New York schools are losing out on millions of dollars because of an arcane local funding mechanism for corporate subsidies. Now, the fight against this tool has some powerful new supporters: labor unions. On Jan. 31, good government groups, legislators, a local development authority board member, and their latest allies from the statewide teachers union and the AFL-CIO gathered in Albany to urge the state to stop the bleeding.

School districts lost $1.8 billion to corporate tax breaks in 2021, according to a study by the subsidy watchdog group Good Jobs First. That’s because all over the state, industrial development agencies have exempted businesses from paying full property taxes for projects ranging from real estate to power plants.

said state Senator Sean Ryan, who last year introduced a bill to halt the tax breaks that harm schools.

Most public school funding in New York comes out of residents’ property tax payments. But IDAs, created by state law in 1969 to spur industrial job creation, have the power to lower the property tax burden for businesses and developers — and as a result, schools miss out on that money.

The bill Ryan pushed on Wednesday, sponsored in the Assembly by Harry Bronson, would prohibit IDAs from eating into schools’ property tax share. It’s part of a larger ongoing effort by legislators and watchdogs to rein in the agencies, which fiscal policy experts, good government groups, and lawmakers have long criticized as being obsolete and easily corrupted. Now, the bill’s advocates say the decades-long fight has reached a turning point, thanks to the entry of major statewide unions.

John Kaehny, executive director of Reinvent Albany, said.

Melinda Person, president of the 700,000-member New York State United Teachers — the state’s largest union — said her organization is going to lead community conversations about the need to not only stop IDA abatements, as the bill outlines, but to reform the local agencies completely.

Mario Cilento, president of the New York state AFL-CIO, said in a statement.

Kaehny called the unions’ organizing power He said in other states, such as Louisiana, unions have been instrumental in pushing back against local subsidies to corporations.

he said.

The fight is already in progress in several towns around New York. In Riverhead, on Long Island’s east end, residents are demanding the local IDA be dissolved. In 2022, the agency diverted $2.7 million from the school district’s budget, forking it over to business owners and developers in the form of property tax exemptions. That’s money that could have been used to pay for air conditioning in classrooms, wages for bus drivers, and teacher training for new technology, among other things, New York Focus reported in September.

said Greg Wallace, president of the Riverhead teachers union.

Rashida Tyler, deputy executive director of the New York State Council of Churches, joined the Ulster County IDA board in the summer of 2022, about a year and a half after the agency approved a controversial $25 million tax break for the Kingstonian, a mixed use development that will include luxury apartments and a boutique hotel.

The Kingstonian deal sparked public outcry. The tax break meant the Kingston City School District would miss out on $16 million in property tax revenue over 25 years. While locals fought the plan, the school board voted against the project. The county IDA approved the tax break anyway.

Tyler said.

And thanks to a New York law known as the school districts can’t make up the money they lose annually to IDA abatements by billing other residents more. If they need more revenue, local governments and most school districts can only increase the total amount of property taxes billed each year by either two percent or the rate of inflation, whichever is less.

Wallace said.

Beyond describing how IDAs negatively affect schools, advocates who spoke at the capitol on Wednesday repeated the same sentiment: The subsidies don’t work.

said Kaehny, quoting a 2013 study.

Person said.

The frustration has become widespread, according to Ron Deutsch, director of New Yorkers for Fiscal Fairness. He said the unions’ entry into the battle is a sign that more people are paying attention to IDAs and

Two policy changes in the last decade helped New Yorkers gain a better understanding of how IDA tax abatements impact schools. On the federal level, the Governmental Accounting Standards Board, the professional organization that sets financial reporting standards for state and local governments, in 2015 started requiring governments to disclose money lost to economic development subsidies in annual financial statements.

Without the change, said Greg LeRoy, executive director of Good Jobs First.

Person said that the February 2023 Good Jobs First study, which identified the $1.8 billion in tax breaks, significantly increased the teachers union’s awareness of how IDA subsidies impact schools.

The second significant change came last March, when New York passed a law requiring IDAs to notify school districts prior to approving tax breaks. Before, they only gave notice to local boards of education, which are typically more removed from their schools’ day-to-day finances, according to Jeffrey Pearlman, director of the Authorities Budget Office, the state IDA watchdog. Sometimes, the impact would slip under the rug.

Outside of the school tax bill, other proposed reforms to IDAs include Senator James Skoufis’s bill to establish a single IDA in each region of the state, decreasing the number of agencies from 107 to 10.

Skoufis and other lawmakers have also taken a stand against IDAs giving tax breaks to housing developers, which experts argue is not permissible under state law. Last September, Skoufis and Pearlman called the practice a

IDA subsidies for housing developers can be particularly harmful to school districts. New developments can mean more students entering the school system while schools lose out on additional property tax revenue.

A spokesperson for the New York State Economic Development Council, the state’s major trade group representing IDAs, said the group does not support Ryan and Bronson’s bill because it would

But members of the coalition who gathered above the Senate chambers on Wednesday see it differently.

As Kaehny put it:

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This story originally appeared in New York Focus, a non-profit news publication investigating how power works in New York state. Sign up for their newsletter at https://tinyurl.com/368trn9p.