Budget committee votes to keep WEDC surplus

MADISON, Wis. (AP) -- Satisfied that Wisconsin's embattled semi-private job creation agency is making necessary improvements, Republicans who control the Legislature's budget committee on Wednesday voted to release its second-year funding while keeping roughly $35 million in surplus.

That surplus could be tapped later for other uses including tax cuts or other economic development initiatives focused on job creation, co-chairs of the Joint Finance Committee said.

Gov. Scott Walker created the Wisconsin Economic Development Corporation (WEDC), a public-private partnership, to replace the state Department of Commerce in 2011. It was beset with problems from the start, including not tracking $12 million in past-due loans, high turnover in leadership positions and highly critical audits that revealed mismanagement at the agency.

In recent months WEDC has been working to correct those problems, ease the concerns of lawmakers who control their funding, and launch a new television advertising campaign designed to attract businesses in neighboring Minnesota and Illinois.

Reed Hall, secretary and CEO of WEDC, testified before the committee and said the agency had taken numerous steps to address concerns and improve operations. He said a recent audit by the agency's independent accountants for the last fiscal year found no material weaknesses or significant deficiencies.

Hall also said he didn't expect there to be any problems with audits currently ongoing by the Legislative Audit Bureau.

Lawmakers are giving WEDC its second-year funding that had been held in check because they believe the agency is improving, said committee co-chair Rep. John Nygren, R-Marinette.

"I think that it is headed in the right direction. But that doesn't mean that they have a complete blank check from the Legislature," Nygren said during a news conference before the meeting. "We see a lot of accountability and transparency with WEDC."

But Democrats, who have long been critical of WEDC, told Hall they weren't convinced all of the agency's problems had been addressed and they lacked confidence in the agency's ability to create jobs and spur economic development.

"I would suggest this has been a homegrown disaster in the state of Wisconsin," Sen. Bob Wirch, D-Racine, told Hall. "I think that maybe you're on the right track now, but this is the fourth year of this administration. We've had a lot of broken promises along the way."

Wary of WEDC's track record, the Legislature this year held back the agency's funding for the second year of the budget pending compliance with recommendations in a spring audit. In October, WEDC notified lawmakers that it had built a $34.4 million surplus, consisting of $18.4 million in reserves and $16 million from taxes on businesses.

The budget committee voted 11-4 along party lines to give WEDC the $59 million it was originally budgeted, but it held back roughly $35 million for the Legislature to use as it wishes.

Neither Nygren nor co-chair Sen. Alberta Darling, R-River Hills, said they had specific uses for the surplus in mind other than they wanted it to be used for targeted economic development geared toward creating jobs or tax cuts. Nygren said he wanted WEDC or Walker to come back with a proposal for how to spend the money.

Creating WEDC was one of Walker's first moves when he took office in 2011. In the campaign, he promised to create 250,000 private sector jobs over four years, and WEDC was charged with being the main agency in charge of helping to lure and retain businesses to the state.

But Walker is struggling to deliver on the job-creation promise. The state added just 63,000 during his first two years in office, and the latest federal labor data shows Wisconsin is 37th in the nation in private-sector job growth.

Walker faces re-election in November. He is being challenged by Democrat Mary Burke, who served as secretary of the Department of Commerce, which WEDC replaced, under Democratic Gov. Jim Doyle.