MADISON, Wis. (AP) -- The board that oversees Wisconsin's pension program for public employees has rejected a request by the head of Gov. Scott Walker's semi-private economic development agency to tap $200 million from the fund to invest in risky startup businesses.
Wisconsin Economic Development Corp. head Reed Hall asked the State of Wisconsin Investment Board in November for the venture capital seed money. The board rejected the request late last year, saying that the use of pension funds to pay for economic development initiatives "does not meet our fiduciary duty."
Walker's spokesman Cullen Werwie said Monday that the governor would not be proposing in his budget that the state's pension fund be tapped to pay for venture capital. Werwie said the request from WEDC was just one potential opportunity to pay for venture capital.
Tom Thieding, spokesman for WEDC, said he didn't immediately know where things stood with coming up with another plan given the rejection from the state investment board.
The request from WEDC to tap the pension fund for venture capital comes two years after Walker successfully forced public workers to pay more for their pension benefits as part of his plan that also made them pay more for health insurance and effectively ended their ability to collectively bargain.
The request also comes as WEDC tries to recover from a series of mismanagement problems, including not closely tracking $56 million in state loans and turnover in top staff during its first year in operation.
Walker and the Republican-controlled Legislature created WEDC in 2011 to lead job-creation efforts for the state as Walker looked to make good on his promise to create 250,000 private sector jobs over four years.
Part of their job-creation agenda has been to bolster the amount of money, known as venture capital, available to help new businesses grow in the state. A $400 million venture capital plan was put forward in 2011, but it died amid disagreement among politicians and special interest groups about how the program would work.
Walker put WEDC in charge of coming up with a new plan. Hall sent the Nov. 28 request for $200 million to SWIB when he was acting director of WEDC. Walker named him as its permanent head last week.
Wisconsin has the only fully funded pension plan in the country. The State of Wisconsin Investment Board manages $86.5 billion of investments, including about $77 billion in the Wisconsin Retirement System from which benefits to retirees is paid.
Hall noted in his letter to SWIB's executive director Michael Williamson on Nov. 28 that the request for $200 million represents just 0.3 percent of SWIB's total assets.
"While nominal in terms of SWIB's overall portfolio, the effect of being able to assist in development a vibrant venture investment in terms of economic development for the state is great," Hall said.
The investment board said in its Dec. 21 response, contained in the report, that promoting venture capital investment in Wisconsin is very important and a state-initiated program can become the catalyst to attract additional means to fund innovative technologies and ideas that will provide job opportunities.
However, it said the challenge for the board was making sure any new investments do not adversely affect its retirement fund while also meeting its "established due diligence and investment requirements."
While the investment board has experts who could advise other state agencies, the use of retirement fund money "to fund economic development initiatives does not meet our fiduciary duty," it said.
Vicki Hearing, spokeswoman for the investment board, said Monday that investment choices are made based on what will bring the best return and those that are purely for economic development would not meet its requirements.
There is about $454 million currently invested in Wisconsin-based businesses and $16 billion in companies with some level of employment and operation in the state, according to a report SWIB filed in December.
The Wisconsin Reporter website on Friday was the first to report on Hall's request for the $200 million, which was detailed in the required report.