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Walker Distances Himself From Alleged Mismanaged Business Subsidies

Wisconsin governor and potential GOP presidential candidate Scott Walker is facing criticism over alleged mismanagement at an economic development agency he helped create.

The Wisconsin Economic Development Corp (WEDC) was intended to create jobs by offering incentives for businesses to relocate to or expand operations in Wisconsin, but a recent report alleges that the organization has not always been diligent about documenting the jobs created through the deals, according to Bloomberg.

Walker proposed the WEDC in 2011, just three days after taking office, and Republican lawmakers subsequently created the semi-public agency as a “larger, more flexible” alternative to the Department of Commerce, which had previously been responsible for providing economic development incentives to businesses.

However, a report released earlier this month by Wisconsin’s Legislative Audit Bureau (LAB) claims that the WEDC “did not consistently comply” with either its own policies or statutory requirements in overseeing the projects that it subsidized.

Although the WEDC is not technically a state agency, it is funded almost entirely with taxpayer dollars, and in FY 2013-14 the organization administered 29 programs that awarded slightly more than $150 million in grants, loans, tax credits, and other assistance to businesses. (RELATED: States May Have to Disclose Business Subsidy Costs)

By law, the WEDC is required to monitor those agreements to ensure that recipients are meeting contractually specified performance measures, and to collect detailed expenditure reports from companies that receive more than $100,000.

Yet according to the LAB report, the WEDC failed to receive about 5 percent of the basic progress reports last year, and collected just seven of the 22 expenditure reports that were required. Despite the delinquency, the report states that the organization “had not regularly sent past-due notices since January 2014.”

Walker’s office responded to the LAB report by saying that while reforms are clearly needed at the WEDC, criticism of the agency itself is little more than a partisan attack. (RELATED: ANTLE: Here Comes Trouble for Scott Walker)

“This is clearly political gamesmanship by legislative Democrats and others more interested in playing politics than on helping improve economic development,” Walker spokeswoman Laurel Patrick told Bloomberg. “It is vital to move forward with meaningful WEDC reforms to help maintain the focus of the organization on the most impactful economic development tools.”

The day that the report was released, Walker abandoned plans to merge the WEDC with the state’s Housing and Economic Development Authority, and about a week later, called for the WEDC’s loan portfolio to be phased out.

One particularly egregious case of WEDC mismanagement, which occurred in 2011 and so was not within the scope of the LAB report, was also revealed last week through an investigation by the Wisconsin State Journal. (RELATED: Scott Walker Has a Micromanagement Problem)

In that instance, the WEDC awarded a $500,000 loan to a Milwaukee construction company at the urging of several Walker aides, including then-Administration Secretary Mike Huebsch and Keith Gilkes, Walker’s former campaign manager who was the governor’s chief of staff at the time.

Public records obtained by the State Journal reveal that the loan was never repaid, and that no jobs were created by the deal, factors that certainly spurred the WEDC’s decision to sue the recipient last year in an effort to reclaim the money.

Huebsch defended his involvement in the deal as a routine part of his job, telling the State Journal that, “As the Secretary of DOA [Department of Administration], I often worked to connect small businesses with resources that could lead to job creation.”

Walker spokeswoman Laurel Patrick likewise claimed that the deal had nothing to do with political favoritism, and that Gov. Walker was never involved in any part of the loan process, despite his role as the agency’s chairman. (RELATED: Latest Scott Walker Scandal: His Spokeswomen are WAY TOO HOT)

Last week, at Walker’s urging, Republican legislators voted to remove him from that role as part of a larger effort to replace elected officials on the WEDC’s board with experts from the private sector.

Follow Peter Fricke on Twitter

 

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