Tag Archives: taxes

St. Paul Companies Are Spending Their Tax Breaks on Super Bowl Sponsorships. Teachers Are Crying Foul.

Originally published in The Intercept on January 26, 2018.
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With more than a million people headed to the Twin Cities over the next 10 days for the Super Bowl, local corporations, St. Paul school district officials, and civic leaders are bracing for what may be a public relations nightmare: the first teachers strike in St. Paul in over 70 years.

The St. Paul Federation of Teachers, nine months into its contract negotiation, authorized a strike vote for January 31. The move comes amid the union’s unconventional strategy of linking declining school funding to corporate tax cuts and narrowing in on local companies on the Super Bowl Host Committee as a potential source of funding for the cash-strapped school system.

The argument the teachers are making in their contract negotiations is straightforward. Cuts, they say, are not the answer. The school district’s financial situation can never really improve until corporations start paying their fair share. In particular, teachers are focusing on the companies that make up the founding sponsors of the Super Bowl Host Committee – companies the union says have avoided paying $300 million in state income taxes over the last five years alone.

The companies say they have made up for some of that with donations, but the generosity has limits. According to a public records request filed by the teachers union, only seven of the 25 Super Bowl Host Committee founding partners donated to the St. Paul public school district last year – for a total of $1.1 million. All 25 companies, by contrast, paid $1.5 million to be founding Super Bowl partners.

Nick Faber, president of the St. Paul Federation of Teachers, stressed that the 3,700 educators in his union do not want to go strike. What they do want, he said, is to see the school district commit to supporting changes to the state tax code, under which corporations have enjoyed massive breaks in recent decades.

Last March, the St. Paul Public Schools announced that it faced a $27 million budget deficit, necessitating staff and program cuts to a district that had already been slashing art, music, and gym, with nurses, librarians, and social workers in short supply. It’s a familiar, vicious cycle – the state reduces its funding for public schools, which also lose revenue when students leave for charters, and districts suffer even more cuts and budget strain.

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December 2017 report: SACKED: How Corporations on the Super Bowl Host Committee Left Minnesota’s Public Schools Underfunded and Under Attack.
Chart: St. Paul Federation of Teachers

The wealthiest Minnesotans have seen their taxes decline over the last four decades. Back in 1977, they paid 18 percent in state income taxes. Over the next 36 years, the legislature reduced that top rate to 7.85 percent. In 2013, the state legislature bumped it back up to 9.5 percent, a move strongly opposed by the state’s influential business leader coalition. With the decline in income taxes has come a drop in real per-pupil state aid, which remains “significantly below” what districts received in 2003. While some of the major local corporations make voluntary philanthropic donations to public schools, the teachers union says those contributions have never come close to the amount the businesses have saved in reduced taxes.

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Chart: North Star Policy Institute

To try and shift the conversation around public education, the St. Paul Federation of Teachers has been highlighting tax havens, loopholes, corporate subsidies, and executive compensation. For example, in a report it published in December, the union noted that 3M – a technology company headquartered in St. Paul – holds $1.4 billion in offshore tax havens, including in places like Hong Kong, Panama, and Switzerland. Likewise, the union said, UnitedHealth keeps over $700 million in overseas havens like Bermuda and the Cayman Islands, citing a 2017 report by the Institution on Taxation and Economic Policy.

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December 2017 report: SACKED: How Corporations on the Super Bowl Host Committee Left Minnesota’s Public Schools Underfunded and Under Attack.
 Chart: St. Paul Federation of Teachers

Kathryn Wegner, an education studies professor at Carleton College and a parent of a student who attends Groveland Park Elementary in St. Paul, has been active in supporting the union’s efforts to highlight corporate tax avoidance. She has joined teachers for rallies outside of banks downtown and been educating other families and community groups about the fiscal situation.

“At my kid’s school, we lost the kindergarten teacher aides, then a librarian, then the music teacher, and our four kindergarten classes went down to three, bumping up class sizes,” she told The Intercept. “Parents are getting upset and wondering how to make sense of it, and understanding the historical context around corporate tax rates has been really useful to grasp the disinvestment.”

The teachers union has been asking corporate leaders to meet with them since October, and finally last week, they had the chance to sit down with representatives from EcoLab and U.S. Bank. At those meetings, the union asked for the companies’ partnership in pressuring state lawmakers to adequately support public education – specifically the state’s unfunded special education mandates.

“They said no,” said Faber. “The only way the state could really close the gaps would be to tax them more.”

U.S Bank did not return The Intercept’s request for comment.

Mesa Denny, an Ecolab spokesperson, told The Intercept that the company does not consider the situation “to be a dispute,” and it is “merely trying to correct the inaccurate and untrue information” promulgated by the teachers union.

“Ecolab believes that strong public schools are vital to a healthy community, and that’s why we have supported the St. Paul Public School System for more than 30 years,” Denny said. “Over the last five years, the Ecolab Foundation has provided more than $3.6 million to the St. Paul Public Schools, supporting strategic imperatives outlined by the school district leadership. Given that we are headquartered in St. Paul and many of our headquarters employees live in St. Paul, we are happy to devote our foundation dollars to these efforts.”

But those donations, Faber said, are not enough to bridge the school funding gap that was created in part by tax cuts. “Given how much school funding has declined, philanthropy just can’t have a real transformative change when we’re so underfunded on a basic level,” he said. “We can’t just accept little grants from corporations; we have to start thinking differently.”

The teachers want the school district to join them in pressuring local corporations to pay more. So far, they say, district officials have refused. Laurin Cathey, human resources director for St. Paul Public Schools, did not return The Intercept’s request for comment.

To address the budget deficit, the school district has proposed that teachers agree to applying to “Q Comp” – a voluntary state program established in 2005 that theoretically could bring up to $9 million to St. Paul schools. But even if St. Paul did apply, the state already distributes all the money it has allocated for the program, so no money would flow to St. Paul unless the legislature decided to appropriate more money. And even if the state did bump up funding, 22 Minnesota charter schools and school districts are ahead of St. Paul in line for the money.

Tyler Livingston, acting director of school support at the Minnesota Department of Education, told The Intercept that St. Paul would not be allowed to jump ahead of the other districts waiting for money if it applied for Q Comp. “The law says explicitly that applications are treated in the order they’re received,” he said.

The union says it is not holding its breath that the state will increase Q Comp funding, especially not during an election year. “The money just isn’t there,” said Faber, “and even if it were, Minneapolis is a Q Comp district and they have a budget shortfall about the same as ours or greater, so obviously Q Comp isn’t going to really address this problem.”

In addition to corporations, the union wants to see wealthy nonprofits, like local colleges and hospitals, pay their fair share in taxes. According to St. Paul’s mayor, a third of the city’s properties are exempt from property tax.

One option is to establish a so-called Payment in Lieu of Taxes, or PILOT, program – something that exists in more than 200 cities, towns, school districts, and counties across 28 states. PILOTs are essentially initiatives to induce tax-exempt institutions to make voluntary payments to the cities in which they’re based. A civic task force formed last year to explore the idea and released a report in September, emphasizing that PILOTs “cannot – and should not – be viewed as a ‘solution’ to St. Paul’s significant budget gaps or long-term financial challenges.” A representative from Citizens League, the Twin Cities public policy group that published the report, did not return a request for comment.

“It’s really frustrating to our members that while HealthPartners” — a local health care provider and insurance company — “avoids taxes and doesn’t want to talk to us about PILOTs, they’re charging us through the roof for our health insurance,” said Faber.

The potential upcoming teachers strike would be the first since 1946, when the St. Paul Federation of Teachers went on strike for six weeks – the first organized teachers strike in U.S. history. The union also voted to strike in 1989, but ended up reaching a last-minute agreement that mooted the strike.

The St. Paul teachers union is considered among the most progressive teacher locals in the nation. Since 2013, it has joined with other progressive unions to organize under the banner of “Bargaining for the Common Good.” Inspired by the Chicago Teachers Union strike in 2012, unions like St. Paul’s have taken a different approach to their contract negotiations, partnering with local organizations to bring a wider range of community-oriented demands to the bargaining table.

Last spring, the union released a report to evaluate how much progress it had made toward reaching the goals it set for itself in 2013. While highlighting some real accomplishments — including reducing student-teacher ratios for low-income students and expanding full-day pre-K programming — the SPFT acknowledged that without more sources of revenue, it would be impossible to really tackle its agenda.

The report helped form the demands the union has since been pushing for in its contract negotiations. The union’s very first proposal is in line with its pre-Super Bowl campaign: a commitment from the school district to push major local corporations and nonprofits to increase revenue for St. Paul Public Schools and support “changes in state tax policy to make these contributions sustainable over time.”

“We’re hoping to see some movement from the school district so we don’t have to take the next step,” said Faber, meaning the strike. Faber says the district can continue to accept corporate charity, but it needs to push them to also “be better neighbors.”

That’s a very different kind of pressure, he said, “and that’s hard work, but I don’t think we have any other choice.”

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Sorry, Walmart: Charter Schools Won’t Fix Poverty

Originally published in The American Prospect on June 30th, 2015.
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Last week, the American Federation of Teachers (AFT) and In the Public Interest released a highly critical report on the Walton Family Foundation’s K-12 education philanthropy, which ended with a call for increased transparency and accountability in the charter sector. The gist of the report is that the Walton Family Foundation—which has kick-started about one in four charters around the country—“relentlessly presses for rapid growth of privatized education options” and has opposed serious efforts to regulate and monitor fraud and abuse. While the foundation supports rapidly scaling up charter networks that have produced promising results, the AFT and In the Public Interest cite a 2013 Moody’s Investment Services report which found that dramatically expanding charter schools in poor urban areas weakens the ability of traditional schools to serve their students, forcing them to lay off teachers, increase class sizes, and cut programs to make ends meet.

A month earlier, Philamplify, an initiative of the National Committee for Responsive Philanthropy (NCRP), published its own report on the Walton Family Foundation’s impact, and found that although they have achieved meaningful results through their environmental philanthropy, “an overreliance on specific market-based vehicles” hinders their ability to create “sustainable and equitable” improvements in education. Philamplify also criticized the Walton Family Foundation for “insulating itself among like-minded peers rather than connecting with the broader field.”

While the Walton Family Foundation did not return my request for comment, Education Week reported that their spokesperson, Daphne Moore, defended their commitment to high-quality schools. Education Week also cites Greg Richmond, the president of the National Association of Charter School Authorizers (NACSA)—an organization that receives funding from the Walton Family Foundation—who argued that the foundation has long demonstrated a commitment to accountability and transparency.

This discussion is sure to continue over the coming months, but what was particularly striking was something in the Walton Family Foundation’s response to the Philamplify report—a statement that has been reiterated by the foundation many times over the past several years. Marc Sternberg, the foundation’s K-12 program director, said, “Education is the set of work we can support that will most directly end the cycle of poverty and change the trajectory of young people’s lives.”

The notion that education is needed to break the cycle of poverty is a popular mantra of the education reform movement. The problem is, it is simply not true at all. The most direct way to break the cycle of poverty is actually to give poor people more money, something that high-quality educations, even college degrees, do not in any way guarantee. So when it comes to the question of redistribution—an integral component to any comprehensive anti-poverty program—the political work of the Walton family deserves far greater scrutiny.

Waltons, Walmart, and Politics

The Walton family heirs own a majority of public shares in Walmart, the U.S.’s largest private employer, which easily makes them some of the richest people on earth. Today, the Walton family has more wealth than 49 million American families combined. The six Walton heirs together have a net worth of at least $148.8 billion.

The Walton family engages in quite a bit of political work outside of its environmental and education philanthropy—much of it to advance conservative legislative goals. In the 2014 electoral cycle, Walmart spent $2.4 million through its PAC and individual donations, and $12.5 million through lobbying. According to the Center for Responsive Politics, Walmart was far and away the biggest big-box retail spender in the election cycle, and has been ranked among the top 100 political donors since 1989. Demos looked at the Walton family’s political contributions between 2000 and 2014 and found that their $7.3 million in campaign contributions heavily favored Republican candidates over Democrats.

Outside of political campaigns, Walmart employs an array of Washington, D.C., lobbyists to advocate on issues like labor, taxes, and trade. Up until May 2012, Walmart was a longtime member of the right-wing American Legislative Exchange Council (ALEC), which works to promote an ideologically conservative agenda around the country. Moreover Walmart has given millions to the Republican State Leadership Committee, the Republican Governors Association, and other organizations that push right-wing policies.

Their animus towards union and labor is no secret, and Walmart has fought strengthening labor law in Washington, D.C., as well as supporting efforts to expand right-to-work laws in state legislatures. In addition, as veteran labor reporter Steven Greenhouse reported for The Atlantic this month, Walmart “maintains a steady drumbeat of anti-union information at its more than 4,000 U.S. stores”—much of which is patently false.

Beyond their efforts to elect conservative candidates and promote right-wing causes, the Waltons also fight against efforts to promote a greater redistribution of wealth through taxation. According to Treasury Department estimates, closing just two estate tax loopholes that the Waltons use would raise more than $2 billion annually over the next decade—but they have long lobbied against any effort to do so. Americans for Tax Fairness, a coalition of 400 national and state organizations that seeks to promote progressive tax reform, found that Walmart and the Walton family benefit from an estimated $7.8 billion in annual tax breaks, loopholes, and subsidies—much of which stems from the fact that so many of Walmart employees earn meager wages and are forced to rely on public assistance.

After years of worker organizing and public pressure, Walmart recently announced that it would raise its hourly wages to $9 an hour by April and $10 an hour by February 2016. While encouraging, such measures alone are unlikely to mitigate the economic hardship most Americans face—especially when, at this point, many cities are pushing for a minimum wage of $15 an hour.

Economic Inequality and Public Education

The evidence that shows impoverished kids are disadvantaged in school is well-documented—and yet many education reformers insist that despite this, we can still provide every child with a high-quality education so that everyone succeeds. We shouldn’t use poverty as “an excuse,” they say.

The idea that we can redesign education to be excellent and equitable without reducing poverty and economic inequality certainly sounds politically pleasant, but we know it’s just not true. That’s why the education agenda of the Walton Family Foundation has so many internal contradictions. The Waltons say they want to create more high-quality schools to help kids in poverty, but they back candidates who support eroding the already crumbling social safety net and fight against paying their fair share of taxes. And while the Waltons continue to advocate aggressively against unions, the Economic Policy Institute has found that the decline in unionization has mirrored the rise in inequality “to a remarkable extent.”

Not only does poverty hurt one’s chance for success in school, but growing levels of economic inequality also further exacerbate these issues—problems that the Walton heirs do not seem interested in addressing. Stanford sociologist Sean Reardon found that the rich-poor gap in test scores is about 40 percent larger now than it was 30 years ago—though the academic performance of poor students has not declined during this time. He also found that before 1980, affluent students had little advantage over middle-class students when it came to academic performance, but “the rich now outperform the middle class by as much as the middle class outperform the poor.” In other words, growing economic inequality has contributed to disparities in academic achievement across the board, even for those not living in poverty. Other researchers have found that the rich now have much greater access to extracurricular opportunities than the poor. In districts across the country, enrichment programs like art, music, journalism, and athletics are being cut—creating even greater divides between the haves and the have-nots in education.

If we want to reduce poverty and economic inequality—things we know hurt student achievement and life outcomes—then we have to address how the education aims of the Walton Family Foundation are incongruous with their political agenda elsewhere. Closing the achievement gap, as Demos analyst Matt Bruenig points out, will not even reduce poverty; it would merely change the distribution of it. In the education-reform world, unfortunately, grantees are unlikely to criticize foundations because they fear they will be blacklisted or de-funded. This makes sense, as there are incredible power imbalances in the philanthropic sector and money is scarce.

The Walton Family Foundation talks a lot about creating high-quality schools. If Walmart, with its billions of dollars in profits, created high-quality jobs with living wages and benefits, children would be far less likely to grow up in poverty and would perform far better in school. Relatedly, if the Waltons backed candidates who supported a more equitable distribution of wealth and stronger social-welfare policies, then children would be far less likely to grow up in poverty, and perform far better in school. It’s certainly true that every child deserves a high-quality education. How to get there, however, is not rocket science.