COMMENTARY: 2020 is no time for subsidies in Nevada

This is the wrong year for Nevada to be handing out big-dollar economic development subsidies.

On Sept. 16, the state approved $25 million in subsidies for a planned Google data center at the Tahoe Reno Industrial Center in Storey County. That same day, Google and Gov. Scott Sisolak also announced that the tech company plans to double its planned investment in a data center currently under construction in Henderson that had already received $25 million in subsidy approvals. At this point, it’s unclear whether Google’s expansion plans in Henderson will receive additional subsidies from the state.

They shouldn’t.

It doesn’t make sense for Nevadans to be subsidizing Google — or any other company — right now. These deals come with price tags attached, and governments pay for targeted economic development subsidies to private companies through a combination of cuts to public services and increased tax bills for everyone else. Meanwhile, Nevada’s finances are already in such trouble that state legislators and the governor had to cut deeply into education, health care and public safety funding this year.

In the long run, history shows that subsidies measurably harm states’ fiscal health. That’s a bad enough decision when things are going well, but it’s an especially terrible way to run a state in the midst of a crisis.

The argument in favor of subsidies is that they are an investment in the future. Yes, sometimes those investments pay off. But why should Nevada invest millions to subsidize potential jobs 20 years in the future, while at the same time cutting other meaningful investments in the future — such as funding for the Early Learning & Development office at the state Department of Education — by more than 30 percent?

Subsidies are good for workers, we’re told. But Gov. Sisolak’s administration has said the state cannot afford to fund $100 per week in supplemental unemployment relief to workers displaced by the pandemic. Stop and think about that for a moment: If the state can’t afford to support its workers in 2020, what business does it have cutting subsidy deals now to support the workers it may or may not have in 2040 or 2050?

This isn’t just about Google. While we may have to wait for an announcement on that specific subsidy, the early evidence is that Nevada’s economic development strategies have not kept pace with the realities of the crisis. One sign of this is that in the emergency 2020-21 budget reductions, the Governor’s Office of Economic Development took a 14.9 percent cut, a significantly smaller percentage loss than the deep cuts made to the state’s universities and community colleges.

This is turning into a case study for how to get “economic development” exactly wrong. Any business owner, trade association or independent economist will tell you that the single biggest factor for business location decisions is access to the right workforce. In that case, why are Nevada taxpayers funding a government agency that exists to attract businesses, at the expense of educating the in-demand workers who actually make the difference in attracting businesses to Nevada?

Yes, it’s good that Google is investing in Nevada. The company clearly thinks it makes good business sense, and that will help encourage other companies to follow its lead. This is good news in a year where good news has been hard to find, and it’s good to see companies such as Google making investments in a better future.

That better future shouldn’t come at the expense of the needs of Nevadans today, though. When Google first became a public company, its founders promised that the company would “do things that we believe have a positive impact on the world, even if the near term financial returns are not obvious.” Right now, Nevada’s public service budgets are being slashed, the state can’t afford to support families facing financial disaster, schools are being asked to do more with less, public health budgets are stretched to the breaking point and taxpayers are struggling to bear the load of it all. In this environment, the best way for Google to live up to that slogan would be to quickly reassure Nevadans that it will forgo subsidies and pay its own way without support.

And if Google — or any other company — does ask for more, Nevada should say “No.”

— John C. Mozena is president of The Center for Economic Accountability, based in Michigan.