Houston Chronicle Sunday

Business tax breaks cost Texas schools $800 per pupil

- By Christine Wen, Danielle McLean, Kevin Welner and Nathan Jensen

At James Elementary in Kansas City, Mo., Principal Marjorie Mayes escorts a visitor to a classroom with exposed brick walls and pipes. Bubbling paint mars some walls, evidence of leaks spreading inside the aging building.

“It’s living history,” Mayes said. “Not the kind of living history we want.”

The district would like to tackle the $400 million in deferred maintenanc­e needed for its 35 schools, but doesn’t have the money. The lack of funds is a result of tax breaks Kansas City lavishes on companies that do business there. The program is supposed to bring new jobs but instead has starved schools. Between 2017 and 2023, those schools lost $237.3 million through tax abatements.

That city is hardly an anomaly. An estimated 95% of cities provide incentives to woo corporatio­ns.

A 2021 review of 2,498 financial statements from schools across 27 states revealed that in 2019 at least $2.4 billion was redirected for tax incentives. Yet that downplays the magnitude: Three-quarters of the 10,370 districts did not provide any informatio­n on tax abatement agreements.

Abatements have long been controvers­ial, pitting communitie­s against one another in beggar-thy-neighbor contests. Yet studies show most companies would have made the same location decision without subsidies.

A three-month investigat­ion by The Conversati­on and experts in economic developmen­t, tax laws and education policy shows that the cash drain is not equally shared by schools in the same communitie­s. Tax abatements often take critical funding from districts that disproport­ionately serve lowincome students from racial minorities.

In Kansas City, for example, nearly $1,700 per student was redirected in 2022 from poorer public schools, while between $500 and $900 was taken from wealthier schools. Other studies found similar demographi­c trends elsewhere, including Texas, New York state, South Carolina and Columbus, Ohio.

The funding gaps often force schools to delay needed maintenanc­e, increase class sizes, lay off teachers or close. All told, tax abatements can harm a community’s value, with funding shortfalls creating a cycle of decline. Researcher­s agree that a lack of adequate funding undermines educationa­l outcomes, especially for poor children.

‘Subsidies don’t work’

At the same time, fewer than a quarter of companies that receive breaks needed an incentive to invest, according to a 2018 study by the Upjohn Institute for Employment Research, a nonprofit research organizati­on.

And governors have used the incentives to take credit for job creation, even when the jobs were coming anyway. “We know that subsidies don’t work,’’ said Elizabeth Marcello, a lecturer at Hunter College. ‘But they are good political stories.’

Atlanta schools face chronic absenteeis­m among Black students and a teacher shortage. But the city showers corporatio­ns with tax breaks, taking $103.8 million from schools from fiscal 2017 to 2022, according to school system financial statements.

In Philadelph­ia public schools, asbestos is a major problem, and the district needs $430 million to clean up such environmen­tal hazards. That’s on top of an additional $2.4 billion to fix dilapidate­d buildings. But in fiscal 2022, tax breaks cost Philadelph­ia schools $118 million.

Meanwhile, in Texas, the Chapter 313 school property tax abatements program, controvers­ial for decades, was allowed to sunset and replaced by Chapter 403 in 2023.

But many 313 property tax breaks will remain for years, including 377 projects worth approximat­ely $15 billion in abatements that will start receiving benefits between 2024 and 2043. Some of the last approvals before the program’s expiration include projects from corporate giants Samsung and Tesla. The Texas numbers are further complicate­d because they are offset by supplement­al payments to the schools by the company. About 20% of the 15 billion will be offset.

Of the 32 Chapter 313 agreements in Harris County since the program started in 2001, totaling at least $430 million even after $370 million in offsets. Nine of the projects are yet to start receiving tax abatements. Three abatements received by Exxon Mobil are in Houston’s Goose Creek district. They have cost the schools over $100 million so far and will cost nearly another $100 million starting in 2024, not including offsets.

Texas abatements work differentl­y than in other states because the state — ultimately the taxpayers — pay the schools back, spreading the burden across schools. In 2019 abatements amounted to $800 per pupil across the state, the highest of any state average by 25%. At the same time, schools in Texas are already very underfunde­d.

Gov. Greg Abbott launched the Chapter 403 initiative, dubbed the Texas Jobs, Energy, Technology and Innovation program, on Feb. 22, 2024. Under Chapter 403 the supplement­al payments from companies to schools were removed, giving school districts less motivation to support tax breaks. Chapter 403 makes more energy projects eligible, but excludes some types, including renewables. It also has more stringent jobs and wages requiremen­ts.

Petrochemi­cal companies who have received Chapter 313 property tax breaks regularly cite locations in Louisiana as competitor­s to create bidding wars for incentives. These include Chevron-Phillips and Exxon Mobil investment­s in Goose Island ISD citing East Baton Rouge; investment­s by OxyChemica­ls in Deer Park

ISD noting a sister site in Louisiana as the main competitio­n; and a joint venture Bayport Polymers, citing two Louisiana locations.

A tale of two cities

Baton Rouge has some of the best and some of the worst outcomes in the state for education, income and mortality. “Only separated by sometimes a few blocks,” said Edgar Cage, the lead organizer for the advocacy group Together Baton Rouge. “Underserve­d kids don’t have a path forward”

A 2019 report from the Urban League of Louisiana found economical­ly disadvanta­ged students don’t have equitable access to high-quality education.

The campus of Exxon Mobil, which has received $580 million in tax abatements since 2000, sits not far from schools in desperate need of maintenanc­e. The company received its latest tax exemption, $8.6 million, to install facilities at the Baton Rouge complex that recycle plastic and purify isopropyl alcohol. The project created zero new jobs.

On Feb. 21, 2024, Louisiana Gov. Jeff Landry signed an executive order removing the school board oversight on corporate property breaks that a previous governor had enabled in 2016. Landry’s order also waived job creation and retention requiremen­ts.

Meanwhile, school bus drivers staged a sickout in protest of low pay and a lack of airconditi­oned vehicles. A teacher shortage looms because district pay is so inadequate. Schools have limited internet access, and outside some buildings glass and barbed wire litter playground­s.

But at least those schools have a playground. Hayden Crockett, a seventh-grader at Sherwood Middle Academic Magnet School, told the school board that his sister’s elementary school lacked one.

“If it wasn’t in the budget to fund playground equipment, how can it also be in the budget to give one of the most powerful corporatio­ns in the world a tax break?” Crockett said. “The math just ain’t mathing.”

Christine Wen is an assistant professor of Landscape Architectu­re & Urban Planning, Texas A&M University. Danielle McLean is an award-winning reporter and editor. Kevin Welner is director of the National Education Policy Center, University of Colorado Boulder. And Nathan Jensen is a professor of government at the University of Texas at Austin.

 ?? Staff file photo ?? As of 2021, the Barbers Hill school district in Mont Belvieu, east of Houston, had granted nearly $900 million in Chapter 313 tax breaks, the most recent records show.
Staff file photo As of 2021, the Barbers Hill school district in Mont Belvieu, east of Houston, had granted nearly $900 million in Chapter 313 tax breaks, the most recent records show.

Newspapers in English

Newspapers from United States