Good Jobs First entered the national scene when it produced documentation that the CARES Act was being used to funnel billions of dollars to private schools and charter schools. The charter schools were double-dipping, first taking money allotted to public schools, then getting millions more from the Paycheck Protection Program, which excluded public schools.
Now, Good Jobs First has released a new report, showing that students are paying for corporate tax breaks.
Abating Our Future:
How Students Pay for Corporate Tax Breaks
Executive Summary
Public school students in the U.S. suffered poorer schools—and local and state taxpayers paid higher taxes—in 2019 due to corporate tax breaks. Thanks to a new government accounting rule, we are able to prove that economic development tax abatements given to corporations cost public school districts at least $2.37 billion in forgone revenue in 2019. That is $273 million — or 13 percent— higher than two years before.
Across the country, 97 school districts lost more than $5 million each; 149 districts lost more than $1,000 per student.
Even though we looked at all 50 states and DC, these dollar amounts come from only 2,498 school districts in 27 states, which represent about 20 percent of independent school districts. For some of the states with no meaningful data, there are legitimate reasons, such as no independent reporting for school districts.
However, as we detail, some dozen states are failing to ensure that school districts and other local government bodies are adhering to the new accounting standard.
In essence, they are either exploiting loopholes in the rule or ignoring it altogether.
With no way of knowing how much revenue school districts are foregoing in these data-absent 23 states and the District of Columbia, it’s clear the harm of abatements is far greater than we can yet prove.
Those costs reduced school budgets, forced states and localities to raise their tax rates to offset at least some of the difference, or some of both.
In some of the states with the most 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 tax abatements “systematic education racism.”
We hasten to add that these tax abatements are, in most states, granted by city or county governments, not by school boards. Even though state equity formulas try to offset the resulting losses, tax abatements effectively amount to what we call an “intergovernmental free lunch,” in which one body of government gets to spend another body’s revenue — a structural flaw that invites over-spending and defeats accountability.
Put another way, local school leaders not only have no say in whether their money should be given away, they often don’t even realize it’s happening.
This 2017-2019 surge in spending on corporate tax breaks also occurred despite the strong economic growth the U.S. enjoyed in that pre-pandemic time span. (Most school districts’ FY 2019 calendars ended June 30, 2019.) Indeed, the nation’s unemployment rate fell to record post-war lows during our study period.
We stress again: The $2.37 billion figure is a conservative summation based on incomplete data. Supposedly, all school districts that use the Generally Accepted Accounting Principles (GAAP) — set by the Governmental Accounting Standards Board (GASB) — should report tax abatements. Though a minority of states do not require their school districts to follow GAAP, many of those districts still do use GAAP accounting, as Wall Street prefers it for rating bonds. Most states do mandate school districts to comply with GAAP, so when their abatement data is missing, we attribute this to either poor state oversight (state auditors, comptrollers or treasurers normally enforce such rules), or loopholes in how “tax abatements” are defined by GASB (or how those definitions have been specified in GASB’s annual Implementation Guides).
These definitional loopholes, or ambiguities of GASB Statement No. 77 (“GASB 77”) — especially regarding tax increment financing (or TIF) and Industrial Development Bonds (or IDBs) — are allowing some of these economic development tax expenditures to go unreported. We detail external evidence of these problems in several states. In other states, foregone revenue is offset through an increased local levy or by state aid. These states argue that GASB 77 does not apply to them because there was no foregone revenue to the districts themselves; instead all taxpayers contribute to the subsidy payouts.
We present in-depth case studies on five states with complete data:
▪ Missouri, where tax increment financing (TIF) proliferates, diverting much- needed revenues away from school districts.
▪ Louisiana, where three of the poorest districts — located in the parishes of West Baton Rouge, St. James, and St. John the Baptist — not only suffered sizeable forgone revenue in 2019 but also large increases from 2017. Indeed, teachers in East Baton Rouge made national news in 2019 when they voted almost unanimously to walk out if the parish school board granted another abatement to ExxonMobil.
▪ New York, where we found statistically significant association between greater tax abatements and higher shares of Black and Hispanic students, after controlling for district size or total enrollment.
▪ South Carolina, where six school districts each lost more than $2,000 per pupil (and four of those have Black + Brown student majorities), while total state losses soared by 31 percent to $423 million in FY 2019.
▪ Texas, where the Chapter 313 program results in heavy per-pupil losses thanks to a system that essentially rewards districts for doling out business subsidies.
In our conclusion, we make seven recommendations to the states and two suggestions to the GASB itself.
The best, most equitable solution is for states to shield school revenues entirely from abatement programs. They can simply rewrite their incentive-enabling laws to exclude from abatements those shares of local property and sales taxes that would normally be apportioned to K-12.
Short of that, we recommend that states cap the share of each locality’s property and sales tax base that can be abated in the name of economic development, and at a very small share, such as two percent. We also recommend caps on dollars per student that can be abated, at $200 annually.
Short of an absolute shield or tight caps, we recommend that states give school boards control to opt in or out of tax-break deals (i.e., to give them equivalent powers enjoyed by cities and counties).
We also recommend four actions by the states now to ensure compliance with GASB 77. They should create clear authority and mechanisms (led by a state auditor, comptroller, treasurer, or education department) to review the financial reports issued by school boards, and if, necessary, correct them. They should require that all localities include a GASB 77 note in their financial reports, whether they have reportable abatements or not. They should require localities to disclose even “immaterial” abatement costs (rather than allowing arbitrary definitional decisions). And they should require all governments that are actively making abatement agreements to compute and report the costs of such deals to all affected jurisdictions in plenty of time for inclusion in annual financial reports.
To the GASB itself, we urge it to start over on tax increment financing (TIF) and issue a clean new Statement that treats all three forms of TIF as reportable abatements akin to those clearly covered by Statement No. 77.
We also urge the GASB to finish the process it began in 2018 and openly declare that property tax abatements that are bundled with Industrial Development Bonds (IDBs) are abatements covered by Statement No. 77.
These safeguards reflect what Good Jobs First has learned since we first explored the tension between abatements and school funding in 2003, and in our many blogs, articles, and studies since GASB 77 was issued in 2015.
Communities cannot determine if tax abatements given to corporations in the name of economic development are worth the price if they don’t know the costs, especially to education.
Diane Ravitch's blog 
Diane posted about GOP corruption in the state of Florida. WaPo reported about Florida’s Joel Greenberg, identified in the current case involving Rep. Gaetz. Allegedly Greenberg smeared the reputation of a teacher who was a political rival (the least of his identified crimes). It’s reported that Greenberg pretended to be a student and contacted the school board about the teacher.
The bar on Republican behavior couldn’t be lower. State GOP offices attract reprobates.
Greenberg is accused of trying to extort Matt Gaetz by claiming he traveled with a 17 year old female across state lines for the purpose of having sex. Gaetz is being investigated for potential sex trafficking charges. The whole sordid episode is under investigation. Gaetz recently revealed he may not run for another term. He stated that he may take a job with Newsmax.https://www.newsweek.com/joel-greenberg-matt-gaetz-probe-investigation-doj-1580053
We would need an army of forensic accounts to understand all the nuanced complexity of school finance which varies from state to state. Since there is no uniformity among states, it is difficult to get accurate information on exactly how much public schools lose due to tax abatements. The study recommends that there are several steps that would useful in tracking where the money is going. What we do know is that public schools are often on the losing end of the equation, and these reported figures do not account for the charter and voucher drain that public schools must also absorb. Residential taxpayers either must pay more or allow their public schools deteriorate.
The only states I have personal experience with are New York and Texas. New York has some of the priciest real estate in the country, yet the public schools are under funded. Class sizes are often over thirty students and classrooms with sparse resources. Tax abatements likely account for some of the under funding. In Texas many of the districts in the report are located in the petrochemical corridor around Houston. La Porte, Brazosport and Van Vleck school districts all have chemical plants or oil refineries in their districts. Texas is very generous to business. Sellers in Texas do not have to report the sales price of properties. As a result commercial properties often wind up paying less because they have a team of lawyers that challenge the appraisals of their properties. Tax increases are often shifted to residential properties. Without laws to protect public schools, their funding will continue to suffer the losses without any way to protect them from budget shortfalls.
The study also mentions Philadelphia as a city that has generous tax abatements. The city had a had a ten year abatement for people that bought homes in “distressed” areas. Many investors and home owners took advantage of this program, but the city collected less in revenue as a result. Now the city is pushing a federally funded program called “Opportunity Zones.” This national program is sold as promoting equity, but it is really a way to get private investors to develop and gentrify parts of the city. This program is supposed to revitalize underserved communities. Both my grandmother’s and my old neighborhood are now “opportunity zones.” Make no mistake the real opportunity is to the investors.https://www.taxpolicycenter.org/briefing-book/what-are-opportunity-zones-and-how-do-they-work
very Chicago: Rahm Emanuel and Arne Duncan selling ‘equity’ as a reason to close down schools and call in the developers to re-gentrify, pushing the unwanted poor completely out of the area
Tax incentives and write-offs along with charter schools contribute to gentrification in many cities. The federal “Opportunity Zone” program promotes private development in cities, and charter schools are often part of the deal.
Thank you for this article, Diane:
Sharing…
-Shira
Giving companies tax abatements to operate their businesses in industrial areas with higher than average concentrations of poverty was Clintonian Reaganomics at its sneakiest. Neoliberal governments claim to help communities afflicted by “investing” in poor communities by offering tax incentives to businesses to set up shop there. What they are really doing to communities afflicted by low wages, industrial pollution, and historical redlining is giving their infrastructure, education, and other public money away to the factories, warehouses, fast food companies, predatory lending businesses, etc. that already operate there. Homeowner tax abatements are complex and usually provide necessary assistance to neighborhoods, but corporate tax abatements are NOT investments in neighborhoods; corporate tax abatements are investments in corporations at neighborhood expense.
I am happy to know about GASB 77 issued Aug 2015. (Definition at App C of “full report” link in link to report posted) Finally we are moving toward informing taxpayers of the true cost of “school choice.”