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Despite Fiscal Warning, Wisconsin Plans To Move Ahead With Foxconn Deal

Aug 11, 2017
Originally published on August 14, 2017 6:15 pm

Wisconsin lawmakers are preparing to move forward on a $3 billion tax incentive package with technology manufacturer Foxconn, even as a new estimate from the state legislature's nonpartisan budget office revealed the state wouldn't break even on the deal until 2043.

The Taiwanese company's plans were announced at a high-profile White House event with President Trump last month. The planned Foxconn factory in southeastern Wisconsin would open by 2020 and cover 20 million square feet on a nearly 1.6-square-mile campus.

On Thursday, state Senate Majority Leader Scott Fitzgerald, who had been the most reticent of Wisconsin's Republican leaders about the deal, changed his tone.

Fitzgerald signaled he is ready to move forward with the deal, tossing aside previous statements that the state budget, which is more than a month past its deadline, should take precedence.

"If we can get both of these things done simultaneously and get this stuff kicked out of the finance committee, then we'd be in a good position to probably finish up the budget and also get Foxconn done," Fitzgerald told reporters Thursday afternoon.

Just one day earlier, the senator had called a new estimate about the long-term economic impact of the deal "striking," urging his colleagues to be "cautious" as they evaluated the incentive package.

The budget office's estimate compared the amount of tax revenue the tech manufacturer would generate for the state with the amount of tax breaks Wisconsin has offered the company.

The estimate focused on the income tax that would be paid by workers at Foxconn because the manufacturer will qualify for a state tax program that exempts it from paying income taxes. It also assumes the facility will hire the maximum number of employees it has projected for the plant: 13,000.

If the manufacturer doesn't employ that many Wisconsin residents, the state's break-even point would be pushed "well past" 2045, the estimate said.

Democrats voiced concern about the incentive package soon after the estimates were released.

"I'm extremely concerned about the cost to Wisconsin taxpayers," said Assembly Minority Leader Peter Barca, who represents Kenosha, which is in the region where Foxconn is expected to build its facility. "The fiscal analysis released today creates new questions on the state's cash flow and on the state's ability to ensure a good return on investment for taxpayers."

Gov. Scott Walker, a Republican, pushed back on that concern, saying more than tax revenues should be considered when evaluating the deal.

"Foxconn is bigger than just future tax revenues," Walker tweeted. "It adds over $10.5 bil. in payroll to WI economy over 15 yrs + construction & indirect jobs."

The estimate projected the Foxconn facility would create 22,000 "indirect and induced jobs" beginning in 2021, as well as 10,200 construction jobs and 6,000 indirect construction-related jobs, resulting in more than $250 million in tax revenue for the state.

The fiscal bureau also noted that its analysis focused only on the impacts of the project on the state's treasury and did not account for other potential benefits to Wisconsin's economy, like the addition of a new sector to the state's manufacturing economy.

Among the other incentives used to draw the company to Wisconsin are exemptions to state environmental laws that would let it escape state permits for everything from filling a wetland to building on a lakebed.

The state Assembly held a public hearing on the Foxconn deal last week. It is expected to hold a committee vote on the package early next week, with a vote from the full Assembly on Aug. 17.

Fitzgerald said Thursday that he expects the state Senate will hold its public hearing on the incentive package on Aug. 22.

Copyright 2017 Wisconsin Public Radio. To see more, visit Wisconsin Public Radio.

ROBERT SIEGEL, HOST:

Wisconsin lawmakers are close to approving one of the biggest tax incentive packages a state has ever offered a foreign company. They're making a $3 billion bet that it will help bring thousands of manufacturing jobs back to the state. And that is despite warnings that it could take decades for taxpayers to break even on the deal, as Wisconsin Public Radio's Laurel White reports.

LAUREL WHITE, BYLINE: When Wisconsin reached an agreement with Taiwanese tech manufacturer Foxconn to build a plant in the southeastern part of the state, it got a West Wing rollout. Governor Scott Walker stood next to President Trump as he boasted about the deal.

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PRESIDENT DONALD TRUMP: This is a great day for American workers and manufacturing and for everyone who believes in the concept and the label made in the USA.

(APPLAUSE)

WHITE: Walker's administration calls the deal a once-in-a-century opportunity. But the state legislature's nonpartisan budget office said the state wouldn't break even until 2043, and that's under the most optimistic circumstances. The powerful conservative group Americans for Prosperity, which is close to Walker, called the deal a taxpayer handout. Republican state Senate Majority Leader Scott Fitzgerald said last week the budget estimates were striking and urged his members to take their time looking at the deal.

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SCOTT FITZGERALD: We should be cautious. I mean, that's what we're doing right now, is the due diligence to make sure that this is a good deal for the state, good deal for locals.

WHITE: The next day, conservative talk radio host Mark Belling invited the Senate leader onto his show for a tongue lashing.

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MARK BELLING: Foxconn is setting this. If you start spitting at these people, who knows what their response is going to be?

FITZGERALD: I'm not saying that at all. I mean, I haven't even got a straight answer yet why there is a hard deadline on the MOU...

BELLING: Because Foxconn's - probably because Foxconn says that they want it. And if that's what Foxconn says, you guys better be OK with that.

WHITE: By the mid-2020s, lawmakers would have to pay Foxconn more than $300 million a year from the state budget. Todd Berry of the nonpartisan Wisconsin Taxpayers Alliance warns there could be consequences.

TODD BERRY: They'll deal with it year by year. They will have essentially punted the problem into the future. And then they'll - you know, they'll be as austere as they need as each year goes along.

WHITE: Berry says other parts of the state budget may get cut to pay Foxconn.

BERRY: Even K-12 education has been fair game in recent budgets.

WHITE: This all comes at a time when Wisconsin's economy is really healthy. The unemployment rate is just 3.1 percent, the lowest it's been since 1999. But the state does have a problem with brain drain. Many young educated people aren't staying in Wisconsin after they graduate from college. State Department of Administration Secretary Scott Neitzel told lawmakers the Foxconn factory would reverse that.

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SCOTT NEITZEL: This opportunity will produce a Wisconsin brain gain, which will end our brain drain. We cannot let this opportunity pass us by.

WHITE: Other supporters argue the company will attract suppliers and other tech companies to Wisconsin, but no one knows for sure. So lawmakers are poised to make a bet, a $3 billion one, that will take decades to break even. For NPR News, I'm Laurel White in Madison.

(SOUNDBITE OF SLEEPDEALER'S "1974") Transcript provided by NPR, Copyright NPR.