Panel Paper: Money Blowing Through: The Effect of Wind Development on School Finances

Saturday, November 4, 2017
Comiskey (Hyatt Regency Chicago)

*Names in bold indicate Presenter

Sarah Cannon and Sarah B. Mills, University of Michigan

Wind energy is promoted as an opportunity for economic development in rural America. One often-advertised benefit of wind development is an increase in tax monies directed toward local schools. For example, in Michigan promotional material for wind farms estimated that the wind farms would pay between $0.4 million and $6.5 million to the local school districts over a 20-year period. However, no one has studied how schools are affected by the entrance of wind farms into a community. This project uses mixed methods to understand whether the entrance of wind farms affects local schools. We interview school officials from five rural, farming communities in Michigan that experienced wind development between 2008 and 2012. We also conduct regression analyses to study how district finances changed using data from the Common Core of Data and the Federal Aviation Administration.

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.