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Built in 1910, James Elementary is a three-story brick school in Kansas City, Missouri\u2019s historic Northeast neighborhood, with a bright blue front door framed by a sand-colored stone arch adorned with a gargoyle. As bustling students and teachers negotiate a maze of gray stairs with worn wooden handrails, Marjorie Mayes, the school\u2019s principal, escorts a visitor across uneven blue tile floors on the ground floor to a classroom with exposed brick walls and pipes. Bubbling paint mars some walls, evidence of the water leaks spreading inside the aging building.<\/p>\n
\u201cIt\u2019s living history,\u201d said Mayes during a mid-September tour of the building. \u201cNot the kind of living history we want.\u201d<\/p>\n
The district would like to tackle the US$400 million in deferred maintenance needed to create a 21st century learning environment at its 35 schools \u2013 including James Elementary \u2013 but it can\u2019t. It doesn\u2019t have the money.<\/p>\n
The lack of funds is a direct result of the property tax breaks that Kansas City lavishes on companies and developers that do business there. The program is supposed to bring in new jobs and business but instead has ended up draining civic coffers and starving schools. Between 2017 and 2023, the Kansas City school district lost $237.3 million through tax abatements.<\/p>\n
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Kansas City is hardly an anomaly. An\u00a0estimated 95%<\/a>\u00a0of U.S. cities provide economic development tax incentives to woo corporate investors. The upshot is that billions have been diverted from large urban school districts and from a growing number of small suburban and rural districts. The impact is seen in districts as diverse as Chicago and Cleveland, Hillsboro, Oregon, and Storey County, Nevada.<\/p>\n The result? A 2021\u00a0review of 2,498 financial statements<\/a>\u00a0from school districts across 27 states revealed that, in 2019 alone, at least $2.4 billion was diverted to fund tax incentives. Yet that substantial figure still downplays the magnitude of the problem, because three-quarters of the 10,370 districts analyzed did not provide any information on tax abatement agreements.<\/p>\n Tax abatement programs have long been controversial, pitting states and communities against one another in beggar-thy-neighbor contests. Their economic value is also, at best, unclear: Studies show most companies\u00a0would have made the same location decision<\/a>\u00a0without taxpayer subsidies. Meanwhile, schools make up the largest cost item in these communities, meaning they suffer most when companies are granted breaks in property taxes.<\/p>\n A three-month investigation by The Conversation and three scholars with expertise in\u00a0economic development<\/a>,\u00a0tax laws<\/a>\u00a0and\u00a0education policy<\/a>\u00a0shows that the cash drain from these programs is not equally shared by schools in the same communities. At the local level, tax abatements and exemptions often come at the cost of\u00a0critical funding<\/a>\u00a0for school districts that\u00a0disproportionately serve<\/a>\u00a0students from low-income households and who are racial minorities.<\/p>\n In Missouri, for example, in 2022\u00a0nearly $1,700 per student was redirected<\/a>\u00a0from Kansas City public and charter schools, while between $500 and $900 was redirected from wealthier, whiter Northland schools on the north side of the river in Kansas City and in the suburbs beyond. Other studies have found\u00a0similar demographic trends elsewhere<\/a>, including\u00a0New York state<\/a>,\u00a0South Carolina<\/a>\u00a0and\u00a0Columbus, Ohio<\/a>.<\/p>\n The funding gaps produced by abated money often force schools to\u00a0delay needed maintenance<\/a>,\u00a0increase class sizes<\/a>,\u00a0lay off teachers<\/a>\u00a0and support staff and even close outright. Schools also\u00a0struggle to update or replace<\/a>\u00a0outdated technology, books and other educational resources. And, amid a nationwide teacher shortage, schools under financial pressures sometimes turn to inexperienced teachers who are\u00a0not fully certified<\/a>\u00a0or\u00a0rely too heavily<\/a>\u00a0on recruits from overseas who have been given special visa status.<\/p>\n Lost funding also prevents teachers and staff, who often feed, clothe and otherwise go above and beyond to help students in need, from\u00a0earning a living wage<\/a>. All told, tax abatements can end up harming a community\u2019s value, with constant funding shortfalls creating\u00a0a cycle of decline<\/a>.<\/p>\n Perversely, some of the largest beneficiaries of tax abatements are the politicians who publicly boast of handing out the breaks despite the harm to poorer communities. Incumbent governors have used the incentives as a means of\u00a0taking credit for job creation<\/a>, even when the jobs were coming anyway.<\/p>\n \u201cWe know that subsidies don\u2019t work,\u201d said\u00a0Elizabeth Marcello<\/a>, a doctoral lecturer at Hunter College who studies governmental planning and policy and the interactions between state and local governments. \u201cBut they are good political stories, and I think that\u2019s why politicians love them so much.\u201d<\/p>\nIncentives, payoffs and guarantees<\/strong><\/h4>\n