Tax & Budget Policy News

Good morning Chairwoman Lassa and Chairwoman Strachota and members of the committee. Thank you for the opportunity to speak today. My name is Bruce Speight and I am a Public Interest Advocate for WISPIRG, the Wisconsin Public Interest Research Group. WISPIRG is a statewide non-profit, non-partisan public interest organization that stands up to powerful interests. We represent 9,000 members across the state. 

I am here today in support of Senate Bill 434, and its companion Assembly Bill 741, and in particular to speak to the benefits of disclosing information about economic development subsidies and making it accessible through an easily searchable online database. 

We live in an era where Americans expect to be able to search their own bank accounts or cell phone bills on line, in which we can verify information people tell us by Googling it on line. To restore public confidence in government, we also need to live in an era of “Google-able government” when in comes to transparency and accountability for the public purse. 

Wisconsin enjoys a proud tradition of open government, and has taken important steps to make government transparent. We are a model in disclosing the activity of lobbyists. And WISPIRG applauds the state for increasing transparency in the disbursement of state procurement contracts in the last session, and most notably for making this information easily accessible on the internet with the new “Contract Sunshine” website.

Yet, there is still more to be done, and SB434/AB741 is an important next step in increasing transparency and accountability in government spending. 

Especially in these tough budget times, we need to track every dollar and make sure we are getting the most ‘bang for our buck’ for any business subsidies. Regardless of what one thinks about whether there should be more or less business subsidies, Wisconsin deserves to get the greatest results and accountability for each dollar. And taxpayers have a right to know whether their dollars are being used efficiently and effectively. 

In the past year the term “Google Government” has come up in many U.S. states that have launched initiatives using the Internet to make accessible detailed information about where tax dollars go and who gets government contracts and subsidies. “Contract Sunshine” is moving us in the right direction with regard to online disclosure of state procurement contracts. We should make sure that SB434/AB741 likewise moves us forward in achieving detailed disclosure of economic development subsidies. 

In October of last year, WISPIRG released a report by the Washington DC based think tank, Good Jobs First, which compares online reporting of lobbying, state procurement contracts and economic development subsidies in all 50 states. The good news is that in a growing number of other states, searchable public databases provide easy access to information about government subsidies with highly detailed information of projects receiving subsidies, including total projected jobs, wages and benefits, and the capital investment of the company. In addition, the best reporting includes outcomes, and the information provided covers a substantial period of time in order to allow meaningful analysis of long term public costs and benefits. 

Minnesota, for example, reports total subsidy amount, wage and benefits data for the jobs created by subsidies, a summary of the goals in the subsidy agreement, outcomes until goals are attained, and (when applicable) a company’s former location within the state and the reason for relocation. This data allows Minnesotans to know which subsidies are creating new upwardly jobs, as opposed to just promoting relocation from one town to another with worse jobs. Wisconsin deserves no less.

Accessibility and formatting of the disclosure reports are also important. We all know that having data somewhere on the web is not the same as true accessibility and usability. For example, the Illinois Department of Commerce and Economic Opportunity has a specially designated corporate accountability Web site created pursuant to the 2003 Corporate Accountability in Tax Expenditures Act. All compliance reports are available there in an easy-to-use database searchable by report year, award year, and program type. Wisconsin deserves no less.

In addition, in some states, with a few clicks, taxpayers can discover how much contractors and subsidy recipients lobbied or gave in campaign contributions. Again, Wisconsin deserves no less.

SB434/AB741, as currently written, does requires online disclosure of economic development subsidies. But, we have three recommendations for improving this bill to ensure that the data reported is thorough and sufficient to inform taxpayers of these investments, and sufficient to access whether or not we are getting a return on these investments. 

First, we recommend that you specify the information that agencies must report both to the legislature and online, and ensure that reporting on actual outcomes is required. While the current bill does cite a few specifics, we should make sure that at the very least we are requiring the same information be reported that recipients in Minnesota and Illinois must report.

Last summer the Journal Sentinel examined deals with 25 big companies that were awarded about $80 million in state subsidies over a 6-year period. The investigation found that overall the companies fell about 40 percent short on the job creation they promised in order to receive the subsidies. In the absence of established accountability mechanisms, the Journal Sentinel reported that the state often lowers its requirements rather than canceling the subsidies or seeking repayment. This is not acceptable. If a contractor in our own home ends up tiling only half the bathroom, we don’t go back and change the contract. If we are going to hold the public sector to high standards, we must have high standards for all types of expenditures.

We owe it to ourselves to at least provide full information about where the money goes, but in addition we should ensure that there is accountability.  Both Minnesota and Illinois have a “clawback” or “recapture” provision, which requires subsidy recipients to repay subsidies if they do not deliver on their promises. This type of measure holds companies accountable and ensures that we are getting a return on our investment. It is a “money-back taxpayer guarantee” for public subsidies. Our second recommendation is that you consider such a provision in Wisconsin as well.

Thirdly, one of the great advantages of integrating thorough data about subsidies is captured in a simple business nostrum: you can’t manage what you can’t measure. Reliable and comprehensive data gives the public the ability to assess whether we are implementing programs fairly and effectively. Some basic questions: Are subsidies focused on the right industries? Are they clustered in certain regions? What kinds of subsidies produce the most jobs? We can’t presently even begin to answer these basic questions because even the people who run these programs don’t know about subsidies they don’t themselves administer. We can’t get the most out of our business subsidies because they are presently distributed in an uncoordinated range of disparate programs that lack a vision of the whole, and where one hand doesn’t talk to the other.

Therefore we believe a third improvement to this bill would be to include all subsidies of all types. We must ensure that any kind of expenditure that affects our public budget’s bottom line be included. Tax breaks and credits, as well as expenditures on loan guarantees lead to a net decrease in our budget surplus the same way that a direct line item in the budget does. Like our neighbors in Minnesota and Illinois who have done this, the public deserves access to this full information to ensure that economic development subsidies are most effective.

While we encourage you to consider these three improvements to the bill, we recognize that SB434/AB741 is a positive step in the right direction. We thank Senator Sullivan and Representative Jeskewitz for their work on this bill. We look forward to working with you and the legislature to increase transparency and accountability. Together we can maintain our proud tradition of open government in Wisconsin, and build public trust in the investments made with taxpayer money.