New rule calls on schools to report impact of tax breaks
(District of Columbia) Despite the national frenzy to land one of Amazon’s headquarter projects last year, state and local officials may find it harder in the future to justify significant tax concessions to corporate dealmakers.
A key reason is likely to be Statement 77 on Tax Abatement Disclosures issued three years ago by something called the Governmental Accounting Standards Board.
The statement, perhaps better thought of as a rule, essentially requires the vast majority of the nation’s school districts—as well as many local government agencies—to publicly report the cost of tax abatements on their jurisdictions.
Thus, the $1.3 billion in tax credits that Nevada lawmakers gave Tesla Inc. to bring the carmaker’s battery factory to the Sparks area four years ago, cost the tiny Storey County School District $38 million in 2017.
To be fair, the tax breaks given corporations in most cases brought economic benefits that also benefitted schools. The new disclosure requirement does not ask for a corresponding breakdown on the positive side of the question.
Still, new research from Good Jobs First, a left-leaning non-profit critical of economic development incentives, reviewed the financial reports of some 5,600 school districts and found that $1.8 billion was lost to tax breaks.
The analysis showed that schools in just 10 states—South Carolina, New York, Louisiana, Ohio, Oregon, Michigan, Missouri, Pennsylvania, Texas and Georgia—collectively lost $1.6 billion last year.
Three of the five school districts with the greatest losses are in Louisiana, where tax breaks were aggressively used to cultivate private investment following Hurricane Katrina.
Good Jobs First estimated that if all of that money had been instead given to schools, districts could have hired nearly 28,000 more teachers in the states studied. South Carolina alone could have funded more than 6,300 more educator positions.
“When it comes to protecting the cornerstone of our nation’s workforce development system, Americans deserve the right to know where their tax dollars are—and are not—going,” the authors of the report said in the executive summary.
“Good Jobs First invites others to join us in making use of our new tax abatement disclosures,” they said. “Let’s exercise our new information rights to shape an economic development strategy that is transparent, inclusive and balanced.”
The accounting board, a private and non-governmental entity, has no authority to sanction school districts covered by the new disclosure rule to comply.
The new rule is incorporated within the board’s existing best-practices accounting standards. Most local school districts try to comply with the standards, if only to satisfy mandates from credit-rating agencies and buyers of local bonds. Some big school districts that receive significant amount of federal money have also been required to meet the accounting standards.
According to the research team, close to 12,000 of the 13,500 school districts in the U.S. are covered by the disclosure rule.
Although Statement 77 was first promulgated in 2015 and took effect a year later, the first full fiscal year that most districts could report on tax abatement was 2017.
Among the specific tax abatement called out in the report is the $98 million that didn’t go to the Hillsboro School District in Oregon last year, the largest loss identified.
Hillsboro, located west of Portland, has among the region’s lowest energy costs and became a hub for data centers born out of the cloud computing industry.
The report also noted that international brand names such as Boeing, Daimler and Mercedes-Benz were drawn to rural South Carolina because of tax breaks.
The Amazon headquarter projects were not part of the analysis, but Good Jobs First noted in a separate web-posting that the impact on local schools will be significant.
“(Amazon) has been getting about 20 economic development subsidy packages a year since 2012 for its warehouses and data centers—$1.6 billion and counting as of mid-2018,” the researchers said. “That’s not counting the ‘megadeal’ the company clearly expects for its second headquarters.”