and accountable way is a frequent criticism of the state’s economic development operations.

The Wisconsin Economic Development Corporation (WEDC), created in 2011 as an independent authority, fell under criticism again with the recent release of another audit showing that WEDC failed to follow state laws and its own policies when awarding grants, loans and tax credits to businesses and failed to independently verify whether or not promised jobs were actually created.

In 2013, the Legislative Audit Bureau (LAB) found WEDC did not have policies to oversee, for example, the multi-million-dollar economic development grant and loan programs. In October 2013, WEDC officials reported to our Legislative Audit Committee they had addressed the problem.

But two years later, the new audit found while WEDC established policies, they weren’t following the grant and loan policies. For example, loans can be “forgivable” – meaning they aren’t paid back – only in “extraordinary circumstances”. But the audit found in FY 2013-14 two-thirds of the loans in one program were determined to be “forgivable”. In another case a taxpayer-subsidized loan was “forgiven” to a company unlikely to create full-time jobs – a requirement of the loan program.

Similar circumstances existed in the state’s business tax credit programs. Credits are awarded to companies to offset taxes owed to the state. In some cases tax credits are “refundable” meaning if the company owes less in taxes than the credit, the state “refunds” or sends taxpayer money to the company.

Auditors found examples of officials not following established rules for tax credits, like not determining if the project would happen without the tax credit; awarding credits without determining if the company’s tax liability fell within the law limiting credits to 125% of the companies tax liability; and instances of awards made without required financial information.

State law also requires that a portion of tax credits must go to rural and small businesses. In July 2014, the WEDC board revised its own policies to eliminate this requirement – in direct conflict with the state law.

Several of these problems were a repeat of a previous audit.

In another case WEDC awarded tax credits to an Illinois company under the Jobs Tax Credit program in conflict with state law that required activities funded by this program to occur in Wisconsin. Auditors wrote, “The business would be awarded tax credits in amounts based on the wages they paid to their employees while working in Illinois, and such amount would increase the longer the jobs remained in Illinois.” As of December, Wisconsin awarded two Illinois businesses $53,678 in tax credits.

Enterprise Zone and Jobs Tax Credits are refundable and they cost us a lot. The nonpartisan Legislative Fiscal Bureau reported the cost of just these two programs was $42 million last year. In another report, the LFB noted that Wisconsin contracted with companies for $352.5 million in tax credits over three years.

Does the substantial state money given to these companies result in any economic activity that would not already exist? This question remains unanswered with the most recent audit.

State law requires WEDC to verify jobs created, retained, and if contractually specified wage requirements are met. A previous audit found WEDC did not conduct verification. This recent audit found that even during site visits to companies, officials failed to review payroll records to independently verify jobs. Without information on wages and jobs, it’s impossible to know if the hundreds of millions in state dollars going to companies accomplished anything.

All of this adds up to one inescapable conclusion: WEDC is a failure. With Wisconsin job growth in the lower third among all states, it is time we reevaluate our state economic development policies. The first step must be putting hundreds of millions in state economic development expenses once again under the accountability and transparency rules of the rest of state government.

STATEWIDE - After the release of yet another devastating state audit showing that the Wisconsin Economic Development Corporation (WEDC) has failed to document that companies receiving grants, tax credits, and loans are actually creating jobs, Governor Walker abruptly announced that he is pulling the plug on his controversial plan to merge the troubled agency with the Wisconsin Housing and Economic Development Authority (WHEDA).

While the cancellation of the proposed merger is welcome news for economic opportunity advocates, it fails to address the fundamental problem. WEDC is not just badly mismanaged, it is a flawed model. The notion that our scarce job creation resources should be doled out to business without real accountability is one of the worst ideas in modern Wisconsin legislative history.

The failure to close loopholes that allow companies receiving WEDC support to outsource Wisconsin jobs is only the tip of the iceberg. Wisconsin job growth has lagged behind the rest of the nation, and even worse the majority of jobs generated have been in low income occupations where poverty wages predominate.

The structure of WEDC itself, which by design has less accountability and transparency than a traditional public agency, raises questions about undue influence, further undermining public’s trust in their own government. In an environment where massive corporate election expenditures have been legalized, the public deserves ironclad guarantees that the process of handing out public economic development dollars is above politics.

The only permanent solution that can restore public confidence is to disband WEDC, and create a fully accountable department. The new department should focus its resources on creating the maximum number of family supporting jobs, not poverty jobs, and should place a special emphasis on areas with the greatest shortage of good jobs. There should be clear publicly known benchmarks for any company receiving assistance, a transparent process fully insulated from political considerations, and clawbacks from companies that fail to create the family supporting jobs that were promised. It should adopt Senator Hansen’s proposal to stop providing funds to companies engaged in outsourcing of jobs. It should also cease WEDC’s failed strategy of wasting money on poaching jobs from neighboring states, rather than investing in new economic opportunity.

Given recent research that shows the WIsconsin middle class has contracted more than any state in the country, it is critical that Wisconsin create an effective public agency that can make real progress on opening opportunity to more Wisconsin families.

“What is good for CEOs is not necessarily good for workers. Handing over our state’s economic policies to multinational corporations engaged in outsourcing and converting middle class jobs into poverty wage jobs is driving Wisconsin’s economy into the ground,” said Robert Kraig, Executive Director of Citizen Action of Wisconsin. “The only way we can halt the decline of the middle class, and expand opportunity to all those who are currently shut out, is to make creating good family supporting jobs the singular purpose of Wisconsin economic policy. No large corporation or CEO has any rightful claim on public dollars, unless they are in turn expanding real economic opportunity for Wisconsin workers.”