Report: Tax breaks costing schools big money (Investigative Post)

That’s among the conclusions of a study released today by Good Jobs First, a national research group that tracks economic development subsidies. The report said tax breaks affecting schools in New York far outpace those in other states.

That lost revenue has prompted state lawmakers, including Sen. Sean Ryan, to propose legislation that would prohibit economic development agencies from abating property and sales taxes that are due school districts.
 

“I believe we put ourselves in this position with our [IDAs] where they were trading school funding and kids futures, you know, to make speculative business deals,” Ryan said in a recent interview with Investigative Post.

Overall, the report found, New York schools lost $1.8 billion in revenue in the 2021 fiscal year, all thanks to state and local tax subsidies to corporations. 

The report understates the amount of money schools are losing out on because only about half of districts self-reported in annual financial statements how much revenue they lost because of tax abatements.

Some recent big-ticket tax subsidies also aren’t accounted for. They include $124 million in tax breaks for an Amazon warehouse in Niagara County and even larger tax abatements for a proposed Micron semiconductor plant near Syracuse.

The $1.8 billion that was reported amounts to about 5 percent of the state’s $34.4 billion aid to schools. The report notes the money New York schools lose each year to tax abatements ranks the state first in the nation for lost revenue. South Carolina ranks second. 

The data, however, was especially limited in Western New York, as only 13 of 100 school districts in the eight counties reported revenue losses.

Warsaw Central School District in Wyoming County lost more money per student than any local district. It lost $2.7 million in revenue during the 2021 fiscal year, or $3,189 per student.

Another Wyoming County’ district, Letchworth Central Schools, lost $2.4 million, or $2,687 per student.

In Chautauqua County, the Dunkirk City School District lost $4.8 million, or $2,400 per student.

Good Jobs First estimated that Buffalo schools lost between $1.5 and $2.5 million, due to property and sales tax abatements issued by the Erie County IDA and city development agencies. 

Overall, public schools in Western New York lost between $16.9 million and $17.9 million to tax abatements in the 2021 fiscal year. Again, that’s with only 13 of 100 districts reporting.

“Even though they are typically the biggest losers of revenue to abatements, New York school districts have no formal authority to interject themselves into IDA negotiations,” the report states.

Across the state, 37 districts lost out on $1,000 or more in funding per student. The state average for all districts is a loss of $541 per pupil. New York spends on average about $14,000 per student. 

The report comes on the heels of state Ryan and state Assemblyman Harry Bronson proposing legislation that would prohibit IDAs from giving out tax subsidies that affect school revenue. Such legislation could upend how IDAs operate, as the largest portion of IDA tax breaks are discounts on property taxes, and most school districts fund their budgets primarily through property taxes.

Ryan, who is scheduled to take part in a press event with Good Jobs First on Wednesday in Albany, argued recently that reducing the power of IDAs to abate taxes would not only help students, but possibly save taxpayer dollars. When IDAs reduce school district budgets, he said, district leaders turn to the state to make up the difference.

​​”But as the IDAs keep exempting large payers from taxes, it just means the state portion has to grow,” he said. “It's almost like we're taking money out of one pocket and putting it into the next pocket.”

The report concludes that “problems with New York State IDAs are numerous and persistent.” Good Jobs First recommends abolishing IDAs altogether or significantly reforming them.

“Short of [elimination] we recommend prohibiting IDAs from entering into agreements that abate school tax revenues,” the report states. “The alternative is the status quo: ever-higher property tax rates on New York residents to mask the large and rising costs of corporate tax abatements.”

Additional recommendations for reform include giving labor unions, community groups, education professionals and affordable housing advocates positions and veto powers on IDA boards.

Good Jobs First has also called on state Comptroller Thomas DiNappoli to better track lost school revenue.

Ryan, for his part, is sponsoring Senate Bill 89. The Buffalo Democrat wants to bring the bill to a vote this spring, after the Legislature enacts a state budget in April.

“I think we can get agreement around it,” Ryan said. “IDAs kind of operate in the shadows.”