GSU report examines popular ESPLOST as U.S. education secretary mulls school funding

By David Pendered

When voters in Atlanta, and Fulton and DeKalb counties, approved a 1 percent sales tax for education last year, they fell squarely within the group of affluent Georgia communities that like what the tax provides – interest-free, pay-as-you-go financing for capital expenses. A new report from Georgia State University outlines challenges that face less affluent communities.

The “new” North Atlanta High School opened on the site of a former IBM complex after an adaptive reuse construction project priced at $147 million. Credit: jedunn.com

The report is the latest contribution to the unending conversation over funding for public education. Debate over school funding is likely to roil as the newly confirmed U.S. secretary for education, Betsy DeVos, takes office. During a confirmation hearing last month, DeVos would not promise that she would not move to privatize or defund public schools, according to a published report.

The GSU report also reminds of Manuel Maloof’s opposition to the education sales tax bill the Legislature enacted in 1996. Maloof contended that the sales tax would enable the state to reduce, over time, its funding for school construction and equipment. The larger-than-life former DeKalb County CEO predicted that affluent counties would simply tax themselves, rather than make noise at the Capitol. Less affluent counties would fall behind, Maloof said.

The report was issued by the Center for State and Local Finance at GSU’s Andrew Young School of Policy Studies. The title is, Georgia’s Special Purpose Local Option Sales Tax for Education: Review of Trends and Policy Implications. The authors are Ross Rubenstein, the Dan E. Sweat Distinguished Chair in Educational and Community Policy, and Nicholas Warner, a research associate at the Center for State and Local Finance who specializes in education finance.

Red blocks mark Census blocks where the closest grocery store is in another county. White blocks indicates either no housing, or where the closest grocery store is within the county. Credit: GSU

The report makes a one-two-three case study that shows why the education sales tax is, as the summary states, a “complicated story” about raising funds to build and equip public schools.

For starters, the less wealthy communities tend to not have retail destinations. As such, residents have to commute outside the county to shop, where they end up supporting the school expenses of wealthier surrounding counties, according to the report:

• “In districts with little retail activity, particularly grocery stores, it is likely that residents must travel outside the county to shop. … Residents in these neighborhoods most likely shop outside the county, sending potential tax revenue to neighboring districts.”

Second, the report documents six counties that export education sales taxes to neighboring counties because of the lack of grocery stores and other retail destinations:

“[M]ost residents must, by necessity, do most of their shopping outside the county. Most of these districts also rank very low in terms of ESPLOST revenue per pupil, including Glascock County (5th lowest), Wilcox County (10th), Wheeler County (18th), Taliaferro (20th), Webster (23rd) and Lee County (36th).”

Finally, the education sales tax program does not provide easy solutions for these tax-exporting counties, the report states. Even if voters don’t enact an education tax in their home county, residents still would have to shop outside their county, where their taxes would support their neighbor’s school district:

The 1 percent sales tax for education levied in Atlanta enables the school district to maintain facilities, including the stadium at Grady High School, with a pay-as-you-go system that eliminates the borrowing costs associated with a bond sales. Credit: Kelly Jordan

• “[I]f these districts repealed the ESPLOST in favor of additional property taxes, residents in these counties would still pay ESPLOST on purchases outside the county, thereby potentially exacerbating their tax burdens.

The report concludes by outlining three recommendations state policy makers could consider if they take up the issue of ESPLOST funding for school construction and equipment. Each addresses what appears to be the heart of the funding divide between wealthy and less-affluence school districts:

• “In sum, these analyses demonstrate that many districts have limited capacity to raise revenues through a sales tax because they lack substantial retail activity. Districts in counties with no urban areas, particularly very rural districts, have substantial potential ‘leakage’ of sales tax revenues to nearby districts. Moreover, large shares of residents in many counties are likely paying ESPLOST revenue to neighboring counties, adding to location-based disparities in resources available to pay for school capital outlay.”

Note to readers: The author served as a paid consultant on the 2011 campaign to extend the ESPOST in Gwinnett County.