Wisconsin Gov. Scott Walker is wearing two hats at the moment. On the one hand, he’s running for the 2016 Republican presidential nomination, on a platform of being the guy who successfully reined in state spending, beating public employee unions into submission and slashing so much from the education budget that state colleges say they’ll be forced to eliminate entire majors. On the other, he has an unhappy pro basketball team on his hands — the owners of the Milwaukee Bucks say that if they don’t get a new arena, the NBA will take their team and move it to Seattle or someplace else — for which he has offered to spend at least $320 million in state, county and city taxpayer funds to replace their home, which at 27 years old has been declared too decrepit to live.
If you’re having a hard time holding those two things in your mind at once, that’s probably why you’re not the governor of a major U.S. state.
Figuring out how to justify giving lots of tax money to the local sports team (or airplane plant or grocery-delivery company) can be troublesome for elected officials regardless of their political bent. If you’re a Democrat, constituents are sure to point out that giving money to billionaires — the Bucks owners’ combined net worth is around $4 billion — might not the best use of taxpayer largesse. If you’re a Republican, tacking on several hundred million dollars in government spending is a no-no when it comes to fiscal conservatism; the Koch brothers, in fact, have already expressed their displeasure with Walker’s offer to the Bucks, albeit not so much displeasure that they’ll necessarily stop funding his political campaigns.
Walker’s response has been twofold. First, he says the arena plan’s extensive government spending would still be within the dictates of budgetary constraint because none of it would be funded by “a new tax.”
He’s right, to a point. All the plan’s funding — $75 million from the state budget, $93 million in county taxes that currently fund the convention center district, $47 million in city tax money, plus $55 million in tax money the county is currently owed but hasn’t been able to collect (much of which is probably actually owed to crime victims, but never mind that for the moment) — were carefully chosen to tap existing government revenue streams, so that Walker and the other elected officials could claim that no one will see their taxes rise to pay for shinier cupholders for Bucks fans. The downside: Using existing funds would punch holes in the state, county and city budgets, which would have to be filled either by cutting other spending or by, you guessed it, raising taxes.
This is becoming an extremely common gambit in sports subsidy deals. Two years ago, Sacramento approved $300 million in city spending on a new arena for the NBA’s Kings largely by selling bonds and promising to pay them back out of future parking revenues. To fill the resulting budget hole, the city simply invented more future parking revenues that would exist one forthcoming day, a sort of financial perpetual-motion machine that just goes to show that local officials have never yet found a road too long to kick a can down.
Even while Walker was insisting that a new arena wouldn’t cost taxpayers anything, meanwhile, he was readying a backup defense: Sure, it’ll cost money, but allowing the Bucks to leave would cost far more. With no NBA team, the governor insisted via a series of Excel charts, the state would lose out on income taxes paid by the team’s players — a figure his office estimated could be worth $220 million, though only by assuming that NBA players of the future will take home an average salary of $33 million a year, more than eight times what the Jared Dudleys and Carlos Boozers of the world currently make.
That argument has been widely disparaged by economists, for a couple of reasons. First off, they note, if the Bucks were to leave, all the people currently spending money on Bucks games would instead spend it on something else. (Though in Wisconsin’s case, since nobody has been crazy enough lately to pay much to see Bucks games, a sizable chunk of team income taxes actually flows from things like national TV contracts.) This helps explain why researchers have consistently found that there is no measurable economic impact when teams move out of cities.
Also, estimates of the benefit of spending on sports venues seldom include the cost of not using the money for something else instead. In 2006, for example, Kansas City, Mo., approved spending $425 million on stadium upgrades for Major League Baseball’s Royals and the National Football League’s Chiefs, money that came from a .375 percent hike in sales taxes. The team owners, needless to say, sold this as a great investment for the city (think of all the beef burnt ends fans would be chowing down on!), but when the Kansas City Star investigated, it discovered that the sales tax hike would have the effect of taking $25 a year out of the pocket of each and every Kansas City resident, somewhat blunting the economic good news.
But that’s all mere math. What governors like Walker are after here is something more: Selling sports projects as an investment that will pay off in jobs, in tax revenue, in the magic elixir known as revitalization. It’s an approach, it’s worth noting, that never gets applied to other budget line items, including some of Walker’s favorite targets. No, the University of Wisconsin system isn’t going to move to Seattle if it loses funding, but its students might — not to mention that all those unemployed English professors are going to have to seriously cut down on their grocery bills if they’re forced to take jobs at Applebee’s. (According to one estimate, the best bang for the government’s economic buck is actually food stamps, since it sends money to people who will spend it.)
For some reason, though, the only citizens whose requests for money get touted as economic development are the ones who own sports teams or other major corporations. But surely that must just be a coincidence. It’s not like governors would have some reason to play favorites, right?