First-Ever Report Details Loss of Revenue to Public Ed Due to Corporate Tax Breaks

Corporate tax breaks divert public support for a state’s infrastructure into the corporate coffers.  It is a way to give away tax money without ever collecting it.

One of the lines of defense for the corporate tax break is that the tax break does not constitute giving away tax money since the money was never collected.

Nice try. However, the diverting of tax money into corporate tax breaks results in fewer dollars directly available for otherwise tax-funded entities, including public schools.

A second justification for corporate tax breaks is that the tax break will result in the indirect benefit of the corporation’s greater economic contribution, which more than offsets the tax break.

Maybe, maybe not. But how is one to know?

Answer: Track and publicize the dollar amounts of state and local corporate tax breaks in order to see exactly how much revenue is being forfeited so that one might evaluate whether the corporate tax break can be economically justified.

In 2013, the Government Accounting Standards Board (GASB) formally took up the issue of tax abatement disclosure; its Statement 77, “Tax Abatement Disclosures,” formally took effect in December 2015. According to GASB,

GASB Statement No. 77, Tax Abatement Disclosures, requires state and local governments to disclose key information about their tax abatement agreements that has not been consistently or comprehensively available before. …

Many state and local governments have tax abatement programs in place. These programs can have a substantial effect on the governments’ ability to generate revenue and their overall financial health. Without providing the kind of disclosures the GASB guidance will require, it can be difficult to determine the extent and nature of the abatements.

In December 2018, the Washington, DC-based, national policy resource center, Good Jobs First, produced “the first-ever disclosure of corporate tax abatements’ cost to public education” in its 29-page report The New Math on School Finance. Below is the December 04, 2018, press release, which includes some highlights from the report:

Subsidies Cost Schools at Least $1.8 Billion Last Year

Washington, DC—A new report from Good Jobs First finds that public schools across the country lost at least $1.8 billion last year as a result of economic development tax incentives granted to corporations. The study analyzes the financial reports of 5,600 of the nation’s 13,500 independent public school districts. The report can be found at https://www.goodjobsfirst.org/newmath

School districts in ten states, led by South Carolina, New York and Louisiana, collectively lost $1.6 billion. If this money were instead reinvested in hiring new teachers and reducing class size, these ten states alone could add more than 28,000 teachers.

Nearly 250 school districts lost at least $1 million each, and in four districts, tax abatements reduced classroom resources by more than $50 million. Hillsboro, Oregon schools lost $96.7 million as a result of extremely generous tax breaks to Intel.

The report, entitled The New Math on School Finance, was enabled by a new accounting standard adopted by the Governmental Accounting Standards Board (GASB), the body that sets accounting rules followed by all states and most localities.

The new rule, GASB Statement No. 77 on Tax Abatement Disclosures, requires most state and local governments to report annually on the amount of revenue they’ve lost to corporate tax abatements. The report also raises the issue of apparent non compliance with the new accounting rule by school districts in many states.

The new rule is especially important for understanding school finance, because it requires the reporting of revenue losses even if they are suffered passively by one government body as the result of decisions made by another body of government.

School boards rarely have input into abatement decisions made by city councils or county boards. Yet schools are often the most adversely affected when property tax abatements or other local tax breaks are granted.

“The numbers for Louisiana are astounding — even more so, in that local bodies are still under-reporting about $500 million in subsidies. As more school districts begin to comply with this new mandate, this report from Good Jobs First will become a treasure trove of hidden insight into how our government truly functions,” said Dianne Hanley, spokeswoman for Together Louisiana, a statewide coalition of faith communities and civic organizations.

“Even before today’s tight labor market, the supply of skilled labor was the top site location criterion used by most companies. Today, it is especially true. Yet when costly corporate subsidies undermine local schools, elected officials are actually undermining their economic development efforts,” said Greg LeRoy, executive director of Good Jobs First.

Important observation above:

“School boards rarely have input into abatement decisions made by city councils or county boards. Yet schools are often the most adversely affected when property tax abatements or other local tax breaks are granted.”

Some notable info from the report:

From Appendix G (page 25), “US School Districts That Lost More Than $1 Million to Tax Abatements in Most Recent Fiscal Year,” the top 15 districts and amounts of loss. Note that both Louisiana and South Carolina each hold four of the 15 top spots, with Louisiana outdoing South Carolina in higher dollar amounts of revenue forfeited:

• Hillsboro School District (OR): $96.7M
• Philadelphia Public Schools (PA): $61.9M
• Ascension Parish Schools (LA): $58.3M
• St. Charles Parish Schools (LA): $54.8M
• Calcasieu Parish Schools (LA): $45.4M
• Port Arthur Independent School District (TX): $44.5M
• Berkeley County Schools (SC): $43.6M
• Storey County School District (NV): $38.6M
• Chicago Public Schools (IL): $37.5M
• Cleveland Municipal Schools (OH): $34.2M
• Iberville Parish Schools (LA): $31.7M
• Greenville County Schools (SC): $30.4M
• Aiken County Schools (SC): $25.6M
• Charleston County Schools (SC): $25.3M
• Ossining Union Free Schools (NY): $25.1M

Also from Appendix G, the bottom 15 districts losing more than $1M in tax abatements:

• Oklahoma County Schools I-89 (OK): $1,100,376
• Bossier Parish Schools (LA): $1,096,322
• Houston County Schools (GA): $1,085,047
• Spokane School District No. 81 (WA): $1,067,885
• Lefourche Parish Schools (LA): $1,059,000
• Richmond County Schools (GA): $1,057,977
• Park Hill School District (MO): $1,057,096
• St. Tammany Parish Schools (LA): $1,039,100
• Coxackie-Athens Central School District (NY): $1,036,756
• Grand Ledge Public Schools (MI): $1,031,078
• Mahomet-Seymour Comm Unit School District 3 (IL): $1,029,908
• Red River Parish Schools (LA): $1,015,000
• Niagara Falls City Schools (NY): $1,014,490
• Gloucester Township Schools (NJ): $1,013,166
• Shippensburg Area School District (PA): $1,010,685

With 4 districts listed, Louisiana makes the most appearances in the bottom 15.

Out of curiosity, I examined Appendix G’s full list to see how many Louisiana districts were included. I counted 21.

Given that Louisiana has 80 school districts, this means that one in four is forfeiting over $1M (many well over $1M) in the name of corporate tax breaks, for a total of $268M in forfeited public school revenue for a single fiscal year. (Appendix F on page 23 provides this total and notes that only 42 districts– just over half– reported info). One of the non-reporters was Jefferson Parish Schools. From page 11 of the report:

Jefferson Parish Schools, Louisiana – In 2014, Jefferson Parish awarded a 100 percent property tax abatement to Entergy Louisiana to support the company’s expansion of its Nine mile 6 natural gas-powered electric plant. The abatement was estimated to be worth over $111 million over 10 years. Property taxes account for about 15 percent of the District’s revenue. Still, the school district has not disclosed any abatement losses in school revenue.

Also regarding Louisiana, on page 16:

Louisiana schools have suffered some of the greatest revenue losses as a result of corporate tax subsidies. In 2016, an effective campaign by the faith-based community group Together Louisiana led Gov. Jon Bel Edwards to sign an executive order giving local school boards the right to opt out of abatement deals granted by the state board that oversees subsidies.

Finally, from page 16, some info on Alabama’s tax laws and why when it comes to the negative effects of tax abatements, Alabama is no Louisiana:

In Alabama, state law requires the school increment of property taxes be shielded from economic development deals offering tax abatements.

I cannot do this report justice in a blog post. There is much info to pore over, including info about which states try to offset the revenue loss to districts due to tax breaks. For example, this from a footnote (page 24) regarding Arizona:

Arizona’s primary abatement program, the Government Property Lease Excise Tax, requires an abating government to implement an excise tax on other taxpayers to offset the losses to school revenue caused by abatements.

In Arizona, other taxpayers are taxed more to offset the tax abatement.

There is also this offset info from page 10, related to California:

In our aforementioned study on corporate tax breaks and school board powers, we documented how in many states local tax breaks are partially offset by state funds, typically via per-pupil equalization formulas. Rarely do such offsets make school districts whole, however. This tension persists and figured prominently in one of the largest changes to incentive law in recent U.S. history. In 2011, California terminated its tax increment financing (TIF) program as part of a budget-balancing legislative package. That gave the Golden State enormous budget relief because it was reimbursing school districts more than $2 billion annually for their TIF-generated losses.

The report also includes suggestions for citizens endeavoring to increase the degree to which states and districts comply with tax abatement disclosure. Thus, not only does the report offer information; it also offers practical advice for improving tax abatement disclosure accountability.

In providing this first-ever report on the impact of corporate tax abatement on public education, Good Jobs First has provided valuable information to citizens concerned about adequately funding their public schools.

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Schneider is a southern Louisiana native, career teacher, trained researcher, and author of two other books: A Chronicle of Echoes: Who’s Who In the Implosion of American Public Education and Common Core Dilemma: Who Owns Our Schools?. You should buy these books. They’re great. No, really.

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