Districts Can Lose Thousands of Dollars per Student in Tax Abatement Deals

May 13, 2021

Carine Martinez

Carine Martinez joined the Foundation in 2016 and is campaign director of Secure and Sovereign Texas and has been director of research and publications since 2021.

As campaign director, she oversees the Foundation’s initiative to look for additional and innovative policy solutions for the state of Texas to help secure its southern border.

As director of research and publications, she oversees and manages the publication schedules for all policy areas the Foundation is working on and is responsible for editing research publications.

Carine also conducted research on Texas–Mexico paradiplomacy, as well as, earlier on, on the effects on taxpayers and consumers of government programs that grant special privileges to certain businesses in the form of subsidies, tax credits, regulatory advantages, or other favors.

She is the co-editor of the Foundation’s Policymaker’s Guide to Corporate Welfare and is the author of several research publications, notably on film incentives, the hotel occupancy tax, and the three-tier system of alcohol distribution. She testified on these issues before the Texas Legislature during its 85th and 86th regular sessions. She was published in several newspapers including the Austin American-Statesman, The Hill, and Forbes.

Carine began working in public policy as a policy intern at the Foundation in 2014. She later worked as a policy analyst for Texas Action during the 84th Legislature and then spent a year in Washington, D.C., working as a research associate for the Charles Koch Institute.

She holds a bachelor’s degree in international business administration (completed in English, French, and Spanish) and a master’s degree in American studies from the Sorbonne in Paris, France.

Carine is originally from Paris, France, but happily moved to the United States in 2011 and finally to Texas in 2013. She became an American citizen in 2019.

Good Jobs First, an organization focused on tracking corporate subsidies, published a report analyzing the effects of tax abatements for economic development on school funding. The results should be a wakeup call to Texas legislators considering whether to renew these controversial corporate property tax breaks.

Abating Our Future – How Students Pay for Corporate Tax Breaks estimates that these tax abatements to select businesses cost U.S. public school districts $2.37 billion in forgone revenues in 2019.

According to the report, 149 districts in the U.S. lost more than $1,000 per student, including 52 in Texas, 18 of which lost more than $6,000 per student. That’s half the average statewide per-student funding.

Texas is one of five states that the report analyzed in detail because most school districts reported the abatements—allowed under Chapter 313 of the Texas Tax Code—in their financial reports (despite some gaps).

Abating Our Future found that Texas was among the top 10 “loser” states in 2019—third in the amount of net forgone revenues, behind South Carolina and New York. Texas’s Barbers Hill ISD ranked among the top 10 “loser” districts in the country in 2019, with $55.2 million in forgone revenues—representing the equivalent of $9,636 per student enrolled in this district.

Because of (sometimes significant) gaps in the disclosure data used, numbers are deemed conservative by the authors. The real cost to taxpayers, who have to make up for the lost tax revenue through their own property tax bills, which are already painful enough, may be significantly higher.

This report adds to the body of research that should give pause to renewing Chapter 313. The revenues that districts agree to forgo are often justified by the assumption that businesses that are parties to these agreements would not come without the abatements. However, both academic research and investigative journalism continue to point to the opposite conclusion.

Another argument is that property taxes are high in Texas for capital-intensive businesses—but they are also high for homeowners and small businesses, and they impact rents as well. It is time to let Chapter 313 expire and to focus on reducing property taxes for everyone instead—individuals as well as small and big businesses alike.

You can read the entire Good Jobs First report here. The authors’ methodology is described in Appendix B.

Good Jobs First took advantage of a recent tax abatement disclosure rule: Statement No. 77 of the Governmental Accounting Standards Board or GASB 77 for short.

GASB is an independent private-sector organization whose goal is to create accounting and financial reporting standards for U.S. state and local governments. In 2015, GASB required that state and local governments using Generally Accepted Accounting Principles (GAAP) disclose in their comprehensive annual financial reports (CAFRs) the tax abatement agreements they enter into and the tax expenditures or reductions of tax revenues—forgone tax revenues—that result from these agreements.

Publicly traded companies in the United States are required by law to use GAAP for their financial reporting; state and local governments are not, except for the states that require it by law, which is the case in Texas for school districts.

Carine Martinez

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