Corporate Tax Breaks Siphon Critical Funding from Philadelphia’s Public Schools

October 28, 2020

Reported Losses Grow a Staggering 81 Percent in Two Years

A school bus in Philadelphia at night
Photo: Sergey Novikov

Washington, DC — Good Jobs First, the national watchdog group on corporate tax breaks, today revealed that public schools in Philadelphia lost $112 million in property tax revenues during fiscal year 2019 due to tax abatements granted to corporations. Compared to the $61.9 million reported just two years earlier, that’s a staggering increase of 81 percent.

Good Jobs First obtained the information thanks to a relatively new government reporting requirement, GASB Statement No. 77 on Tax Abatement Disclosures, which requires most localities to report how much revenue they lose to economic development tax abatements of all kinds. Philadelphia offers breaks through the Keystone Opportunity Zone program, which waives some state and local taxes for business, through tax increment financing (TIF), and through generous tax abatements on new and renovation construction.

The Philadelphia findings are part of a major update to Good Jobs First’s 2018 study, The New Math on School Finance, which revealed that about 2,000 school districts in 28 states reported losing at least $1.8 billion to economic development tax abatements in fiscal year 2017. That report revealed only one other school system– Hillsboro School District in Oregon’s “Silicon Forest” – lost more than Philadelphia’s.

But for fiscal year 2019, Philadelphia has exceeded Hillsboro’s reported losses and may prove to be the #1 school-revenue loser nationwide when Good Jobs First completes its 50-state scan.

Last year, the City Council voted to reduce the level of tax abatements for new residential construction, which currently grant a 100 percent property tax abatement for 10 years. The change, set to take effect in 2021, would still allow a developer to pay nothing in Year 1, but then the amount abated would be reduced by 10 percentage points each year after that – so 90 percent in Year 2, 80 percent in Year 3, etc.

The Council is currently debating whether to delay the start of that phase out to 2024, giving developers another three-year window in which to receive 100 percent, 10-year abatements.

“Abatements and other tax loopholes have deprived our schools of hundreds of millions in funding, while public school children attend buildings filled with mold, lead and asbestos and teachers are told to buy their own school supplies,” said Councilmember Helen Gym. “It is outrageous that corporations would continue to seek higher profits at the expense of our kids’ education. Instead of lining the pockets of those who are already wealthy, we should invest our tax dollars in our children—a strategy actually proven to reduce poverty, build intergenerational wealth and revitalize neighborhoods.”

Good Jobs First Executive Director Greg LeRoy said the growth was astounding. “Disinvesting schools is the worst possible thing that could happen for the future of Philadelphia’s economy. The city’s leaders should act on these new disclosures and stop the bleeding. Especially now with the pandemic, schools need extra funding to safely adapt.”

Good Jobs First has long recommended common-sense reforms to protect our nation’s most foundational economic development investment—our public education system—from corporate tax abatements. Those include exempting the school district portion of taxes from any economic development subsidies, giving school officials a role in determining when and how their money is given away and/or strictly capping the severity and duration of all abatements.

Good Jobs First, based in Washington, DC, is a non-profit, non-partisan resource center promoting accountability in economic development.