When a law providing for state-subsidized venture capital was signed in 1999, it seemed like a win-win. The state would provide $50 million to investment firms, called CAPCOs, which would invest in fledgling companies, creating plenty of jobs along the way. As one might imagine, things didn’t turn out exactly as planned. According to a new Milwaukee Journal Sentinel report, the program ultimately created 202 jobs, which, if my math is correct, equates to a ludicrous cost of $247,000 per job.

This fiasco is a classic example of what can go wrong with too little oversight and a poorly written bill, which, as Gov. Scott Walker was quick to point out, was passed under former Gov. Jim Doyle. At its heart, the program wasn’t a bad idea. The state provides a modest $50 million investment, and makes it back plus some profit. Beyond that, the state, if everything went well, would also enjoy the extra tax revenue that the new jobs would generate.

So where did it go wrong? The real question is, where to start? There were two huge problems with the bill. The first issue was that the law, for whatever reason, only required the CAPCOs to invest half of the funds that the state gave them. Let me say that once more: The CAPCOs were only obligated to invest half – HALF – of the money given to them. The other gaping flaw was the CAPCOs weren’t required to share any profits or returns with the state. When asked recently about these issues, the bill’s chief sponsor, then-state Sen. Gwen Moore, D-Milwaukee, told the Journal Sentinel that she had expected the investment firms to “comply with not only the ‘letter of the law,’ but also with the ‘spirit of the law.'” That seems to have worked out pretty well.

Of course, it wasn’t just a problem of bad legislation. Even if these issues had been fixed in the language of the bill, there still would have been a problem of oversight. Several investments that the CAPCOs made don’t appear to satisfy the requirements laid out in the law. To qualify for funds under the program, a company (supposedly) needed to show that they were unable to obtain loans through other means. In one case, a company that had been in operation since 1921 and secured conventional loans from commercial banks was still approved by the Commerce Department for funding under the state program.

Bravely forging ahead despite this putrid performance record, the CAPCO companies involved in the previous debacle spent $250,000 last year lobbying state lawmakers to renew the program – except this time, they want it bigger. Several Assembly members, including Assembly Speaker Jeff Fitzgerald, R-Horicon, have been hesitant to exclude the same CAPCOs from new plans for venture capital funding. However, as the Journal Sentinel was preparing to publish their article, the CAPCOs ceased their lobbying. This specific example is illustrative of the broader problem of what happens when bad legislation and poor oversight collide. Both are very real problems, but neither is insurmountable. These issues can be tackled with careful and deliberate planning. Hopefully this will serve as a lesson to the state as it contemplates new ways to spur job creation in a still-lagging economy.

Joe Timmerman ([email protected]) is a freshman majoring in math and economics.