Monday, August 7, 2017

Vinehout recognizes that the Fox-con could break rest of state budget

One of the Wisconsin Dems I’ve liked for quite a while is State Sen. Kathleen Vinehout, mostly because of her in-depth knowledge and interest in policy and outcomes. Sen. Vinehout was on Mike Gousha’s show over the weekend, and while part of the converstion revolved around whether Vinehout would formally enter the Governor’s race, another part of it discussed the state’s Foxconn incentive package, an item Vinehout recently gave strong skepticism about in a recent column titled “The Hype and the Small Print.”

Sen. Vinehout told Gousha that we need to see a wider picture about how the Fox-con affect other needs in the state, as the huge price tag could have an effect throughout Wisconsin.
"Voters are right to question the whole policy of whether or not we should give a great deal of money to one company," Vinehout said.

She said the tax credits proposed for Foxconn are "front-loaded," meaning that "we’re going to have to pay out cash" to the company when it starts making capital expenditures.

"We haven’t even seen the state’s cash flow statement going forward. What's it going to look like to the budget? How much are we going to have to cut schools and health care and local government and roads in order to pay for these tax credits? That's the math that the legislature needs to see," she said.

She's got a point, you know.

That math would likely come from the Legislative Fiscal Bureau, and while the LFB has done an overview of the Foxconn package itself, it hasn’t drilled down into how much future budgets will be affected. And the more I look at this Fox-con, the more it seems like we would see the largest amount of money go out the door in the first 5 years of this project (assuming it works at all). Remember that $1.5 billion of the potential $3 billion in tax breaks are related to capital expenses that go toward the infrastructure and building of the Foxconn facility. Along with that, the LFB says the other $1.5 billion are write-offs related to salaries
“…attributable to wages paid to full-time employees for services that are performed in Foxconn’s Enterprise] zone or that are performed outside the zone, but within the state, and for the benefit of the operations within the zone, as determined by WEDC.
So would those services include Foxconn oversight and planning of the facility as it’s being built? Is it the initial start-up employees that are later diminished over time as automation takes their places? This provision seems to have the ability for many of the write-offs to be up front as well, and I see nothing in the bill limiting how much can be written off in a given year- there’s only a maximum that can be written off in total.

That’s where Sen. Vinehout’s point about “cash flow going forward” is key. If the next two budgets face massive constraints because we are handing out massive amounts of money related to the Foxconn start-up, then who gets hurt by that? You can bet it won’t be the rich and corporate that donate to WisGOP campaigns.

As mentioned, the LFB hasn’t said what the budgetary effect of this Fox-con might be in the coming years. That’s something worth seeing (if we even can, since the whole project and the amount of jobs it’ll create is theoretical), because the people of Wisconsin need to know what items are being neglected in the coming years in favor of this Fox-con, and we need to know if that’s a worthy trade-off.

It seems like WisGOP assumes the answer many voters would come up with is “No, it’s not worth it,” which is why they’re trying to jam this through as quickly as possible, before people understand the true costs of the Fox-con. Which is all the more reason this thing needs to be slowed down, examined thoroughly, and improved for state taxpayers. Or totally tossed out as a crony capitalist giveaway that isn't a proper way to develop our economy. Either solution is good with me.

1 comment:

  1. And here are Assembly Democrats asking that the Fox-con deal be given a real public hearing, and demanding that the Joint Finance Committee be allowed to discuss and find out what the budgetary impacts will be.

    That's more like it. Yes, the "pros" say process arguments fall flat. But I don't see that here, because it's part of a bigger theme of "Republicans are trying to sneak this through because it's a bad deal."

    More of this pushback, please!