February 16, 2003

The Big Bite

Reg Weaver
President, NEA

Over the years, local governments across the country have been playing Santa Claus-giving corporations very generous tax breaks.

These gifts are intended to encourage the corporations to invest in your city or county and not someone else's. But it is not clear if the economic benefits derived from the subsidies exceed their costs. More research is needed. What is painfully clear, however, to a growing number of school board members and educators is that these corporate property tax breaks are taking a big bite out of public school revenues. Billions of dollars a year are now lost to school districts across the country as a result of corporate property tax breaks. It's an unintended consequence of economic development subsidies.

Tax abatements and tax increment financing (TIF) are the two main subsidies given. Enabled and regulated by states, they are implemented by local jurisdictions.

Abatements exempt all or some of the value of a company's property for a specified period of time-usually 10, 20, or even 30 years. TIF is a stealth subsidy based on a diversion of property taxes to support the development of a designated area.

The problem for a school district is that economic development brings more children. This leaves the district with two choices. Either cram the additional children into the existing schools, increasing class sizes, or build additional facilities and hire more teachers by raising the tax rate on homeowners and small businesses-never a happy prospect.

Schools and children are especially vulnerable to property tax abatements and diversions because local property taxes remain the single largest source of funding for public education.

We know what it takes to create an excellent school: quality teachers and support professionals, small class sizes, textbooks and computers, and modern school facilities which signal to every student that what happens here is important. We also know that these things require adequate funding.

Corporate tax breaks are shortchanging our schools. And come budget-cutting time, these tax-based subsidies are less visible than outright appropriations, and therefore are less likely candidates for the chopping block. But out of sight is not out of mind. It is time to shine the spotlight of public scrutiny on these corporate property tax breaks. There is no such thing as a "free" subsidy. Either the unsubsidized taxpayers or the children pay.

More states should follow Florida and Maryland's lead by shielding school revenues from the effects of abatements and TIF.

After all, it is our children, not the corporations, who need a break. Our children deserve the best. Educating every child in America to the fullest extent of his or her potential is not only a moral imperative-it is an economic necessity. We must decide whether we want to benefit from what our children become or suffer due to their neglect.

Every day our children's minds are developing and their characters are being formed. They cannot wait. Let us give our children the gift that keeps on giving-an excellent public education-and let us give it now.

Reg Weaver

President, National Education Association

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