Public school districts in South Carolina suffered a sharp increase in lost tax revenues in FY 2019 due to tax breaks granted to corporations by county governments. Schools lost at least $423 million – an increase of nearly $100 million, or 31 percent – compared to just two years earlier, according to a new Good Jobs First report.
A small part of the increased losses stems from more districts reporting revenue-loss data, but the overwhelming majority – $83 million – stems from costlier tax abatement packages. School district boards in South Carolina have no say in the decisions to award such abatements, even though K-12 loses the most revenue.
Already-poor school districts lost the most. Six school districts each lost more than $2,000 per pupil; they also have some of the highest student poverty rates in the state as measured by the share of students eligible for free or reduced-price lunch. And four of those six districts have a Black plus Hispanic student majority. These school districts are located in Dorchester, Greenwood, Chester, Orangeburg, Barnwell, and Calhoun Counties.
Of the state’s 81 public school districts, at least 72 experienced some revenue loss to abatements in 2019. Twelve lost more than $10 million each that year. All of this foregone revenue was initiated by South Carolina’s counties: As empowered by state law, counties offer businesses incentive packages including fees in-lieu of taxes (a.k.a. property tax abatements in the form of deep discounts), special source revenue credits, infrastructure credits, and/or multi-county business (industrial) park tax exemptions.
The $423 million is the net revenue loss to K-12 education—i.e. after accounting for offsetting fees paid in-lieu of taxes and state reimbursements.
The biggest dollar-revenue loss was suffered by the Berkeley County School District: $54 million in 2019, an $11 million increase from two years earlier. This is the county where Google has been operating a massive data center since 2007, and where Volvo Cars North America has been manufacturing autos since 2015. Both companies benefit from property tax abatements, according to this Post and Courier report.
The Charleston County School District lost $32 million to fees-in-lieu of taxes deals and special source revenue credit programs in 2019. Boeing, Daimler Vans, Comcast, and Mercedes Benz, among others, benefit from local tax abatements and exemptions there. The county does not disclose how much subsidy each company receives, but many are evidently substantial. By one conservative estimate, Boeing, for example, is getting more than $300 million over 30 years in property tax abatements, as awarded by the Charleston County.
Other big losses were reported by school districts in Greenville, Spartanburg, Chester, Aiken, Lexington, and York Counties.
Absolute dollar amounts don’t tell the whole story, of course. The amount of revenue lost per student, and whether a school district’s student population is poor also matter. Several school districts in South Carolina reported under $10 million in tax abatements, but on a per-pupil basis they have the highest revenue losses (over $2000 per student), and at least four-fifths of their students are eligible for free or reduced-price lunches.
Dorchester County School District No. 4, for example, lost $3,726 per student—the second highest in the state—and it has a Black and Hispanic majority, with all students qualified for free or reduced-price lunches. Also, among the top per-pupil revenue losses are Orangeburg Consolidated School District No. 3 and Chester County School District; both have some of the highest student poverty rates in the state.
This new form of tax-break analysis is made possible by a new accounting rule, GASB Statement No. 77 on Tax Abatement Disclosures. It requires state and local governments that abide by Generally Accepted Accounting Principles (GAAP, to which Statements are amendments) to disclose their revenue losses resulting from economic development tax abatement programs.
This obligation applies whether the government is the actively granting entity—such as South Carolina’s counties—or a second government that loses revenue passively, such as the state’s school districts. Each jurisdiction reports its own portion of the foregone tax revenue in its audited financial statement, a report of the prior fiscal year’s income and spending.
Good Jobs First issued a national summary of the impact of tax abatements on public education, made possible by GASB Statement 77, in our 2018 study , The New Math on School Finance . Our new findings about South Carolina are a preview of our new research findings as we update that 2018 study.
Of course, this new disclosure system only succeeds if the school district complies with the rule by obtaining this information from the city or the county tax assessor and then reporting. Unfortunately, some states have yet to send clear compliance signals about GASB Statement 77 reporting, so that there is little to no data from their localities.
Fortunately, South Carolina is among those states we have found to be an exemplary complier. When the rule first came out, the South Carolina Association of Counties (SCAC) was proactive, ensuring that local governments had the information they needed to abide by the rule. Thanks to SCAC’s laudable effort, taxpayers are able to know exactly how much tax incentives in South Carolina are costing its cities, counties, and school districts.