Administration's economic development strategy is all show, not much go
A commentary by Darin Von Ruden, Westby, president of the Wisconsin Farmers Union.
State agency budget proposals tell us a lot about the direction in which the governor and state agencies intend to head in the coming years.
Judging by the budget numbers that were released last month, this Administration is proposing to invest its economic development dollars in a few flashy show horses, rather than a herd of tried-and-true workhorses.
In 2011, Gov. Walker dissolved the Wisconsin Department of Commerce and replaced it with a public-private entity called Wisconsin Economic Development Corporation (WEDC). That organization is charged with encouraging job creation and economic development in the state.
How has WEDC performed so far?
A report recently released by the Federal Housing and Urban Development agency found that WEDC had violated state and federal guidelines when awarding grant and loan funds to Wisconsin businesses.
WEDC failed to make sure that the companies it was supporting were financially sound. For example, WEDC failed to perform required underwriting before extending grants of $390,000 to Gilman USA LLC, a machining company in Grafton, and $1 million to Morgan Aircraft in Sheboygan.
WEDC also came under fire for how expensive its projects were.
In one case, WEDC made a forgivable loan of $3 million to metal fabricating company Kapco to create 152 jobs at its Osceola plant. That's a hefty $20,000 of state investment per job created. State guidelines called for spending no more than $10,000 per job created.
Despite this questionable track record, WEDC is requesting over $24 million for grants and loans to Wisconsin businesses for the 2013-2015 biennium.
In contrast, the Department of Agriculture's budget request zeros out funding for two business development programs with proven track records.
The Agriculture Development and Diversification Grant (ADD) provides small grants to help stimulate Wisconsin's agricultural economy through the development or exploration of new product, markets or technologies.
From 1989-2006, the ADD grant program created 600 new jobs, 450 new products, and 180 new markets, and generated a whopping 19-to-1 return on state investment.
The state invested $321,000 per year into this program in the last biennium. DATCP proposes $0 for this program in the 2013-2015 biennium.
The Buy Local, Buy Wisconsin grant is a newer program that focuses on building the infrastructure to develop the growing local foods economy.
In the first two and a half years that the program was up and running, it tallied 38 new jobs created (impressive for a program of its size) and a 5-to-1 return on state investment.
The state invested $200,000 per year for this program in the last biennium. DATCP proposed $0 for the program in the 2013-2015 biennium.
The administration's focus appears to be on making a small number of high-profile grants to larger employers, rather than making modest seed grants to small businesses that have proven their ability to generate solid returns.
This strategy of putting all of our eggs in one basket is unwise.
One of the reasons that Wisconsin fared better than other states during the last economic recession was the diversity of our state's economy, and specifically the presence of agriculture as a counterweight to manufacturing and service sector industries.
Farms, unlike factories or call centers, are tied to land and place. When the going gets tough and other businesses pull up stakes and seek greener pastures elsewhere, farms stay put and keep contributing to the state's economic output.
Let's take that $24 million that WEDC is requesting and diversify our portfolio, putting at least $1 million of that back into the Agricultural Diversification and Buy Local programs.
Sure, it's nice to keep a few show horses. But it doesn't make sense to empty the barn of workhorses in the process.