The Milwaukee Journal Sentinel endorsement simply says that the "fund of funds" approach has "...worked well elsewhere". It would have been nice if they at least offered one quick case study. Given their lack of detail, I looked for other states that have used similar approaches. One state that I found clearly stood out to me and unfortunately it was not in a good way.
The State of Oklahoma established the Oklahoma Capital Investment Board (OCIB) in the late 1980's. It borrows money that it then invests in private venture capital funds. Here are some of the reported problems that I've found with their system and I certainly hope Wisconsin is not planning on repeating any of them:
- In 2006 a state audit was done of the Oklahoma Capital Investment Board and it "found $31 million in debt and more questions than there are answers". It also found that the OCIB had $26 million in other unfunded commitments. In fact the agency has a long record of carrying debt during most of its existence. A state auditor also identified other areas of concern including a lack of transparency and no real way to track performance.
- Just last week a bipartisan group of lawmakers criticized the OCIB on several levels. Including the fact that too many dollars were being invested in companies and corporations outside of state's borders. Legislators also accused the OCIB of not even being fully transparent with them much less with the public.
- During the same hearing one Republican legislator actually questioned whether OCIB was even operating legally because although it was originally created as a public entity and received public funding, it was later made private and still received public funding. This privatization reportedly added to the many transparency problems that were already present.
If Wisconsin continues to pursue the "Fund of Funds" route, I certainly hope that we don't fall into the same kind of dysfunctional pattern that exists in Oklahoma. And I certainly hope that no one involved in that state's venture capital strategy is trying to influence our debate here.