Education Funding and Budget

Educators look to end the big corporate tax giveaway

By Amanda Litvinov, this article originally appeared on NEAToday.org

When a school district is $30 million in the hole, the effects are evident.

In Louisiana’s East Baton Rouge Parish School District, some students are crammed into classrooms that weren’t built to accommodate large class sizes. Older buildings are cleaned and patched, but floods and vandalism have taken their toll.

“Conditions in some of our buildings are deplorable,” says Dr. Tia Mills, an elementary special needs educator and president of the East Baton Rouge Parish Association of Educators (EBRPAE). “Schools are underfunded and employees are not getting paid what they deserve.”

Teacher salaries in East Baton Rouge have gone down by more than $9,000 since 2008 (accounting for inflation). So many educators have left the district that in recent years, there have been classes with no permanent teacher all year.

Louisiana ranks 49th in the country for teacher salaries and pay in East Baton Rouge Parish is in the bottom third of school districts in the state, according to the Louisiana Association of Educators (LAE).

That’s why Mills, like many of her colleagues, works a second job. In addition to teaching at Eden Park, the district’s alternative elementary school, Mills is an adjunct professor of history—“another salary I can’t live off of,” she says.

But Mills—working with LAE—found a way to fight back, after pinpointing a glaring source of their funding troubles: corporate tax breaks.

Louisiana’s Industrial Tax Exemption Program (ITEP) offers an extreme example of the subsidies that states routinely lavish upon corporations.

For more than 80 years, local governments in Louisiana have lacked control over their own tax-break decisions. Instead, one state body, the Board of Commerce and Industry, has routinely granted petrochemical giants like ExxonMobil long-term property tax abatements. This program alone costs public services throughout the state about $1.7 billion per year, and schools lose the most: about $600 million annually.

EBRPAE members spent well over a year organizing, stayed vigilant during several 7-hour school board meetings, and endured some nasty name-calling from those who oppose their campaign.

“I tell everybody, this is not sexy work,” says Mills. “It’s not. But it has to be done.”

LAE members’ perseverance paid off: This year, the East Baton Rouge Parish School Board denied Exxon-Mobil a $2.9 million abatement—a story so big it dominated the New York Times business section on February 5.

A Lot of Dollars, No Sense

The original purpose of such corporate tax subsidies was economic development. Starting in the 1930s, Southern states created incentive programs to lure companies from the Northeast and Midwest. Now, it happens everywhere.

When companies can credibly threaten to move jobs, they stage secretive tax-break auctions. That is why the high-profile competition to land Amazon’s second headquarters, or HQ2, gained so much attention; it was a rare public auction.

Residents of Queens, New York, and Arlington, Virginia, were not uniformly thrilled to discover they had been chosen at a cost of $2.8 billion and $796 million in incentives, respectively. Community groups in Queens organized to successfully block Amazon’s arrival; the company abruptly cancelled its New York plan mid-February.

Another high-profile corporate tax abatement drama is playing out in Wisconsin, where former-Gov. Scott Walker awarded $4.8 billion to Foxconn Technology Group in 2017 for a massive flat-panel display factory—the largest subsidy ever awarded to a foreign-based corporation.

(Since the deal was announced, the number and nature of promised jobs has been repeatedly revised downward, and Foxconn recently admitted it may never manufacture anything in Wisconsin.)

Walker lost his re-election bid to now-Governor Tony Evers, who is working to minimize the financial fallout. As the Wisconsin Education Association Council agree has said, even if those jobs do materialize, they would come at far too great a cost to schools. The job creation incentive alone will cost the state $300 million per year between 2022 and 2026, drawing down the funds available for K-12 schools and the public university system.

The harm corporate tax subsidies do to public education has long been understood,but until now, it could not be accurately measured. That has changed as a result of a new government-accounting rule that NEA and other groups helped win in 2015.

Thanks to that new rule, we now know that in 26 states alone corporate subsidies cost schools at least $1.8 billion last year. That’s according to a first-of-its-kind report, The New Math on School Finance, from the watchdog group Good Jobs First.

Dr. Tia Mills (center) and colleagues pushed the school board to use its new power to deny corporate tax exemptions. (Photo courtesy of East Baton Rouge Parish Association of Educators)

The analysis shows that Hillsboro School District in Hillsboro, Oregon— where Intel and several cloud computing data farms enjoy big tax breaks—lost more to corporate subsidies in 2017 than any other school district in America: $96.7 million.

Under Oregon’s school funding formula, that tremendous loss is not absorbed only by Hillsboro; all 197 school districts take a proportional hit.

But that’s not easy in a state with limited revenue sources, where schools have been underfunded for decades.

“Our biggest struggle is class sizes,” says Hillsboro Education Association
President Jill Golay. “We have numbers that are really off the charts.” She’s referring to lower elementary classes of 30-plus and middle school
classes over 40.

“When I moved from Idaho to Oregon in 2010 I went from 18 to 32 first-graders,” Golay says. “That’s a lot of kids when you’re trying to teach them to read. I know the school district is committed to reducing class size if the funding is there.”

That $96.7 million would surely help.

Golay credits companies like Intel for their contributions to local schools in the form of donations and employee volunteers.

“They do a lot for us. But that’s not the same as revenue that you can count on every year,” she added.

If the goal of economic development incentives is to strengthen a local economy, then these lavish corporate subsidies are failing, says Greg LeRoy, executive director of Good Jobs First.

“When tax abatements cause school districts to have fiscal stress and reduce school quality, they actually undermine the local business climate,” LeRoy adds.

That’s because school quality is an important factor in location decisions both for companies seeking well-educated workers and for those hoping to convince key managers and their families to relocate.

Knowledge is Power

Educator unions have long known that corporate subsidies drain resources for schools. But now they have a better idea by how much.

The study by Good Jobs First was made possible by a new accounting standard known as GASB Statement 77, which (finally!) requires state and local governments to report the amount of revenue they lost to corporate tax abatements each year.

That’s good news for NEA members and everyone who cares about great schools. Leaders can steer the conversation away from austerity and terrible choices to how much taxpayer money is given to corporations and whether it is too much.

The work the East Baton Rouge local has done to organize against subsidies provides a promising example.

Maybe some of these incentives made sense 80 years ago, but these huge corporations that make billions should not be taking this kind of money out of the local schools.” – Alexandra Clark, school psychologist

First, Gov. John Bel Edwards—whose election was strongly supported by LAE because of his support for public education—issued an executive order in 2016 empowering local taxing authorities to vote for or against industrial tax exemptions.

EBRPAE educators seized the moment and joined forces with Together Baton Rouge, a coalition of faith and community groups, to inform citizens about how collecting these taxes could boost their local school budgets.

EBRPAE energized its own members by connecting the subsidies to the cuts in school resources and low pay. More members became regulars at union meetings. They circulated information and “Call your school board member” action alerts to all school employees, and showed up to school board meetings wearing bright red in honor of the #RedForEd movement.

School psychologist Alexandra Clark has not only become more active in her local, but outspoken on economic issues.

“I finally understood that if Louisiana would quit giving away our wealth, we would have money for raises and support staff and could retain people,” says Clark.

EBRPAE educators have had a series of meaningful victories. They stopped one request by announcing their intention to take leave and storm the Louisiana Board of Commerce and Industry meeting to speak out against ExxonMobil’s latest exemption request—for facility upgrades that were completed two years ago. The issue was dropped from the meeting agenda.

“Our state is one of the richest in resources but has some of the lowest test scores and worst health indicators,” said Clark. “Can this go on?”

“Maybe some of these incentives made sense 80 years ago,” she said, “but these huge corporations that make billions should not be taking this kind of money out of the local schools.”

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