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What Do We Know About Economic Development in Wisconsin?

 q       It is needed.  Since January 2001, Wisconsin has lost over 48,000 manufacturing jobs.  Average wages in Wisconsin are lower than surrounding states.   The fastest growing sector of the economy is retail – which provides low wage, low benefit jobs.  And, many workers who begin in jobs that pay below the poverty level, stay there.

 q       Not enough about what is happening… it’s difficult to determine the total amount of taxpayer-financed subsides to private firms, or the success or failure of these efforts:

    • No unified economic development Budget—we do not have an accurate list of all the programs or agencies that provide subsidies to private companies
    • Little reporting required of subsidy outcomes
    • Little collaboration among state and local economic development actors

 q       Not much about what the results have been.  Companies that have received subsidies have not been required to report on results.  We do not know if jobs have been created, much less if they are family-supporting  jobs.

  How Much Money has Wisconsin spent on Subsides?

  •  A couple hundred million up to $1.2 billion per year of grants, loans, tax abatements, and bonding issues: expenditures of public money to private firms.

  The Solution: SARA (Subsidy Accountability and Reporting Act)

This bill, recently introduced in the State Legislature, would help Wisconsin develop a sound, strategic economic development policy aimed at creating good jobs.

The Subsidy Accountability and Reporting Act (SARA) bill requires state agencies to:

  • Collect information such uses of public resources
  • Negotiate agreements with each company specifying what standards the company will meet
  • Report on the results to determine if the public purposes have been met

 Basic elements of the bill are:

  • Business subsidies should be subject to reporting requirements that are grants in excess of $25,000 in value and loans or loan guarantees in excess of $75,000.
  • Every proposed business subsidy requires a public hearing conducted at least 30 days prior to the awarding of the subsidy.

 Agencies that grant business subsides must:

  • Create written standards for the awarding of subsides. Subsides may not be granted in the absence of such standards
  • Enter into written agreements with the recipient of the subsidy
  • Report subsidy activity annually to Legislative Audit Bureau

 Written agreements with recipients of business subsides must:

  • Identify measurable milestones
  • Require annual reporting by a recipient on progress toward accomplishing milestones
  • Identify consequences, if any, for failure to meet milestones
  • Require a commitment to maintain operations in Wisconsin for at least five years

 Subject: LRB 1129/2

In this era of budget deficits and rising unemployment, it is critical that the state government understands how it is using its economic development funds and what results are occurring. This bill mandates state agencies that provide subsides to businesses have clear criteria for making those subsides and report on the results of those subsides.

Wisconsin Citizen Action believe that public money used to support private companies should have a public purpose such as the creation of high wage/high benefit jobs. This will help prevent the state paying twice. Some companies in Wisconsin have received subsides although employees are paid minimum wage and receive no health insurance. Many of these workers are eligible for BadgerCare and other assistance.

There should also be accountability for results. Currently, although numerous agencies and programs provide business subsides, there is virtually no reporting on actual results. If companies fail to produce the agreed upon goals, then there should be consequences.

This bill will enable Wisconsin to examine its investments in private companies to achieve desired goals. It will give the legislature an accurate view of how much is spent by multiple agencies to promote economic development. It will also allow communities where those companies are or will operate to have a voice in this process.

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