Can you imagine your local school board passing a resolution that allows a company to pay no property tax for the fire department and the police department? Of course not. But that is exactly what is happening to school boards in most states when city councils and county boards pass tax abatements.
Local property taxes are a key source of funding for public schools. Local governments are responsible for collecting property taxes; in most states, they also have the power to exempt companies from paying these taxes as an enticement to build facilities within their jurisdiction. When local governments grant tax abatements, school budgets often bear the brunt of their generosity, with very little input – let alone a vote – from school boards or local citizens.
There are two ways in which a few states currently ensure that school boards have this control:
• By prohibiting the school portion of taxes from being abated, which shields school funding from tax abatements, or
• By giving school boards veto power over abatement decisions.
The strongest way to protect school revenues from being depleted by business subsidies is for the state government to prohibit the abatement of the school portion of property taxes. Because states set the rules for how local governments use abatements, states can amend those rules to say that school funding may not be touched.
Florida has three kinds of local tax incentives that affect property taxes:
• Property tax abatements,
• Enterprise zones, and
• Tax increment financing.
None of these affect schools because Florida explicitly forbids abatement or diversion of the school portion of local property taxes (the city and county portions can still be used for subsidies). Maryland also shields school revenues from both abatements and TIF, and eight additional states shield schools from either one program or the other.
Giving school boards a formal say in subsidy decision-making is another line of defense for school funding. School boards should have a full voting seat on any board that abates or diverts property tax revenue away from schools. And separately, school boards should have the right to vote up or down on each deal for the school portion that would be abated or diverted.
More school boards are poised to take action on this issue. There has been very little media coverage, but school board associations in at least 21 states have researched or lobbied on the issue of abatements and/or TIF. Many have sought to convince their legislature to protect school revenues from subsidies, or at least give school boards some say.
In fast-growing communities, businesses should desire to pay for their portion of the education of their employees children and their potential future workforce. The question has to be asked if they don’t want to educate the children of their employees is that really the type of business a community wants to attract?