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Texas should not be subsidizing wind energy producers at the expense of its schoolchildren

Wind power and other renewables have their place in the energy mix. But since the federal subsidies for wind farms are so large, it's unclear Texas needs to provide additional incentives. These funds could be better used to raise teacher salaries and otherwise upgrade the quality of public education across the state. Removing or reducing the state incentives for wind generators will not by itself solve the education crisis in Texas, but it would be a step in the right direction.

Texas prides itself on being a low-tax, low-spend state; and the state's business and political leaders often attribute Texas' dynamic economy to our competitive fiscal climate.

But despite its economic dynamism, Texas' per capita income was 4 percent lower than the U.S. average of $38,611 in 2007. Though this disparity can be partly attributed to the state's high rate of immigration and changing demographic structure, it also reflects a historic "underinvestment" in public education - at least compared with the rest of the United States.

In 1995, Texas ranked 25th among the 50 states in spending per pupil. But by 2006, we had slipped to 44th. At $7,561 per pupil, Texas' spending on public education was more than 17 percent below the national average of $9,138. Even Arkansas, Alabama and Louisiana spent more per pupil on public education than Texas in 2006 despite recording incomes well below those of the Lone Star State.

Though spending more money on public education isn't a guarantee of improved outcomes, researchers have found strong correlations between higher incremental spending and improved student performance.

Put differently, though increased per-pupil spending by itself isn't sufficient to... more [truncated due to possible copyright]  

Texas prides itself on being a low-tax, low-spend state; and the state's business and political leaders often attribute Texas' dynamic economy to our competitive fiscal climate.

But despite its economic dynamism, Texas' per capita income was 4 percent lower than the U.S. average of $38,611 in 2007. Though this disparity can be partly attributed to the state's high rate of immigration and changing demographic structure, it also reflects a historic "underinvestment" in public education - at least compared with the rest of the United States.

In 1995, Texas ranked 25th among the 50 states in spending per pupil. But by 2006, we had slipped to 44th. At $7,561 per pupil, Texas' spending on public education was more than 17 percent below the national average of $9,138. Even Arkansas, Alabama and Louisiana spent more per pupil on public education than Texas in 2006 despite recording incomes well below those of the Lone Star State.

Though spending more money on public education isn't a guarantee of improved outcomes, researchers have found strong correlations between higher incremental spending and improved student performance.

Put differently, though increased per-pupil spending by itself isn't sufficient to guarantee higher test scores and improved graduation rates, it is clearly a necessary step. In short, Texas will have to allocate more resources to public education in the years ahead if we want to maintain a qualified workforce that can keep our economy growing.

Unfortunately, a number of so-called economic development programs are working at cross-purposes with the goal of improving educational outcomes.

For example, under Chapter 313 of the Texas Economic Development Act, developers of wind farms for commercial use can apply for a "value limitation" that significantly reduces their public school district tax obligation. The value at which the property is limited (and therefore taxed) varies with the size of the school district. For small districts, the cap on projects can be as low as $1 million while for large school districts the cap can go as high as $100 million.

When an agreement is reached between the wind company and the school district, the value of the property is capped and the state makes up the difference between the capped value and the appraised value.

The valuation cap then reduces the taxes paid by the wind company for a 10-year period. Since the local school district is "held harmless," and the wind investors bring new jobs to the community, the program has become extremely popular.

Through January of this year, the Texas Comptroller of Public Accounts had approved value limitations for wind generators of about $11.2 billion on a total investment of $12 billion.

Applying a tax rate of $1.50, this means the state will be reimbursing school districts to the tune of $168 million in 2008 alone. But because the valuation limit is good for 10 years, the state is obligated to send at least $1.7 billion of its own-source revenue to participating school districts over the next decade.

Should the rapid pace of wind energy development continue, the potential revenue losses from the value limitation could total $12 billion by 2025.

Wind power and other renewables have their place in the energy mix. But since the federal subsidies for wind farms are so large, it's unclear Texas needs to provide additional incentives.

These funds could be better used to raise teacher salaries and otherwise upgrade the quality of public education across the state. Removing or reducing the state incentives for wind generators will not by itself solve the education crisis in Texas, but it would be a step in the right direction.

Bernard Weinstein is professor of applied economics at the University of North Texas in Denton.


Source: http://www.star-telegram.co...

SEP 15 2008
http://www.windaction.org/posts/17104-texas-should-not-be-subsidizing-wind-energy-producers-at-the-expense-of-its-schoolchildren
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