Given Foxconn’s global track record in job creation and the systemic deficiencies in the Wisconsin Economic Development Corporation’s working, Foxconn’s LCD screen manufacturing plant in Wisconsin has significant challenges ahead.
Going by audits conducted at the state of Wisconsin, the agency tasked with holding Foxconn accountable for providing up to 13,000 jobs in exchange for $1.5 billion in state tax credits, has a history of failing to verify job-creation claims and rewarding companies that fall short of quotas.
This assumes significance in the wake of Foxconn’s proposal of installing a LCD screen manufacturing plant in the state which was announced late last month. This announcement is one of the largest economic development agreements in U.S. history and rides on the crest of President Donald Trump’s electoral promise of creating U.S. manufacturing jobs.
An audit conducted in May this year, found significant deficiencies in the manner in which the Wisconsin Economic Development Corporation (WEDC) worked. Not only did the agency not independently verify jobs numbers claimed by recipients of tax credits, it also posted inaccurate jobs figures online.
Such reports were earlier filed by the non-partisan Legislative Audit Bureau in 2013 and 2015 which identified significant shortcomings in WEDC’s working.
The agency intends to hire more staff to help manage the Foxconn project and is “committed to providing the highest level of transparency, accountability and accuracy in all of its awards,” said Mark Maley, WEDC’s spokesman.
According to critics, subsidies are likely to not produce the promised economic growth and the creation of jobs given the lack of oversight and the fact that the state does not pursue companies which they do not meet their commitments.
In fact, many of the high-profile deals between manufacturers and U.S. states have a spotty track record of long-term job creation.
Case in point: Boeing Co cut nearly 16,000 jobs in the state of Washington after having won the largest share of a 16-year, $8.7 billion incentive package; it cut nearly 1,200 jobs in South Carolina after securing a multi-million-dollar incentives there as well.
“States should always be skeptical of any job projections. That’s why incentives should contain provisions to limit the costs per job-year, and to claw back incentives if a company leaves,” said Tim Bartik, senior economist with the Kalamazoo, Michigan-based W.E. Upjohn Institute for Employment Research.
Formed in 2011, as part of Republican Governor Scott Walker’s push to create jobs, the WEDC helped negotiate the deal with Foxconn wherein the state of Wisconsin offered $3 billion in total state subsidies.
The audit also found that the agency did not penalize companies even after it became aware it became aware that they will not be able to meet their contractual targets.
It allowed one unidentified business to keep $1.4 million in tax credits after missing job-creation quotas and forgave a combined $1 million in loans to two businesses after the they missed job targets, auditors found.
“WEDC cannot be certain about the numbers of jobs created or retained as a result of its awards,” reads Joe Chrisman, Wisconsin’s state auditor report.
Walker, who negotiated the Foxconn deal along with the WEDC, did not respond to a request for comment.
In an e-mailed response, Foxconn said, the Wisconsin project is expected to create “tens of thousands” of jobs in the state but it declined to commit to a specific number.
The non-partisan Wisconsin Legislature Fiscal Bureau has estimated it will take at least 25 years for the state to break even on its tax break even if Foxconn creates 13,000 jobs. The payback period would grow even longer if that many jobs do not materialize. Lawmakers are however skeptical of this report.
Concern over Foxconn’s promise to create jobs is based in part on the company’s record around the globe.