Motion #154 Page 1

Motion:

Move to adopt the following provisions related to the operations of the Wisconsin Economic

Development Corporation (WEDC):

a. Paper #710, Alternatives #2 and #3. Transfer $3,750,000 GPR in 2013-14, and delete$3,400,000 GPR and transfer $3,750,000 GPR in 2014-15 that was provided for increasedmarketing activities to the Joint Committee on Finance's GPR supplemental appropriation. RequireWEDC to submit a plan, for Committee approval, specifying the extent to which marketing

expenses may be funded with existing funds, rather than requiring additional GPR funding.

b. Paper #711 Alternative #5. Reduce GPR funding in the WEDC operations andprograms appropriation by $4,087,100 in 2013-14 and $4,086,800 in 2014-15, and provide the sameamount of economic development SEG (an increase to the bill of $2,087,100 in 2013-14 and

$86,800 in 2014-15).

c. Transfer an additional $27,274,700 GPR and $28,276,000 SEG in 2014-15 fromWEDC to the Joint Committee on Finance's GPR and SEG supplemental appropriations. Requirethat WEDC submit a report to the Joint Committee on Finance that includes information indicatingthat the Corporation is complying with the recommendations of the Legislative Audit Bureau (LAB)included in the LAB May, 2013, audit of WEDC, and that the chief executive officer of WEDCappear before the Committee at the second quarterly meeting in fiscal year 2013-14 under s. 13.10of the statutes (December, 2013). Provide that the Committee may release the funding based on the

CEO's testimony and the information included in the report.

d. Require that the CEO of WEDC submit a request to the Joint Committee on Financefor approval, detailing the specific provisions of any proposal to create any nonprofit foundation or

corporation, and to appear at the Committee meeting considering the request.

e. Require, beginning in 2014, the WEDC Board to have an annual independent auditconducted of the Corporation's financial statements for the previous fiscal year, and submit the auditreport to the Joint Legislative Audit Committee, and the chief clerk of each house of the Legislature,

for distribution to the Legislature.

f. Require all employees of WEDC to be subject to state ethics laws, and to file an annual

statement of economic interest.

WISCONSIN ECONOMIC DEVELOPMENT CORPORATION

Corporation Operations Reform

[LFB Papers #710 and 711]

Senator Darling

Representative Nygren

Motion #154 Page 2

Note:

Under the motion state funding allocated for WEDC purposes would total $59.3 millionannually (versus $57 million in 2012-13).

WEDC was created as an Authority under 2011 Wisconsin Act 7. Under the provisions of2011 Wisconsin Act 32, the Department of Commerce was eliminated and statutoryresponsibility for creating and administering economic development programs, providing certainrelated technical assistance, and administering existing programs and several tax credits wastransferred to WEDC. WEDC receives most of its funding from annual state appropriationsprovided to the Corporation. Base level funding for WEDC for fiscal year 2012-13 is

$32,790,600 GPR and $24,189,200 SEG. The bill would provide WEDC with $3,750,000 GPRin 2013-14 and $7,150,000 GPR in 2014-15 for increased marketing activities, and increased

expenditure authority of $2,000,000 SEG in 2013-14 and $4,000,000 SEG in 2014-15, for thecapital catalyst and seed accelerator programs.

Under current law, the state code of ethics applies to WEDC's chief executive officer andmembers of the WEDC Board, but not to any other WEDC staff. WEDC is not statutorily required

to announce procurement opportunities publicly or accept proposals from all interested vendors.WEDC is also allowed to select a preferred vendor without soliciting competitive bids.

g. Require WEDC to be subject to state statutory purchasing provisions.

h. Require that the annual report submitted to the Joint Legislative Audit Committee andthe legislature include: (1) an accounting of the location, by municipality, of each job created orretained in the state in the previous fiscal year as a result of the program; (2) an accounting of theindustry classification, by municipality, of each job created or retained as a result of the program;(3) the amount of tax benefits allocated and verified under the program; and (4) the recipients of taxbenefits allocated and verified under the program.

i. Require WEDC to provide the following reports to the Joint Legislative AuditCommittee: (1) by October 1, 2013, the status of the Corporation's efforts to comply with; (a)creating all required economic development program rules; (b) stipulating contractually that allrecipients of grants and loans of $100,000 or more must provide WEDC with a verified financialstatement describing how the funds were spent and ensuring that recipients submit the verifiedfinancial statements; (c) developing at least one expected result for each of the goals of all economicdevelopment programs that it administers; (d) ensuring that recipients of economic developmentgrants and loans submit the contractually required progress reports; (e) annually verifying theperformance information reported by the recipients of a sample of grants and loans; and (f) ensuringthe annual economic development report presents clear, accurate, and complete information oneach program's results; and, (2) by October 1, 2013, the status of all outstanding economicdevelopment loans for which it was responsible from January 2013 through September 2013,including the number and outstanding balance of loans it amended, the number and outstandingbalance of loans it forgave, the number and outstanding balance of loans it referred to theDepartment of Justice for collection proceedings, and the number and outstanding balance of loansit wrote off.

Motion #154 Page 3

The WEDC Board is required to submit, by October 1, to the Joint Legislative AuditCommittee and the Legislature, a report for the previous fiscal year on each WEDC economicdevelopment program that contains all of the following: (a) a description of each program; (b) acomparison of expected and actual program outcomes; (c) the number of grants or loans madeunder the program; (d) the amount of each grant or loan made under the program; (e) therecipient of each grant or loan made under the program; (f) the sum total of all grants and loansawarded to, and received by, each recipient under the program; and (g) any recommended

changes to the program.

Beginning in 2013, LAB is required to conduct biennial financial and program evaluationaudits of WEDC. In May 2013, the LAB completed an audit of WEDC and recommended that the

Corporation submit certain reports to the Legislative Joint Audit Committee.

In March 2013, the WEDC Board passed a resolution authorizing WEDC to create anonprofit foundation to solicit donations from regional economic development associations,businesses, and individuals. The foundation is to be controlled by the Corporation's chief executiveofficer and governed by a board of directors separate from WEDC's governing board. According tothe Legislative Audit Bureau, current statutory provisions stipulate that the Board shall have all thepowers necessary to carry out the purposes and provisions of the statutes governing WEDC.

However, the statutes neither specifically authorize, nor prevent it creating the foundation.

This motion would transfer $3,750,000 in increased GPR funding provided to WEDC formarketing activities in each year of the biennium to the Committee's GPR supplementalappropriation. WEDC would be required to submit an expenditure plan for Committee approvalspecifying marketing expenses that would be financed with the funding. The motion would increase

SEG funding by $2,087,100 in 2013-14 and $86,800 in 2014-15 and decrease GPR funding by$4,087,100 in 2013-14 and $4,086,800 in 2014-15. Along with the increased SEG funding includedin the bill, the GPR reductions would be entirely offset by the SEG funding increases

The motion would transfer all of the Corporation's remaining GPR and SEG funding for2014-15 to the Joint Committee on Finance's supplemental appropriations. WEDC would berequired to submit a report to the Committee that included information indicating the Corporation'scompliance with recommendations in the May, 2013, audit of WEDC, and the CEO of theCorporation would appear before the Committee, under s. 13.10 of the statutes, at the December,2013, quarterly meeting. The Committee would base its decision to release the funds on the CEO'stestimony, and information in the report. In addition, the CEO would have to appear before theCommittee for approval, before creating a nonprofit foundation. The motion would make WEDCemployees subject to state ethics laws, and require them to submit the annual statement of economicinterest. WEDC would also be subject to state purchasing statutes. WEDC would be required toinclude specific information in its annual program report about the number, location, and industry ofjobs created or retained by the Corporation's economic development grant, loan, and tax creditprograms. The Corporation would be required to submit certain reports to the Legislative JointAudit Committee recommended in the LAB audit. The WEDC Board would be required to have an

annual independent audit conducted.

[Change to Bill: -$11,573,900 GPR and $2,173,900 SEG]