COLUMBUS – The economic development subsidies granted to many businesses may be harming public education by diverting funding that local school districts sorely need to sustain their educational missions, according to a study commissioned by the National Education Association.
The study examined the extent and expense of tax subsidies nationwide and detailed conditions in five states: Ohio, Minnesota, Florida, Montana and Texas. The study found that economic development subsidies (cutting companies’ property taxes and granting long-term diversions of certain school district property taxes to corporations undertaking investments in those districts) do not necessarily promote balanced economic development.
In Ohio, economic development subsidies have created monumental problems for school districts because public schools receive about three-fourths of their funding from property taxes. When revenues are lost due to abatements, the state and local school districts share the burden of revenue loss.
While the state shoulders most of the cost through state aid payments to local school districts, the districts continue to lose money because the state does not reimburse for tax breaks affecting levies for capital outlay and debt service.
The study found that property tax abatements and tax increment financing cost Ohio’s public schools more than $100 million in revenue in 1999 because more than $3.3 billion of real property was exempt from taxation.
This has had a devastating effect on schools, particularly in Ohio’s industrialized urban districts.
Gary L. Allen, president of the 130,000-member Ohio Education Association, the state affiliate of the NEA, said that the problems associated with abatements are compounded many times over at local levels.
“The study suggests that today’s development subsidies may be undercutting our ability to educate tomorrow’s workforce,” Allen said. “When companies build facilities and bring in staff and their families, they increase local school enrollments and generate a demand for more teachers and classrooms.
“But if the new corporate property has tax abatements, it fails to generate the revenues necessary to serve the very enrollment it has created.”
Allen said that when extensive corporate subsidies sap the funding of quality public schools, they may be undermining the attractiveness of a geographical area to the highly skilled work forces that businesses seek.
“Ultimately, working families and unsubsidized businesses bear the cost of economic development subsidies because they must pay higher taxes to replace the revenues diverted to subsidized corporations. Either that or they put up with decreased school services such as fewer teachers in classrooms, fewer computers, and so forth,” Allen said.
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