The head of the state's economic development agency told reporters this week that a set of proposed changes to the agency's verification process for tax credits wouldn't result in any changes in practice at the Wisconsin Economic Development Corporation.
WEDC Secretary and CEO Mark Hogan's comments came in response to criticism from lawmakers, including some who voted last week to approve the changes in an extraordinary session.
Here's what the bill would do, why lawmakers have concerns and why WEDC officials say those concerns are unwarranted.
The bill lifts a cap on how many tax credit enterprise zones WEDC can designate, but requires legislative approval for each one. Under current law, WEDC can designate up to 30 enterprise zones without legislative approval. The agency has designated 26. Under the bill, WEDC could exceed the 30-zone limit, but each zone would require approval from the Legislature's Joint Finance Committee.
The WEDC enterprise zone tax credit program allows the agency to award tax credits to companies looking to expand an existing Wisconsin business or move their operations to the state.
The WEDC board would grow, and it would be responsible for appointing the agency's CEO for a set period of time. The bill would give the board the authority to appoint a CEO, rather than the governor. However, this provision would expire after Sept. 19, 2019. At that point, Gov.-elect Tony Evers would have the authority to appoint a CEO.
Under current law, WEDC has a 14-member board with 12 voting members. Six members, appointed by the governor, serve staggered four-year terms. The Assembly Speaker and Senate Majority Leader each appoint three members. Under the new bill, both legislative leaders would appoint four members each, to serve staggered four-year terms. Both legislative leaders would also each appoint one person each to serve one four-year term, expiring Sept. 1, 2019. The governor would continue to have six appointees, bringing the number of voting members on the WEDC board to 16, until Sept. 1, when it would go down to 14.
Hogan said WEDC did not ask for those changes, and said he is "happy to be here if the board decides I should stay on."
WEDC's liaison for the state's Foxconn project would be appointed and supervised by the board, not by the governor's administration. That's a change from the Foxconn legislation, which would place the position under the supervision of the Department of Administration.
Verification requirements to determine the eligibility of tax credit recipients would change. Under current law, WEDC must annually verify information submitted by tax credit recipients before a company can claim a credit. The bill removes that requirement.
Instead, the bill requires WEDC to annually verify the information submitted by recipients based on a sample of credits. Tax credit recipients would also have to submit a signed statement attesting to the accuracy of the information they provide the agency.
The changes to the verification requirements prompted concerns from some legislators, including at least one Republican. But WEDC officials said the statutory changes wouldn't alter the way they verify credits.
Sen. Robert Cowles, R-Green Bay, voted against the bill. Cowles co-chairs the Legislative Audit Committee, which has issued reports critical of WEDC's verification practices over the course of the agency's existence.
A 2017 audit by the nonpartisan Legislative Audit Bureau found that WEDC "cannot be certain about the numbers of jobs created or retained as a result of its awards."
"A cloud will continue remain over the agency until they can accurately verify data being received from award recipients," Cowles said at the time. "While WEDC has significantly improved in several areas relating to the administration of its programs, Wisconsin needs to have a precise understanding as to which programs are most beneficial to our economy."
Cowles told the Milwaukee Journal Sentinel last week if there is a good reason for the changes, "I haven't heard it."
Sen. Luther Olsen, R-Ripon, said he didn't know the changes were in the bill when lawmakers voted, but he was comfortable with what was approved.
Senate Minority Leader Jennifer Shilling, D-La Crosse, said the agency should not be given less scrutiny after years of "scandals, mismanagement and under-performance."
In a meeting with reporters on Tuesday, WEDC officials said they've been seeking the changes for years because the requirements under current law are too onerous. Hogan said he's had previous conversations about the changes with legislative leaders including the co-chairs of the audit committee. A Cowles spokesman did not respond to a request for comment.
WEDC currently awards credits to 300 companies with "a couple hundred-thousand employees," Hogan said. The Legislative Audit Bureau's interpretation of current law, Hogan said, is that WEDC must independently verify each one of those jobs. To do so would be "crushing" from both a financial and human resources standpoint, Hogan said.
"The fact is you’re never going to be able to independently verify over 200,000 employees. It’s a process that cannot work," Hogan said. "We knew three years ago that the only resolution to this was to change the statute, to codify the practice."
Two WEDC officials — senior financial servicing director Rick Cushman and chief financial officer Brian Nowicki — shared with reporters the agency's current procedure for verifying information from tax credit recipients.
According to the agency, companies that receive credits are required to file an annual report detailing their employees, hours worked and wages paid. WEDC employees conduct a manual review and use software to determine the number of employees and the amount of wages eligible for tax credits.
Currently, WEDC conducts a sample of 10 percent of jobs at 10 percent of the companies receiving credits to verify eligibility, Hogan said. The samples are then reviewed by Clifton Larson Allen, an outside auditor. The outside audit cost WEDC about $50,000 last year, officials said.
Hogan argued state statutes are mean to provide directions, not specific instructions on policies and procedures. The legislation "clarifies and it will identify what we already do," he said.
"I am confident that the information that we have and the tax credits that we give, I have a high level of confidence that we're doing the right thing and we're very certain about the results that we verify," Hogan said.