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Protecting Public Ed, an NEA Executive Summary
Joined: Apr 23 2007
Posted: Dec 19 2007 at 4:38pm
This study aims to help education advocates protect public schools and public services from the effects of certain types of economic development subsidies. These subsidieswhich state and local governments often dispense in response to corporate lobbying for a good business climateinclude cutting companies property taxes and granting long-term diversions of certain districts property taxes to corporations making investments in those districts (the latter is called tax increment financing, TIF). Some abatements and TIF districts help revitalize distressed areas, create opportunity for low-wage workers, build or rehabilitate affordable housing, and otherwise stabilize low- and moderate-income communities. But as abatements and TIF have proliferated, they have often strayed from their original antipoverty intentions. This report does not condemn all abatements or TIF; it does argue that all parties affected by such expenditures ought to have a say in them.
The report examines the extent and expense of these tax subsidies around the country, and it details conditions and policies in five states: Ohio, Florida, Minnesota, Montana, and Texas. Overall, the report casts doubt on whether such subsidies promote balanced economic development, especially on the expanding scale at which governments are dispensing them (one estimate puts the cost at nearly $50 billion per year). Most importantly, the report shows how these subsidies can harm public education by diverting funding that local schools badly need to sustain their educational mission. Public schools are particularly vulnerable, because local property taxes are now the largest single source of funding for public education, amounting to about 65 percent of all local education funding and 29 percent of total education funding (local, state, and federal).
The researchers looked at abatements, TIF, and school finances in all 50 states and the District of Columbia (hereafter included in the count of states) by researching statutes, news reports, and other studies and by interviewing the leaders and staff of state school board associations, tax departments, and development agencies. The paper indicates that 43 states allow cities or counties to give companies significant, long-term property tax abatementstax holidays that may last 10 years or more. And 48 states allow cities to divert local property tax revenues into special redevelopment areas, TIF districts, for as many as 30 years. The full extent of all subsidies is exceptionally difficult to track in exact dollar terms, as the details reside in myriad local jurisdictions and, as tax expenditures rather than direct allocations, often do not appear directly in budgets. The information we collected, however, reveals some important features of the problem:
All 50 states offer either abatements or TIF or both. In 32 states, respondents report that one or both of the subsidies divert funding from schools. In 14 more, interviewees did not know how these subsidies affected school revenue. Thus, schools in at least two-thirds of the states appear vulnerable to the loss of revenue to abatements and TIF.
Educators are putting development subsidies under increasing scrutiny. At least 18 state school board associations have researched or lobbied on the issue.
Some states are providing aid to local school districts that helps cushions revenue losses from abatements and TIF. But respondents in 16 states said their states do not reimburse schools adequately for abatement losses, and respondents in 15 states reported inadequate reimbursements for funds diverted to TIF.
School boards in Kansas, Minnesota, Ohio, Pennsylvania, and Texas have gained a formal say over whether the school portions of property taxes can be subject to abatement. Five other states r
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