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The state’s flagship job-creation agency fell short of its goals for business assistance and job creation last year while building a $34 million reserve, more than double the amount it’s supposed to have.

In response, the beleaguered Wisconsin Economic Development Corp. is asking the Legislature’s Joint Finance Committee to withhold state funding over the next two years totaling $18.4 million — the amount the agency’s reserves exceeded a target of up to 25 percent of its revenues set by the WEDC board.

The quasi-public agency, which Gov. Scott Walker created in 2011 to help fulfill his goal of creating 250,000 jobs in his first term, awarded $13.8 million in business loans in the 2012-13 fiscal year, out of $44.1 million in available funding.

The amount awarded was down from $15.9 million the previous fiscal year, but still more than annual amounts since 2005 under the old Commerce Department, which WEDC replaced.

The loans, tax credits and other programs WEDC offered last year are expected to create 37,313 jobs, short of an agency goal of 50,000. The new goal for 2013-14 is 20,825, CEO Reed Hall said in an interview Tuesday.

Hall, who later this week marks his one-year anniversary at the agency’s helm, said last year’s job creation goal, set before he came aboard, was overly optimistic, but he expects to surpass this year’s goal.

“The good news is we’re on the right track,” Hall said.

WEDC’s reserves totaled 54 percent of revenues as of June 30. The UW System’s $648 million in reserves that caused an uproar among Republican legislators earlier this year totaled 25.7 percent of its budget. WEDC officials bristled at the comparison, noting the agency began discussing how to return the surplus to the state with its board starting in July.

Hall said the surplus resulted from multiple factors, including businesses accessing low-interest loans from private banks without the public reporting requirements attached to WEDC loans. The reserves also include $13 million left over from the Commerce Department.

Hall also acknowledged the agency has been more cautious with its loan policies, and that some businesses may not be applying for loans because of two scathing audits released in the past year that found accounting problems at the agency and identified specific businesses that had defaulted on loans.

One audit last fall showed WEDC had lost track of $12 million in overdue loans, many of which were underwritten by the Commerce Department. A Legislative Audit Bureau report in May found WEDC failed to follow state law and gave money to ineligible projects between its creation in July 2011 and June 2012. An LAB audit of the agency’s finances for that year is still pending. The May report found the agency didn’t comply with a state law requiring that it provide a detailed accounting of the goals and results for all economic development programs run by state agencies.

Earlier this month, WEDC quietly posted on its web site that report for the first time with the required information. The agency also shared it with members of its board and lawmakers.

The report showed the agency had missed the goals for helping businesses in more than half of its 26 economic development programs in fiscal year 2013.

Assembly Minority Leader Peter Barca, D-Kenosha, said he didn’t buy the explanation that businesses weren’t interested in the loans. “Clearly I don’t think we’re meeting the needs of the marketplace right now,” said Barca, a member of the WEDC board.

Republican leaders defended the agency, saying it continues to improve its internal processes. Gov. Walker spokesman Tom Evenson said WEDC “is more responsive and helpful to job creators than the old Department of Commerce and is contributing to our economy’s growth.”

Senate Majority Leader Scott Fitzgerald, R-Juneau, said WEDC is still addressing some of the issues that arose during its infancy, but the work its agents are doing on the ground “has been a great success.”

In response to the May audit report, the finance committee made changes to the state budget so that $7.5 million for a two-year WEDC marketing campaign and another $55.6 million for 2015 are withheld until the agency demonstrates compliance with the audit recommendations.

In a letter Monday, Hall asked the JFC at its next meeting on Nov. 6 to allow the agency to use $7.5 million in reserve funds for the marketing campaign. An additional $10.9 million for 2015 would also be held by JFC in case demand for loans picks up. If it isn’t used, state support for WEDC would decline from $77 million in 2013 to $44.7 million in 2015.

Capital W: Plug in to Wisconsin politics

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