Legislature Moves Forward on Venture Capital

Wisconsin is a few steps closer to having a state-funded venture capital fund. On June 6, AB 181 was passed by the Assembly and its companion, SB 169 was the subject of a public hearing in the Senate Committee on Economic Development and Local Government. These bills would provide the framework for managing the $25 million in venture capital funding included in the proposed 2013-15 state budget.

AB 181 passed the Assembly 91-2, with overwhelming support from both parties. Only Reps. Chris Kapenga (R-Delafield) and Daniel Riemer (D-Milwaukee) voted against the proposal. The Senate can now take up the Assembly bill or continue work on its own version of the bill. There are some differences between the two proposals.

Both houses have removed any involvement of the Wisconsin Economic Development Corporation (WEDC) with the proposed program in response to the Audit Bureau’s report on mismanagement at the pseudo-agency. The Assembly bill would place the Department of Administration (DOA) in charge of managing the fund while the Senate favors management by the Wisconsin Housing and Economic Development Authority (WHEDA). However, the Senate author, Alberta Darling (R-River Hills), has indicated that DOA would be an acceptable overseer.

Another difference between these bills is the inclusion of sector-based restrictions on investment in the Assembly bill. As drafted, the Assembly bill would only allow investments in agriculture, information technology, engineered products, advanced manufacturing, and medical devices and imaging industries, which critics say could limit the fund’s effectiveness. The Senate bill originally included this restriction as well, but a committee amendment has been introduced that would do away with this provision.

Although these bills appear to be on the fast track, they are not the only venture capital proposals being discussed. Assembly Minority Leader Peter Barca (D-Kenosha) and Sen. Julie Lassa (D-Stevens Point) have introduced a competing proposal that would invest $208 million over six years.

In addition to being a much larger pot of money, the plan would not restrict the funding to specific sectors. It does target economically distressed communities by designating 25 percent of the fund’s profits for investment in areas with high unemployment.