Governments love to give out taxpayer money to private companies in an attempt to spur economic development. But what about the state and local agencies who miss out on that revenue? A new report suggests that schools bear the brunt of the loss.
The Governmental Accounting Standards Board (GASB) is a private independent organization that “establishes accounting and financial reporting standards for U.S. state and local governments.” One such recommendation, issued as GASB Statement No. 77, “requires state and local governments to disclose key information about their tax abatement agreements,” in which state and local governments agree to reduce an individual person’s or company’s taxes, typically in exchange for some sort of economic development project.
Good Jobs First, a nonprofit organization that supports transparency in economic development deals, used these tax-abatement disclosures to examine their effect on school funding, specifically in St. Louis.
“Local governments in Missouri have complied with Statement 77 (unlike some other states), making it straightforward to track revenue lost to economic development tax breaks and compare among jurisdictions,” wrote Good Jobs First research analyst Anya Gizis in a new report. This allowed Gizis and two co-authors to compile financial disclosures from St. Louis Public Schools, plus 23 school districts from suburban St. Louis County, and compare the lost tax revenues in each.
“All told, St. Louis area schools lost at least $260.7 million to tax abatements in the six fiscal years 2017 through 2022,” the report found. Even this number is likely an undercount, as not every district submitted numbers for each of the six years.
St. Louis Public Schools (SLPS), the city’s school district, saw by far the biggest losses: $167.9 million over six years, nearly 65 percent of the countywide total. The report calculates a per-pupil loss of $1,634—a staggering amount for a district that spends an estimated $17,000 per student. According to the report, SLPS’s student body is also nearly 88 percent black, and 100 percent of students qualify for free or reduced-price meals due to low household income.
Meanwhile, the suburban Rockwood R-VI School District—whose students are 75 percent white and only 8.5 percent of whom qualify for reduced-price meals—only lost $2.2 million, a comparatively paltry funding loss of $18 per student.
The report posits that poor and minority students are most negatively affected by such abatement schemes. “On average, white students lose $179 per year, while Black students lose more than three times that—$610 per year,” its authors write. “After [SLPS], the second hardest-hit group of students are those with disabilities. The Special District of St. Louis County, which serves children with special needs residing in suburban districts, loses $1,148 per student per year.”
The report further breaks down the numbers by the types of economic subsidy programs that they supported. Of the $260.7 million in total lost revenue, $69.37 million went to tax-increment financing (TIF), including $64.18 million from SLPS alone.
New development projects tend to drive up property values, leading to an increase in property taxes. But under TIF, the city or county government subsidizes the development by borrowing against that future higher revenue; local services that are funded through property taxes, like public schools, road maintenance, and police and fire departments, get none of the extra cash.
The East-West Gateway Council of Governments, the local metropolitan planning organization, released a report in 2011 on the use of TIF in the St. Louis area. It found that the use of incentives like TIF “has been ineffective both as a way to increase regional sales tax revenue or to produce a significant increase in quality jobs.” It further found that “the use of TIF and other tax incentives, while positive for the incentive-using municipality, has negative impacts on neighboring municipalities.” In other words, cities and counties that use TIF steal jobs away from neighboring communities by incentivizing employers to move; jobs aren’t created, they’re just shifted around.
The Good Jobs First report includes several policy recommendations—for example, that “St. Louis Public Schools be given veto power or voting power on the St. Louis TIF Commission proportional to their share of TIF revenue,” allowing it to decide where that money gets spent. It also suggests that “every school district’s share of the property tax should simply be 100% shielded from abatements.”
A better idea would be to allow everyone to opt out: Taxpayers choose where to spend their money, private companies are responsible for funding their own development projects, and state and local governments stop meddling in the affairs of either.