The Orleans Parish School Board may vote this week to opt out of a state tax break program that has cost New Orleans schools millions per year.
Meanwhile, board member Ben Kleban’s proposal to funnel $3 million from the school district’s reserve funds to bolster early childhood education for children three years old and under didn’t get much traction during a meeting of the board’s budget and finance committee on Tuesday. But the full board will revisit the proposal at its meeting on Thursday.
Kleban, who submitted both items, originally thought the tax savings could help fund early childhood education. He said close to 12,000 low-income families in the city don’t have access to quality, affordable early childhood education care and programs.
“My thinking was that this was maybe an opportunity for at least taking a first step towards advancing our long term goal around expanding early childhood education access,” he said.
But because the revenue from opting out of the tax break program would start slowly and K-12 school funding fell short this year, he decided to separate the items. The district can decide how to allocate any new revenue later, Kleban said.
“I think the point here is there’s a lot of needs in our education system,” from birth through high school, he said.
The committee on Tuesday forwarded a proposal that would commit the board to reject all industrial tax exemption requests for the next three years.
The committee, however, sent the proposal to the full school board without a recommendation, citing uncertainty about how the state tax program will work in the future because of changes to the program that Gov. John Bel Edwards recently proposed.
The full board is set to vote on the proposal at its Thursday meeting.
The industrial tax exemption is the state’s most expensive tax incentive program. It cost local governments $13.7 billion in lost tax revenue between 2006 and 2016, according to The Advocate.
Even though the exemption affects local property taxes, industrial tax exemptions were approved by a state board until 2016. But under two 2016 executive orders from Edwards, local agencies — such as school boards and police districts — can vote to keep their portion of the taxes. It appears the first local agency to reject the tax break was the Caddo Parish Sheriff’s Office in February.
Since 2000, government bodies in New Orleans have forfeited $210 million to the Industrial Tax Exemption Program, according to an estimate contained in Kleban’s proposal. That includes $68 million for New Orleans schools.
With state approval, the program grants certain manufacturers exemptions from local property taxes. Under current rules, eligible properties can get 100 percent property tax exemptions for five years with a renewal option for up to three years at 80 percent. In 2016, Together Louisiana, a group that has been critical of Louisiana’s generous corporate tax giveaways, estimated the school district missed out on $3.7 million annually in 2015 because of the industrial tax exemption. Broderick Bagert, a lead organizer of Together Louisiana, appeared before the budget committee Tuesday.
“We’re not familiar with any state that allows their school taxes to be used in this way,” Bagert said.
It’s not clear how much money the proposal would be worth for New Orleans schools. It would not apply to exemptions that are already in effect. Only new requests and requests for renewals would be affected.
Bagert said in his best estimate, the schools would probably see about 20 percent of the $3.7 million in their first year and an additional 10 percent the following year. It would take several years for all the current tax exemptions to sunset.
A brief circulated by Kleban last week included a list of 69 organizations, including charter operators, churches, businesses and nonprofits, that supported the plan to opt out of the industrial tax exemption program and use the funding for early childhood education.
Even though the two items were technically uncoupled, several speakers at the committee meeting seemed to link them together. A pastor spoke in favor of spending the saved dollars on early childhood education.
Others advocated the money be used for all students. Ken Ducote was a longtime district employee who now heads the Greater New Orleans Charter Schools Collaborative.
“Let’s give all of the businesses a chance to invest in education and pay their fair share of taxes,” Ducote said.
Nolan Marshall III, the Vice President of External Affairs and Policy at the New Orleans Business Alliance — whose father, Nolan Marshall, Jr., is on the school board — asked that the board not abdicate its responsibility to consider individual tax exemption proposals. As the father of a toddler, he said he is in favor of more money going to schools. However, he cautioned board members not to make decisions about economic development “in a silo.”
Kleban defended his proposal and said it set a clear tone for businesses. He also said there should be a full evaluation of the decision, if it’s approved, after three years.
Board members Woody Koppel and Nolan Marshall, Jr. criticized the proposal because the board will still have to vote on each exemption request.
“Wouldn’t this just kind of make this ceremonial?” Koppel asked.
After hearing from Bagert about new rules Edwards has recently proposed for the exemption, the committee voted to send the proposal to the full board without a recommendation.
Under Edwards’ 2016 orders, local government bodies were able to craft and vote on the terms of proposed tax exemptions. But under his new proposal, the state would negotiate the terms, and local government bodies would only be allowed an up-or-down vote. Board member Leslie Ellison recommended changing the language of the resolution in light of the possible changes.
Orleans Parish isn’t the only one eyeing industrial tax exemption funds for education. On Monday in East Baton Rouge Parish, the Louisiana Association of Educators argued the money should be used to raise teacher salaries.
Expanding early childhood education
The committee was likewise unable to reach a consensus on another of Kleban’s proposals: using $3 million of its reserve funds to expand early childhood education.
After the New Orleans City Council pledged $750,000 to early childhood education, Kleban said it was important for the board to “come up alongside the city.”
Ellison thought the proposal seemed like a “knee jerk” reaction.
“Where does the funding go?” she asked. And she wanted to know how many students it would benefit.
Several speakers said they supported the funding, but wanted to see a plan along with it. Ellison offered a substitute motion to defer any action until Thursday and asked Superintendent Henderson Lewis Jr. to bring a plan forward that would include a working group.
A study from the Education Research Alliance of New Orleans last year found charter schools have little incentive to offer pre-kindergarten programs. It’s too costly, and unlike traditional schools, charter schools can’t rely on a central office to help pay for it.
During the school year prior to Hurricane Katrina, there were 67 pre-kindergarten seats for every 100 public-school kindergarten students. Ten years later, according to the study, there were 44 seats per 100, a 34 percent drop. Those students come with less funding from the state and require more supervision, making the city’s youngest students some of the most expensive to educate.
“Our job is to protect the interests of kids and families,” Kleban said.