Flimsy Job Projections Used to Promote Selective Business Tax Breaks
Data center jobs unclear and legislation may not be enforceable
Gov. Rick Snyder will likely sign into law legislation that gives data centers special tax breaks, on the condition that they create 400 jobs by 2022 and 1,000 by 2026. But the legislation creating the exemptions on sales and use taxes does not require any new jobs to be created in the coming year, and it is unclear how the industry's performance at job creation will be verified or tracked.
Tricia Kinley, the director of tax and regulatory reform at the Michigan Chamber of Commerce, said that it was difficult to take seriously the amendment that added the job-creation requirement.
“It was a flimsy amendment and we think it probably isn’t even enforceable,” Kinley said. “This whole thing is a huge disappointment. We don’t see any merit in it. Unfortunately, all it took was a few people saying this could be good and the Michigan Legislature moved at warp speed to get it done, leaving it up to rest of Michigan’s businesses to pick up the tab.”
“What we’re talking about here are data centers, which is an industry primarily concerned with housing servers,” Kinley continued. “This isn’t an area in which there’s a great potential for job creation. At some future point, it could probably mostly be covered remotely.”
Gov. Rick Snyder, a supporter of the special tax break plan, is expected to sign the bills into law. Rep. Jim Townsend, D-Royal Oak, offered the amendment requiring the job creation targets being used to justify the exemptions. According to a well-placed source, the Snyder administration coordinated the wording of the amendment with Townsend.
Tax exemptions for data centers became a legislative issue only a few weeks ago, and it all started when Switch, a Las Vegas-based data company, proposed putting a large data center in the Pyramid Building near Grand Rapids. Switch offered its proposal on the condition that it receive sufficient tax breaks. Snyder lent his support to the project and most West Michigan lawmakers fell in line.
On Nov. 10, Senate Bill 616 was introduced by Sen. Tonya Schuitmaker, R-Lawton, and Senate Bill 617 was introduced by Sen. Peter MacGregor, R-Rockford. But the Legislature balked at moving ahead with the tax exemptions for Switch alone and it began discussing giving them to all of the state’s data centers.
Another factor that caused some lawmakers to hesitate was the revelation made 10 months ago that state taxpayers were on the hook for over $9 billion in liabilities from tax exemptions handed out during the second term of former Gov. Jennifer Granholm. Still, both bills garnered more than enough votes. In the House, 32 Republicans joined 29 Democrats in support of the bills. The votes were also bipartisan in the Senate, where the measures passed 26-12.
Proponents of the breaks for Switch claimed the project would create as many as 1,000 jobs over 10 years. But the two bills sent to the governor count jobs created by the entire data center industry by Jan. 1 2026 as meeting the requirement for tax exemptions.
The Switch project was, backers claimed, going to bring a $5 billion investment to West Michigan. There is nothing in the legislation about verifying investments made either by Switch or the data center industry.
Neither Schuitmaker nor Townsend responded to phone calls requesting comment.
When MacGregor was asked how the job creation numbers would be tracked, he said, “That was not my amendment; it was put on in the House." He added, “It was just described to me and I said I was OK with it. It’s Treasury’s job to report the jobs to the Legislature. I’ll do my best to track them as well.”
“This is important legislation that will encourage more investment by high-tech companies in Michigan,” he continued. “It makes our state able to compete with the other Great Lakes states.”
When asked about the fact that the jobs requirement could be satisfied by the entire industry, MacGregor said, “That’s right, it’s not just Switch now. As the bill sponsor, I did my due diligence in the Senate, but I can’t say what more was done in the House. I don’t know all the details, but I can find them out for you.”
In the past, the Michigan Economic Development Corporation's ability to accurately keep tabs on the number of people employed by companies receiving subsidies has been drawn into question, particularly since those companies may face incentives to game the system. What, then, of the possibility that 1,000 data center jobs would be in place on the required date of Jan. 1, 2026, only to dwindle to a lot less over the next month, when presumably they were no longer being tracked or measured?
“I really can’t speak to whatever MEDC has done,” MacGregor said.
If Switch's Nevada-based employees fly into Michigan a few days a week, will they be counted as jobs created by Michigan data centers?
“Not as far as I’m concerned," MacGregor said. "I think they’d have to, at least, have a Michigan driver license. If they (the data centers) don’t do what they’re supposed to do we can change it. I believe this is good legislation and, seriously, I’ll find out more of these details and let you know what they are.”
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
There They Go Again: Liberals Claim Bogus Education Funding Cuts
Michigan group, drawing on national report, 'ignores billions of dollars at school districts’ disposal'
The headline atop a press release from the Michigan League for Public Policy is clear enough: “Michigan still lags significantly behind nation in per pupil funding.” But easily accessible data proves the headline wrong.
According to the latest U.S. Census Bureau figures, Michigan’s ranking among the 50 states (plus the District of Columbia) for per pupil spending is 23rd. There are 28 states that spend less per pupil than Michigan and, when adjusted for per capita income, Michigan ranks in the top ten for per pupil spending.
Claiming that funding of K-12 education in Michigan is somehow singularly deficient has long been a rhetorical tactic in the playbook of teacher unions and political liberals. But comparing the state’s actual per pupil spending levels to those of other states has long provided a potent rebuttal. To put it bluntly, when it comes to K-12 spending, Michigan is not and never has been a piker. Yet, when confronted with the state’s K-12 spending figures, the crowd that claims “we always need more K-12 spending” typically shouts its claims all the louder.
The MLPP website lists its values as follows: “Honesty, Integrity and Nonpartisanship; Social and Economic Justice, Fairness and Opportunity; Equity, Diversity and Inclusion; and Democratic Process and the Dignity of All.”
When asked to explain the press release in light of Census Bureau numbers, Alex Rossman, communication director for the league, said it was based on a report from the Center on Budget and Policy Priorities. The report, he said, focused on the change in education funding from pre-recession levels to current levels.
“The press release we issued highlighted the area where improvement is still needed — the fact that Michigan is still 7.5 percent below where per-pupil funding was in 2008, which ranked us 12th-worst in the country, out of 46 states,” Rossman said. “This ranking is based solely on the percent change in per pupil formula funding between [fiscal years] 2008 and 2016, not national per pupil dollar amount rankings.”
“Also, as you will note in the report and in our press release, there are other areas of education funding where Michigan has improved, and when that funding is factored in, Michigan is more in the middle of the pack,” Rossman added. “I’m not familiar with the Census numbers you’re referring to, but I’m guessing the difference is either the time frame analyzed, the funding — per pupil versus total education funding — and/or percent change versus specific dollar amounts.”
Nonetheless, the question remains: Does a headline that reads, “Michigan still lags significantly behind nation in per pupil funding,” represent a report about state K-12 spending that’s limited to comparing 2008 spending to that of 2016?
In reality, a closer look at the report shows that the headline has two errors. First, it is factually incorrect. But even more, it does not reflect the full substance of the very report it is supposed to describe.
The report is titled: “Most States Have Cut School Funding, and Some Continue Cutting.” The press release highlights a portion of the report covering only certain forms of funding from state governments. It is within this category that Michigan’s ranking could accurately be described as 12th-worse in terms of per pupil spending decline (adjusted for inflation) between 2008 and 2016.
Ben DeGrow, the education policy director with Mackinac Center, pointed out that placing so much weight on such a narrow slice of K-12 spending history blurs more than it clarifies.
“Focusing on the number 12 ranking exaggerates the impact of the recession on Michigan K-12 budgets by taking only a partial snapshot that ignores billions of dollars at school districts’ disposal,” DeGrow said. “The figure compares only 'general formula funding' that relies heavily on dollars appropriated by the state legislature. In fact, when Michigan school districts raise local funds, the amount of state contribution goes down.” Previous editions of the same report have similarly understated the amount of taxpayer money given over to public schools.
“Even the National Education Association, which regularly advocates for more K-12 funding, paints a different picture than the MLPP,” DeGrow continued. “The NEA says Michigan increased spending from roughly $11,000 per student in 2007-08 to more than $14,000 per student in 2013-14.”
In fact, the report upon which the press release was based included a comparison of total K-12 funding (adjusted for inflation) between 2008 and 2014. This part of the report revealed that Michigan experienced only a 1.7 percent decrease, (adjusted for inflation) which was the third-smallest decline among the 31 states the report said had lower overall K-12 spending at the end of the period in question.
Also, among the 12 states the report highlighted for increasing total per pupil spending between 2008 and 2014, four — Iowa, Minnesota, Nevada and Tennessee — spend less per pupil than Michigan, according to Census Bureau figures.
So a headline that read, “Michigan lags behind several states in per-pupil funding” would have been accurate. Even that, however, would have sidestepped a broader issue.
“The long-term picture of education spending in Michigan and the U.S. shows dramatic increases that don’t match up with real results for students,” DeGrow said. “Most peer-reviewed academic studies can’t find a connection between additional funds and increased learning.”
Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.
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