Students lose out as cities and states give billions in property tax breaks to businesses — draining school budgets and especially hurting the poorest students

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 it 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, according to the Kansas City Public Schools.

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, according to the academic research that appeared in Community Development. 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 their value is unclear: 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. In multiple cities examined, tax abatements often take critical funding from districts that disproportionately serve low-income students from underrepresented groups.

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 New York state, South Carolina, Texas, 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.

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.

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.”

In October 2023 an environmental team was preparing Southwark School in South Philadelphia for the winter cold. While checking an attic fan, members of the team saw loose dust on top of flooring that contained asbestos. Within a day, Southwark was closed — the seventh Philadelphia school temporarily shuttered since the previous academic year due to possible contamination by the cancer-causing agent.

Asbestos is a major problem for Philadelphia’s public schools. The district needs $430 million to clean up the asbestos, lead, and other environmental hazards that place the health of students, teachers, and staff at risk, according to a comprehensive 2017 facilities report from an outside contractor. And that is on top of an additional $2.4 billion to fix failing and damaged buildings.

Yet the money is not available. Matthew Stem, Pennsylvania’s former deputy secretary of K-12 education, testified in a 2023 lawsuit about financing of Pennsylvania schools that the environmental health risks cannot be addressed until an emergency arises such as the one at Southwark because “existing funding sources are not sufficient to remediate those types of issues.”

Meanwhile, the city keeps doling out abatements. In the fiscal year ending June 2022, such tax breaks cost the school district $118 million — more than 25% of the total amount needed to remove the asbestos and other health dangers, according to the annual comprehensive financial report of the school district. These abatements take 31 years to break even, according to the city’s own impact analyses.

Huge subsets of the community — primarily Black, brown, poor, or a combination — are being “drastically impacted” by the exemptions and funding shortfalls for the school district, said City Councilmember Kendra Brooks.

More than half the district’s schools that lacked adequate air-conditioning — 87 schools — had to go to half days during the first week of the 2023 school year because of extreme heat. Poor heating systems also leave the schools cold in the winter. And some schools are overcrowded, resulting in large class sizes, she said.

City Council recently passed a scale-back on the 10-year property tax abatement by decreasing the percentage of the subsidy over that time. But even with that change, millions will be lost to tax exemptions that could instead be invested in cash-depleted schools. “We could make major changes in our schools’ infrastructure, curriculum, staffing, staffing ratios, support staff, social workers, school psychologists — take your pick,” Brooks said.

Baton Rouge is a tale of two cities, with 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.”

The campus of ExxonMobil, 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, 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, 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 and urban planning, Texas A&M University; Danielle McLean is an award-winning reporter and editor at The Conversation; Kevin Welner is director of the National Education Policy Center, University of Colorado Boulder; and Nathan Jensen is professor of government, the University of Texas at Austin.

This is a condensed version of an article from The Conversation. Read the original, complete article here.