Abating Our Future: How Students Pay for Corporate Tax Breaks

30/03/2021

 149 school districts alone lost more than $1,000 per student

School Districts Lost Nearly $2.4 Billion to Corporate Subsidies in FY 2019

Washington, DC, 2021 - Economic development tax abatements given to corporations cost public school districts $2.37 billion in foregone revenue in fiscal year 2019. That’s an increase of 13 percent – a $273 million jump – from just two years earlier and came during the pre-pandemic period of economic prosperity, a new report details.

The losses were widespread: 97 school districts lost more than $5 million each, and 149 districts lost more than $1,000 per student. That left less money for students, who suffered poorer schools, and caused working families to pay higher local and state taxes. 

These massive losses were reported in only 27 states, and even those disclosures are incomplete. And in the other 23 states plus DC, for reasons ranging from legitimate to indefensible, school districts fail to disclose any meaningful information about how much revenue they are losing to corporate tax abatements.

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These are the key findings from Good Jobs First’s analysis of data obtained via a new governmental accounting rule and contained in a new report, “Abating Our Future: How Students Pay for Corporate Tax Breaks.”

“From hiring more school counselors and nurses to expanding pre-K access and restoring after-school programs, there are countless ways districts could be using this money,” said Christine Wen, a Good Jobs First fiscal policy coordinator and the report’s lead author. “But we still don’t know the full story because too many states are failing to require local governments, including school boards, to provide the new tax-break disclosure data to the public.”   

Indeed, despite the $2.37 billion price tag, the findings represent only about one in five independent public school districts across 50 states and D.C. (a small number of districts do not produce annual financial audits)In about a dozen states, the report details, school districts are dodging the disclosure rule and suffering no state penalties or sanctions.

Without clear oversight, some school districts—and their hired accounting firms—are free-lancing. They are ignoring the disclosure rule, reporting abatements in misleading ways that hide actual losses, blaming cities or counties for missing data, claiming excessive complexity, or reporting that losses are 'immaterial' without defining that term, said Greg LeRoy, executive director of Good Jobs First. These states merit more investigation. It’s clear the harm of abatements is far greater than we can prove yet.

In some states with more-complete disclosures, it is evident that the poor pay more. That is, school districts with the highest rates of poverty (measured by metrics such as the share of students who qualify for free or discounted school lunches) are likely to suffer the highest losses.

And because U.S. poverty is racialized, this means that Black and Brown students often suffer the greatest losses. Indeed, Kansas City Public Schools Superintendent Dr. Mark T. Bedell recently called the community’s approach to tax abatements “systemic racism.” His school board is seeking tax-break reforms to reduce racial and economic disparities in the region. 

Good Jobs First scoured the end-of-year spending documents of more than 10,300 school districts to determine the cost of the tax abatements.

Other significant findings: 

  • South Carolina reported more K-12 losses than any other state; its $423 million in abated revenues was a staggering 31 percent increase from two years prior.  
  • At $112 million, no district lost more in net tax abatements than the Philadelphia City School District, where 75 percent of students are Black and Latino. 
  • Storey County School District in Nevada reported the highest per-pupil foregone revenue — over $35,000That is due primarily to subsidies given to Tesla Motors, led by billionaire Elon Musk.  
  • Of the 149 districts that reported losses of more than $1,000 per student, 52 were in Texas. 
  • 87 New York school districts lost between $1 million and $10 million in FY 2019; and three of these  Peekskill, New Rochelle, and Rensselaer  lost over $10 million. All are relatively poor, and two have large shares of Black and Latino students.  
  • Officials in California, home to more students than any other state, are misinterpreting the rule, saying because the state makes up the revenue districts would otherwise lose from abatements local governments do not have to report totals. 

School boards do not typically award abatements; states give that power to cities or counties in what amounts to “an intergovernmental free lunch” where education is the biggest loser. The report recommends that states amend tax-break laws to completely shield those revenues dedicated to education. 

The report also details reforms needed in those states that fail to enforce the new accounting rule. State auditors, comptrollers, treasurers, or education commissioners should have clear authority to enforce the rule and be able to impose penalties on school districts that ignore or evade it. 

Finally, the report concludes that the Governmental Accounting Standards Board (GASB) itself needs to fix its analyses of two kinds of tax abatements (tax increment financing and industrial development bonds) to resolve ambiguities that are causing some local governments, including school districts, to fail to comply and disclose. 

Good Jobs First, based in Washington, DC, is a non-profit, non-partisan resource center promoting accountability in economic development and corporate conduct. It was honored by State Tax Notes magazine for its successful leadership role in advocating for GASB Statement No. 77 on Tax Abatement Disclosures

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