Wisconsin Democrats Hit State’s Fiscal Bureau Hard on Foxconn Incentives

Terms of the memorandum of understanding that Walker signed with Foxconn CEO Terry Gou on July 27 are incorporated in a bill pending in the Assembly's special session that Walker called to enact the legislation. The bill would authorize Wisconsin to pay Foxconn about $3 billion in cash incentives to coax the huge contract manufacturer to begin producing LCD display panels within four years with a workforce of up to 13,000 employees (see 1708040056). Walker and other supporters of the Foxconn deal deem enactment of the legislation crucial for converting the MOU to a binding contract, and they have self-imposed a Sept. 30 deadline for getting the legislation done.

Though Republicans hold majorities in the Wisconsin Assembly and Senate, Democrats in the caucus made clear in the two-hour hearing, which was webcast on the WisconsinEye Network, that they won't acquiesce quietly to the Foxconn deal or the legislation. “Treat me like an idiot and just give me the numbers,” said the most outspoken of them, Rep. Jason Fields (D) of Wisconsin’s 11th assembly district in Glendale. In the cash payments that Wisconsin makes to Foxconn, "What are we giving and what are we getting” in return? Fields asked Fiscal Bureau Program Director Rob Reinhardt. What the state pays out in payroll incentives depends on how many employees Foxconn actually hires and how much it pays them, said Reinhardt.

The MOU and legislation obligate the state to pay Foxconn 17 percent of the company's payroll costs in cash incentives up to a certain cap for a maximum of 15 years, Reinhardt told Fields. At full employment, the maximum Wisconsin has agreed to pay Foxconn in cash incentives assumes a workforce of 13,000 employees commanding nearly $54,000 in average salary, state analyses have shown.

But what if the Foxconn deal “goes to hell?” Fields asked Reinhardt in his follow-up. “How are we protected? That’s really what everybody wants to know.” Were Foxconn to “tell us next month, 'Sorry, we’re going to Ohio,' then we’ve wasted a lot of time here, but we didn’t give them any money,” responded Reinhardt. “They don’t get any money unless they have capital expenditures,” he said. As future protections, the MOU and legislation also obligate Foxconn to repay the state if the company supplies false or misleading information about its payroll or capital costs to land the cash incentives or reneges on key commitments about the project. For example, Foxconn would owe Wisconsin cash refunds if it ceases operations at the display fab and doesn’t resume them for a year.

Fields also pressed Fiscal Bureau Director Bob Lang for answers on whether the state legally can pursue ownership shares in the Foxconn display fab in return for the cash incentives it pays out. Lang told Fields he posed those questions to state attorneys, but hadn’t heard back yet. If Wisconsin is going to pay Foxconn huge sums to build a display fab in the state, “we might as well have some ownership in it,” said Fields.

Reinhardt acknowledged at the hearing that the legislation leaves many questions unanswered or at least open to interpretation. Democrats in the caucus pounced on that as evidence the legislation and the MOU on which it's based are being rushed through the Republican-controlled legislature without the proper vetting.

For example, for all the cash incentives payable to Foxconn that will be borne by Wisconsin taxpayers, Rep. Chris Taylor (D) from Wisconsin's 76th district in Madison wanted to know if there's anything in the bill preventing an Illinois resident from crossing over the Wisconsin state line and commuting the short distance to Kenosha to work at the display fab. Reinhardt responded that to his knowledge, the bill is silent on state residency requirements. Reinhardt also said he was unsure of the answer to another question about how the legislation would treat out-of-state residents who telecommute to their jobs at the Foxconn display fab.