Jobs vs. Schools
The property-tax abatements that communities offer corporations to build plants and offices sacrifice millions of dollars that otherwise would go to classrooms and teachers Washington columnist.
MANUFACTURERS are demanding bigger local tax breaks, tax breaks that cut into public schools funds. Local property-tax abatement has put nearly every city and state in vicious competition to attract and retain jobs. Businesses have local communities over a barrel.
I don't criticize the businesses for doing that. That is part and parcel of the way it is done today. But the impact of loss of school revenue is seriously affecting the ability of local schools to buy books, hire teachers at decent wages, maintain buildings, educate our children, and transform them into productive citizens.
What is particularly ironic is that American business leaders chronically decry the state of American education. Corporate CEOs state that an educated, literate work force is the key to American competitiveness. They point out their magnanimous corporate contributions to education in one breath, and then they pull the tax base out from under local schools in the next.
Recently the New York Times reported that New York State and local governments grant as much as $500 million a year in tax breaks to business.
Much of that money comes right out of the schools. Further, there is no evidence that tax incentives attract businesses to communities in the first place.
A study at Purdue University on enterprise zones in Indiana found that in 1988, the city of Gary, Ind., paid $73,654 in property-tax subsidies for every single job created. South Bend, Ind., paid $173,539 for every new job.
If each new job pays an average of $25,000 a year, which is on the high side, it will be completely subsidized by the taxpayers of South Bend for nearly seven years.
It cost Indianapolis, the city that won the much-touted development plum of 1991, the United Airlines maintenance facility, $364 million in state and local subsidies, including a highly speculative $70 million in tax-increment financing bonds.
We must put an end to this competition in tax subsidies, because most of the money granted to corporations comes directly out of the schools. And if property values go down as communities raise tax rates to compensate for corporate subsidies, the schools lose even more.
In most states, local school boards are completely cut out of the process. School boards in Ohio and Texas have gone to court demanding greater say in tax-abatement decisions. School boards in Minnesota have won tighter restrictions on the use of tax-increment financing.
Last year, the National School Boards Association surveyed the nation's 13,000 school districts to investigate the effects of corporate exemptions on public school finances. Local boards were asked whether they had lost money as a result of tax abatements. The initial returns are enough to concern any parent who has kids in public school:
Danville, Ill., reported losing $111,000 in 1990. Poudre School District in Colorado lost $497,000. Cedar Rapids, Iowa, School District lost $500,000. Plaquemines Parish School Board in Louisiana lost over $1 million. St. Louis, Mo., public schools lost $17 million, 13 percent of their $226 million budget. Philadelphia lost $24 million.
The list goes on with examples across the country.
MOST glaring was the furious competition between Arlington, Texas, and Ypsilanti, Mich., to keep their General Motors assembly plants. Arlington was successful, but at what cost? They offered an incentive package giving GM tax breaks between $7 million and $10 million, most of which would come straight out of the pocket of the local schools.
General Motors argues that tax abatements are not a leading factor in their decisions. Things may have gotten so bad that they are right. For example, in 1991 GM successfully cut, by over $1 million, its annual taxes in Tarrytown, N.Y., forced the town to lay off dozens of teachers and administrators, eliminated new library books and school supplies, and postponed school repairs. This plant is slated for closing anyway.
But as a condition for locating its new Saturn factory in Spring Hill, Tenn., GM forced the local government to waive all property taxes until 1995. In fact, GM will not be liable for the full taxable value of the plant until the year 2025. By that time, the plant may be obsolete.
Corporations in my own city of Cleveland, have depleted the school system of more than $100 million in tax revenues, according to the president of the school board.
Last year, a new downtown hotel and office building was given a 100 percent property-tax exemption, which cost the Cleveland schools $4.8 million. I am pleased to have that new hotel and office building in downtown Cleveland, but I do not believe that it ought to be built at the expense of the kids who go to school in the city of Cleveland.
I want to repeat that I do not point my finger at the developers and say you should not have done this. As long as it is permitted under the law, it is probably part of their corporate responsibility to do it.
But consider this: The Florida State Department of Revenue estimates that businesses in the state received tax concessions amounting to $500 million last year, while the state's business contributed little more than $32 million to public education. Businesses are contributing to the education problem, not helping to solve it.
They are not to blame; we are to blame, if we do not do something about it. They are taking out essential revenues needed to educate our kids - and they are calling it economic development. I believe it is time corporate America came to grips with what it is doing here.
Certainly businesses face intense pressures in competing, but they will not be able to compete in future years unless the children of America are educated.
It is an endless circle. Businesses criticize the job our schools are doing, and then proceed to nail down every tax break they can get, further eroding the schools' ability to do the job. They will continue to do it, unless we put a halt to it. I do not say this in a negative way. The business community should accept it as being good for America.
The only effective way to end the competition is for the federal government to simply prohibit the awarding of tax breaks that reduce the amount of revenue for schools.