On the website for the local school district of Blackwell – a town of just over 300 people in rural Texas – the school principal, Abe Gott, says, “We believe that whatever your dreams are, you can do them from Blackwell, Texas. ”
To back this up, the Blackwell Consolidated Independent School District is offering a post-secondary scholarship of up to US $ 36,000 for graduates of the district’s single high school. So far 140 students have benefited from scholarships, according to Gott.
The money that makes this possible comes from a $ 35 million deal the school district negotiated with a wind farm company in 2005, as part of the industry’s massive growth in Nolan County and Texas. .
The spread of wind power to rural America has been a financial boon to school districts such as Blackwell. However, due to the complexity of how schools are funded, the impact on student success is limited, according to a new study we conducted as researchers in public finance, economics of education, and politics. energetic.
A windfall of wind taxes
Nolan County – one of three counties served by the school district – is home to 1,371 wind turbines that generate a maximum of 2,097 megawatts, enough to power half a million homes in Texas a year. This includes the 585 megawatt Sweetwater wind farm and the 735 megawatt Horse Hollow project, which was the largest in the world when it went into service in 2006.
Over the past 25 years, wind power has flourished in the United States, growing from less than 2 gigawatts of capacity in 1995 to over 110 GW last year, enough to cover more than 7% of the electricity supply to the whole country. It provides over 10% of the supply in 14 states and over 40% in two of those states – Iowa and Kansas.
In 2020, there were over 1,600 commercial wind power plants consisting of nearly 68,000 individual turbines. The industry continues to grow rapidly, with an additional 200 gigawatts of plans for grid connections starting at the end of 2020.
With all this rural development comes property tax revenue. Wind projects paid approximately $ 1.6 billion in property tax revenue to states and local jurisdictions in 2019.
These are undoubtedly welcome revenues for school districts in rural areas, which sometimes struggle to generate local tax revenue. But as researchers, we wanted to know: How do school districts use wind farm revenues? And does this money help improve student success?
To find out, we collected data on new wind power installations in the United States from 1995 to 2017 and on tax revenue trends in school districts. We then checked to see if the new wind farms resulted in significant changes in school budgets and how school districts were spending their money, such as new buildings, hiring more teachers to reduce class sizes, or increasing teachers’ salaries.
We have found that wind power installations result in a large increase in local revenues for school districts. Schools have dramatically increased their capital expenditures, such as buildings and equipment, but have only modestly increased their operating budgets, such as hiring more teachers to reduce class sizes.
When priorities and policies collide
Numerous studies have shown that smaller classes result in better student performance. So why are districts investing new tax revenues in capital spending rather than downsizing class sizes?
We believe this is due to public school funding formulas and state and county tax laws, and the incentives they provide to school administrators.
As the wind picked up, it grew from just 16 school districts in 1995 to 900 districts in 38 states in 2016. Rural areas of the West, Midwest and Texas lead the pack.
The amount of tax revenue a school district derives from a wind power facility depends on state and local laws and how those laws interact with public school funding formulas.
States use a wide variety of approaches to taxing wind farms, ranging from normal property tax treatment to full exemptions. Sometimes wind farms make “payments in lieu of taxes” known as PILOTS.
Kansas, for example, exempts wind projects from property tax for the first 10 years. Some wind companies make PILOT payments to host counties, but individual school districts are often excluded from these agreements. Wyoming has a centralized school funding system, so all revenue generated by wind projects is fully captured by the state and redistributed to schools on a formula basis.
Texas, the first state in wind power, has a complex system of local taxation of wind farms. Due to the state education funding system, much of the additional tax revenue generated by wind facilities can be captured by the state.
Texas uses a formula to take money from school districts with high property tax revenues per student and give it to poorer districts.
But that does not apply to local property tax revenues spent on debt repayment in Texas. There is therefore a strong incentive for school districts to borrow money by selling bonds to pay for capital improvements, and then to use the wind farm revenues to pay off the bonds.
As a result, Texas school districts tend to place wind tax revenue in buildings and facilities, rather than teachers and operations. For example, the Blackwell School District, in addition to its scholarship fund, spent $ 15 million on a new football stadium and a new college complex.
Impact on school finances
The growth in wind power development over time and across the country provides an ideal setting to examine how wind power – or really any external increase in funding – can impact school district finances and, therefore, on student achievement.
Our sample included 638 school districts that had a wind power facility at some point between 1995 and 2017. It’s no surprise that these “wind districts” tend to be smaller and more rural than the average school district.
We have found that new wind farms result in large increases in the amount of local revenue per pupil, with only small reductions in state aid. We have also seen strong increases in spending per student. Texas, in particular, raised and spent more than other states.
But we found that most of this new spending was used for building improvements or new facilities rather than operating or “running” expenses. District expenditure on buildings increased by 73%, while operating expenditure increased only slightly, by around 2%.
This allocation of funds appears to be driven in part by the formulas states use to provide assistance to local school districts. States typically reduce the amount of funds they send to a district that sees an increase in local tax revenue, in order to equalize spending.
In some cases, however, this only applies when a district spends more on day-to-day operations, not when it spurs building improvements or new construction. Thus, to avoid losing state aid, districts are more likely to use new local revenues from wind farms for new buildings or repairs than for operating expenses.
This is exactly what we saw in our study. While school facilities and equipment have undoubtedly improved, revenues from new wind farms have resulted in little or no change in class sizes or teacher salaries. Consistent with previous research which shows that better student-teacher ratios are clearly linked to student achievement, we found little change in student outcomes.
So, while the new development of wind power can significantly boost rural economies and tax revenues, decisions about how the money is used are still made within the constraints of policy and law. funding for local schools.
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