“It’s a potentially dangerous policy where you reward a company that threatens to leave. It’s a dangerous precedent. Why wouldn’t every other company make the exact same pitch?” said Steve Weitzner of Silverlode Consulting, a site selection firm. “In this case, you’re rewarding a company that is actually cutting a lot of jobs in the state” [Tony Cook, “Why Carrier Deal Could Set Troubling Precedent,” Indianapolis Star, 2016.12.02].
Over the years, I’ve watched, for years, for 10 years, for 12 years, for 15 years, beyond Obama, and I’ve watched as politicians talked about stopping companies from leaving our states… Remember, they’d give the low-interest loans. Here’s a low-interest loan if you stay in Pennsylvania. Here’s a zero-interest loan. You don’t have to pay. Here’s a this. Here’s a tax abatement of any kind you want. We’ll help your employees. It doesn’t work, folks. That’s not what they need. They have money. They want to go out, they want to move to another country, and because our politicians are so dumb, they want to sell their product to us and not have any retribution, not have any consequence.
* * *
I’ve been watching these politicians go through this for years…. I’ve been watching them give low-interest loans. I’ve been watching them give zero-interest loans. These companies don’t even need the money, most of them; they take the money. There were a couple of instances where geniuses with great lawyers gave them money and then they moved anyway…I mean, the whole thing is crazy.
According to Open Secrets, defense contractor United Technologies’ PAC has given $1.18 million to federal candidates this year, 35% to Democrats, 65% to Republicans. UT PAC gave Kristi Noem $4,000, John Thune $7,500, and Nancy Pelosi $10,000.
In essence, United Technologies took Trump hostage and won. And that should send a shock wave of fear through all workers across the country.
Trump has endangered the jobs of workers who were previously safe in the United States. Why? Because he has signaled to every corporation in America that they can threaten to offshore jobs in exchange for business-friendly tax benefits and incentives. Even corporations that weren’t thinking of offshoring jobs will most probably be re-evaluating their stance this morning. And who would pay for the high cost for tax cuts that go to the richest businessmen in America? The working class of America [Senator Bernie Sanders, “Carrier Just Showed Corporations How to Beat Donald Trump,” Washington Post, 2016.12.01].
Take Trump hostage, says Senator Sanders? Sounds like fun! Let’s do some math: Trump is willing to give up $7 million (of Indiana’s money) to keep 850 jobs from going to Mexico. (The deal also keeps 300 HQ and engineering jobs in Indiana that Carrier intended to move to North Carolina, which only voted for Trump over Clinton by 3.7 points instead of 18.91 like Indiana—try harder for the Führer next time, North Carolina!) That’s about $8,200 per job. My fellow workers, send President-Elect Trump a letter. Tell him you want $8,200 or you’re moving to Mexico and offshoring your own job. For the cost of a stamp, my wife and I could get over $16,000! (One more key number: temperature in Acapulco tonight as I write is 78°F.)
Sioux Falls Mayor Mike Huether just increased his stock at Dakota Free Press (and hey—given how little stock he has with me, any increase is significant). Evidently Mayor Huether withheld $100K out of $275K in economic development (translation: corporate welfare) money budgeted for the Sioux Falls Development Foundation last year.
Why? Because, says outgoing city economic development chief Darrin Smith, the Sioux Falls Development Foundation already had about that much money from the city that it wasn’t using:
The foundation was sitting on about $91,000 of unused city money from previous year’s budgets, and Smith said sending another $100,000 to the organization, which had no immediate plans to spend the money, wouldn’t have been prudent.
“We make it very clear in the annual agreement that if we see those (leftover) dollars grow … we’re not going to keep sending those dollars,” Smith said. “Any project that would have come forward that needed help, they would have been in position immediately to help with that” [Joe Sneve, “City Hall Withholds $100K from Economy Booster,” that Sioux Falls paper, 2016.05.03].
SFDF president Slater Barr says yeah, they are sitting on city dollars, but gee whiz, maybe something will come up, and then golly gee, we need to have lots of public dollars available to juice the economy, because hokey smokes, the market sure isn’t going to work on its own in South Dakota’s biggest, best connected, most prosperous city.
Good choice, Mayor Huether. Now maybe you can spend some of that $100K on boosting the city’s multi-cultural outreach so you can land a human relations coordinator who will stick around for more than four months.
Among the five vetoes Governor Dennis Daugaard issued yesterday was one seemingly admirable rebuff to corporate welfare. The Governor said no to Senate Bill 100, a measure that would have favored broadband projects in the Reinvestment Payment Program of the Governor’s Office of Economic Development. The program currently gives grants to new industrial projects costing more than $20 million and industrial expansion projects costing more than $2 million. These grants are capped at the total amount of state sales and use taxes paid on the project by the developer.
(Note: The Legislature and Governor are willing to give rich corporations millions back on their sales tax, but they can’t pass an exemption on the food tax for those corporations’ employees. Priorities, priorities….)
SB 100 made broadband projects eligible for these tax refunds. AT&T, Verizon, CenturyLink, the Chamber of Commerce, and Heartland Consumer Power District (run by the Governor’s old pal Russell Olson) all lined up to say you betcha to SB 100. Remarkably, this broadband refund was one corporate handout too far for Governor Daugaard. In his veto letter, the Governor says the telecommunications industry already has enough public incentives and market reasons to build broadband projects in South Dakota. He says we reformed our economic development grants in 2013 to get rid of automatic tax refunds and that SB 100 would take us back to that bad practice:
The changes in Senate Bill 100 would be a step back to the system of automatic tax refunds that the Reinvestment Payment Program was designed to replace. Specifically, the bill makes qualification automatic for a segment of broadband projects receiving federal grant funds. Clearly, companies receiving a federal grant have already committed to their project regardless of any state incentive. In addition, the bill creates internal inconsistencies in the law that will make it confusing for the Board of Economic Development to administer, and for prospective applicants to understand. The Board of Economic Development must have the authority to direct our state’s incentives to projects that will not happen without an incentive [Governor Dennis Daugaard, veto letter to SB 100, 2016.03.25].
I commend the Governor’s logic: government should meddle in the free market only to make good things happen that the free market won’t make happen on its own. Of course, if we’re talking about broadband projects already supported by federal grants, we have to convolute the logic a bit: Uncle Sam is already propping up the project, so it’s no longer a truly free market project, but it’s going to happen without our adding a few percentage points to the developer’s subsidized profit margin.
Far be it from me to stand in the Governor’s way when he wants to check corporate welfare, but as I review the text of SB 100, I’m not convinced it would have undermined the authority of the Board of Economic Development as much as the Governor’s veto letter says. SB 100 does contain the problematic provision that an attestation that the project has satisfied the conditions of an awarded federal grant shall “satisfy any requirement by GOED that the project would not have been undertaken but for the reinvestment payment.” But consider these two clauses added by Rep. G. Mark Mickelson’s amendment on March 7:
(6) For all broadband applications the award of a reinvestment payment shall be subject to the board determination that the reinvestment payment increases the scope of the project on terms and conditions satisfactory to the board; and
(7) Notwithstanding all of the above, the board shall have the discretion to award or deny a reinvestment payment based on its determination on whether the reinvestment payment will have a positive effect on economic development and job growth [SB 100, as amended in the House, 2016.03.07].
SB 100 allows the Board of Economic Development to retain its discretion in refunding taxes on broadband projects. The Board could still look at the potential effect of its handout and say, “Our refund won’t add one hire or one fiber-optic hookup, so we’re not giving the money.” But I can understand the Governor’s contention that the language is a little confusing: if satisfaction of federal grant conditions establishes that the project wouldn’t happen without our help, can the Board still deny the grant on the assertion that the grant wouldn’t make an economic difference?
SB 100 passed unanimously in the Senate and 61–5 in the House with minimal discussion and no dissenting speeches in either chamber. The only opponent testimony in committee came from the executive branch. SB 100 may not have roused the passions necessary to override a veto… and since we’re talking corporate welfare, that’s fine with me. Let’s keep these multi-million-dollar corporations kicking in their fair share toward increased teacher pay, just like the rest of us.
This morning I laid out four good reasons that SB 159, which would give insurance companies tax credits for giving low-income kids scholarships to private schools, should die as it did last year. House Appropriations almost granted my wish. Rep. Jean Hunhoff (R-18/Yankton) wanted to send SB 159 to the 41st day; Rep. David Anderson (R-16/Hudson) offered a substitute motion to table. The table motion insulated SB 159 from further debate in committee. Rep. Anderson’s motion to table passed on a slim 5–4 margin.
But some House members really, really want these stealth vouchers. This afternoon they voted to smoke out SB 159, forcing House Appropriations to send it to the full House for debate tomorrow.
House members should consider three items as they prepare to debate this constitutionally and fiscally unwise bill.
First, SB 159 should require a two-thirds vote to pass. It creates a new tax expenditure. It costs the state money (as laid out in the fiscal note to SB 159). It is essentially an appropriations bill, and our state constitution requires that any separate appropriations bill receive a two-thirds vote of all members of each house.
Second, Section 9 of SB 159 keeps secret the identity of the insurers receiving tax credits to fund private-school scholarships. If SB 159 is really in the public interest, the public should know who’s getting tax dollars for carrying out that interest, so we can be sure there’s no corrupt diversion of funds to friends of state government.
Third, before the House convenes, members should ask why prime HB 159 sponsor Senator Phyllis Heineman and her insurance agent husband D. Greg Heineman need any more state money to subsidize their support for Catholic schools. D. Greg’s company, Williams Insurance Agency, is clearly a friend of state government: according to the state’s invoice database, Williams Insurance Agency has received over $8.6 million in payments from the state for various insurance services:
payments to Williams Insurance Agency
2016 (so far)
total since July 1, 2011:
Heinemans get millions in nice contracts from the state, and still need tax credits to fund their philanthropy to private schools? Come on—give someone else a turn at the trough!
The big reason to vote Senate Bill 159 down once and for all is its unconstitutional effort to launder public money for private schools. The stink of cronyism and corporate welfare should ice that cake and convince the House to stick with its duty to support public schools.
Meanwhile, in local corporate welfare news, my city council is formalizing some handouts to big corporations. Ordinance 16-01-03 received a favorable first reading last night, with the six members of the nine-person council present all voting aye.
Ordinance 16-01-03 formalizes the statutory authority municipalities have to hand out sales and use tax refunds to “the consumer or user of machinery or other tangible personal property in the nature of a capital asset capital asset which is used directly in the manufacturing or processing or fabricating or compounding of personal property which is intended to be sold or leased for final use consumption” [SDCL 10-52-10]. Aberdeen wants to use that authority to hand out sales tax rebates to big projects. Here are the city’s criteria for “big”:
at least $5 million in new construction property value
at least $10 million invested in “non-realty capital assets”
more than $10 million in combined new construction and non-realty capital assets
The refunds will only be able for certain kinds of business ventures:
manufacturing, processing, fabricating, or compounding
data processing, hosting, and related services, including payroll services and financial transactions
research and development in the social sciences, in the humanities, or in the physical, engineering, and life sciences
Ordinance 16-01-03 explicitly excludes the following projects:
residential housing or transient lodging
health care facilities
establishments not subject to property tax or equivalent taxes measured by gross receipts.
The refund will be 50% of the sales and use tax developers pay for the construction and other investment necessary to build and launch their project.
To translate, if you are regular folks moving to Aberdeen, working hard, buying a house, and feeding your family, you will pay 2% sales tax.
If you are a local weapons instructor looking to build a $500,000 training facility and shooting range, you will pay 2% sales tax.
Hmm… the richer you are, the lower your tax rate… isn’t that the definition of a regressive tax? Come on, Aberdeen! I thought you were South Dakota’s beacon of progressivism!
Raising my hackles just a little more about this corporate welfare are the comments city manager Lynn Lander and Aberdeen economic development chief Michael Bockorny made prior to last night’s meeting about the city’s economic development incentive plans:
Lander said this is the first of two economic development incentives he plans to present to the City Council for consideration. He declined to share details of the second incentive.
Bockorny is aware of the second incentive that will be pitched at a later date.
Hold on a moment: if I were a city councilor (I’ve thought about it!), and if I were being asked to sacrifice city revenue and make our tax system more regressive for the sake of economic development, I’d want to know all the incentive proposals that the city manager and other parties plan to bring forth. If the city manager puts the sales tax rebate on the table, then hints that he’s holding another incentive plan behind his back, I want to see it! Before I vote for the sales tax rebate, I need to see the other proposal. Maybe the two proposals will work really well together. Maybe the city can only afford one such tax expenditure, and I want to pick the more progressive of the two proposals. Maybe I’ll approve the first proposal, but I need to see the second proposal now so I can say no, send the city manager back to scale the second proposal down, and then be able to say for sure that the city manager really did scale it back for a fair compromise when he brings it to the next meeting.
Whatever the case, this idea of, “Vote for this incentive now, and we’ll tell you about our next super-secret incentive later!” doesn’t pass open-government muster. If Aberdeen is going to spend tax dollars on corporate welfare, we need to see the big picture so we know just how free a ride our leaders want to give the richest among us.
Bernie Sanders isn’t so far ahead of the socialist curve. South Dakota does socialism all the time. The difference between Bernie Sanders’s socialism and South Dakota’s socialism is that Sanders calls for Rooseveltian socialism on behalf of the masses:
[President Franklin Delano Roosevelt] saw one-third of a nation ill-housed, ill-clad, ill-nourished.
And he acted. Against the ferocious opposition of the ruling class of his day, people he called economic royalists, Roosevelt implemented a series of programs that put millions of people back to work, took them out of poverty and restored their faith in government. He redefined the relationship of the federal government to the people of our country. He combatted cynicism, fear and despair. He reinvigorated democracy. He transformed the country.
And that is what we have to do today [Senator Bernie Sanders, speech, transcript by Vox, 2015.11.19].
The state Transportation Commission doubled the amount of highway aid available to local governments for economic development projects Friday.
Then the commission spent nearly all of it — though almost none of the projects approved Friday are in West River.
The panel approved $3.12 million for local-access work in 11 small communities, as well as $400,000 for a new ethanol plant to be built at Onida and $250,000 for a produce-delivery company opening at Dell Rapids.
…The commission didn’t take any action on a request for DOT to provide aid for township roads.
Your choice at the polls in 2016 won’t be evil socialism versus good manly, Godly capitalism. It will more likely be between socialism for all, everyone working for everyone’s benefit (something America’s young voters seem to get), versus socialism for the few, everyone working to enrich the elites.
But not every farm was afflicted by disease. According to [Canistota chicken farmer Tom] Neuberger, the avian flu never found its way onto smaller, free-range farms.
“One of the state poultry association guys was here to check our operation out, and they didn’t find a small operation like ours that got the disease,” Neuberger said.
Neuberger said he and his wife have raised chickens for about 40 years and also raise geese, turkeys, ducks, beef, pork, lamb and chickens grown for meat [Jake Shama, “Egg Producers Yet to Recover from Avian Flu,” Mitchell Daily Republic, 2015.10.28].
Any chicken—whether factory fowl or family friend—can get bird flu. But the fact is that in South Dakota in 2015, the corporate flocks got it and the backyard flocks didn’t.
The decline in eggs has led to higher prices. Nationwide, farmers received an average of $2.38 per dozen for table eggs in August, according to USDA data. Farmers received $0.86 per dozen at the same time last year and $0.87 in 2013.
This marks the first time egg prices paid to farmers have risen above $2. Additionally, June and July marked the second- and third-highest prices paid of all time, respectively, according to USDA records dating back to 2000 [Shama, 2015.10.28].
I pay an extra two bucks to add one egg to a Sausage McMuffin at McDonald’s. The farmer gets a tenth of that money.
The Future Fund was started by Governor George Mickelson decades ago to invest in South Dakota’s workforce and build its economy, and I can’t think of anything better to invest Future Funds in than career and education programs throughout the state and right here in Aberdeen [Governor Dennis Daugaard, speech at A-TEC Academy, Aberdeen, SD, 2015.09.01, timestamp 7:58].
But the Governor isn’t valuing education in itself as a great humanist enterprise. Education remains a means to a corporate end. Consider his revisitation of his disdain for philosophy majors, along with psychology majors and art historians who don’t get jobs in their academic fields:
[4:02] It frustrates me today to see many young people enter their postsecondary academic pursuits not knowing what they want to be….
[4:39] This building gives you the opportunity while you’re still in high school to explore possibilities, to try your hand out at electronics, to try med tech, or try machining or welding or some of the other things that are taught as part of your career and technical education offerings either here or elsewhere in the state. It gives you a chance to try it out.
Someone told me recently that the most common college major is psychology…. I don’t know if that’s accurate or not, but there certainly are a lot of them. I know when I go to college graduations, sometimes I’ll be a commencement speaker, and you can read through the program, how many graduates there are in this or that field, and boy there are plenty in of psychology grads. There’s philosophy grads, there’s art history grads. And those are great fields of study. They’re interesting. Those who graduate with those degrees will go on to become counselors and historians and great philosophers. Many of them, though, will go on to work at jobs that don’t require those kinds of degrees, and those students will be burdened with lots of debt and a job that has nothing to do with the degree that they spent a lot and borrowed a lot to obtain.
Conversely, behind these walls, lies training for a degree or the beginnings of a degree for which there is truly demand in the marketplace, for which there are jobs available and employers who want you. So career and technical education programs prepare South Dakotans, prepare students for opportunities awaiting them after graduation [Daugaard, 2015.09.01].
The Governor says a couple nice things about philosophy, but the thrust of this passage discourages students from pursuing education in the humanities. I don’t mind the Governor’s promoting career and technical education. I agree that for plenty of students, CTE is a good career path. But I still don’t get why the Governor has to persuade students away from one education path in order to promote another. Studies and career paths are like towns. Saying “Aberdeen’s a nice place to live” does not require that (and is not proven if) I say, “Huron and Watertown suck!” I can say, “Huron and Watertown are nice; Aberdeen’s nice, too.” Why can’t our Governor stop playing the grouchy, narrow-minded dad and say, “Psychology and art history are nice; vo-tech is nice, too”?
The Governor’s statements here suggest that education is valuable only if it translates into a clearly related, lasting, and lucrative job. But graduates of any educational program, liberal arts or vocational/technical, may change career courses for perfectly good reasons. An math major may reach graduate school and decide he’d rather be a lawyer and work in politics. A welder may move to a market where she can get better pay or better working conditions as a carpenter or a freelance writer. An art historian may meet a wonderful mate, take twenty years out of the workforce to raise wonderful kids, then jump back into the workforce as a pastor or a pastry chef.
And that’s fine! We need not view any of those choices to work outside one’s academic preparation as a loss, a waste, or a declaration of error. The demands of the marketplace change. People change. Philosophers and welders, humans both, share the potential to tire of philosophizing and welding and to crave broader horizons. That’s why, instead of programming them to follow one paycheck-promising career path, we must teach them to be open to broader possibilities.
The Governor ignores the non-economic value of learning. Some students willingly devote time and money and go into debt to study certain subjects just because those subjects are fascinating and beautiful parts of human culture. The Governor’s philosophy of education seems formed entirely by employers and the transient demands of consumer culture, with an at-best dismissive eye toward the more enduring intellectual and spiritual aspects of learning. (Check this out: Dennis Daugaard is the live-in-the-now materialist in this discussion, while I am fighting for the everlasting soul.) In the Governor’s impoverished view, education is not for building souls; it is for building tools to be used by corporations to make widgets and profit.
I welcome every two-million-dollar investment Governor Dennis Daugaard wants to make in my school district to help give kids more opportunities to learn and grow. The Future Fund grant that built A-TEC is still corporate welfare, but less direct, and providing broader benefits for young South Dakotans through our public school systems than any handouts filtered through corporate exploiters of state largesse.
But if the Governor can spend $8.5 million dollars to help kids in twelve K-12 districts try out welding and carpentry, why not spend another $8.5 million to fund a gifted education coordinator/teacher for every South Dakota school district to help kids develop their fullest intellectual potential? (151 districts, $8.5 million… that’s over $56K per district.) What are you afraid of, Governor Daugaard: that the gifted kids might do more philosophizing?
The business and housing assistance programs created three years ago as part of the Building South Dakota program saw big demand so far. But one designed specifically to offer tax breaks for smaller business projects has found few takers.
There have been two grants totaling $36,480 for equipment upgrades by Yankton-area businesses Sapa Extrusions Inc. and TruXedo Inc. Meanwhile, the program’s fund balance has grown to more than $1.3 million.
The grants, which are essentially refunds of sales and use tax, are available to businesses with projects smaller than $20 million or purchasing equipment for less than $2 million.
Crony capital points its fork at small business’s plate and says, you gonna eat that?
Costello told members of the Legislature’s Government Operations and Audit Committee that a legislator — Rep. Dick Werner, R-Huron — suggested there be consideration to allow funds to be transferred between Building South Dakota’s various programs.
Costello said that could be helpful in making best use of the money, so large amounts aren’t mothballed. He said it could work both ways for a program. “In future years, it may reverse itself,” he said [Mercer, 2015.08.26].
Do call me when the big boys leave free state money on the table for the small fry.