Money Blowing Through: The Effect of Wind Development on School Finances
*Names in bold indicate Presenter
Preliminary interview results indicate that school districts feel little to no effect of wind farms. This is largely due to the funding mechanisms of Michigan schools. The largest share of property taxes directed toward local schools goes to the general fund. Michigan has a redistributive tax policy that allocates public schools a fixed amount per pupil. This allowance is first comprised of funds from local property taxes and then supplemented with state funds. Local areas that raise taxes in excess of their allowance send excess funds to the state. The rural schools in the communities that experienced wind development have historically benefited from these redistributive policies. However, this policy means that any increases in revenue from local taxes are offset by a reduction in state revenue. Therefore there is little change to district budgets due to the mileages paid to the school district. Regression analyses confirm these reports. A model that includes both district and year fixed effects finds that wind turbines lead to an increase in revenues from local sources but do not effect the total revenue.
Michigan has an additional level of government between the school district and the state called Intermediate School Districts (ISDs). In contrast to the experience of school districts, officials from ISDs with large wind development projects report an increase in funding. These additional funds are redistributed to districts through efforts to fund programs including special education, vocational education, and reading specialists.
We conclude that the entrance of wind development has not affected the budgets of school districts in Michigan. This is largely related to Michigan’s redistributive school funding. In this specific case, wind developers should be careful in promoting the benefits to local schools and not overstate the impact of their taxes. More generally, industries entering an area should understand how the financial polices of a region will affect the school budget in order to set realistic expectations about their effects.