Wind farms deliver gusts of wind to rural colleges, however college funding legal guidelines restrict how cash is spent

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Eric Brunner, University of Connecticut; Ben Hoen from Lawrence Berkeley National Laboratory and Joshua Hyman from Amherst College

(THE CONVERSATION) On the website of the local school district in Blackwell, a town of just over 300 people in rural Texas, principal Abe Gott says, “We believe that regardless of your dreams, you can make them come true in Blackwell, Texas. ”

To demonstrate this, the Blackwell Consolidated Independent School District is providing up to $ 36,000 post-secondary scholarship to graduates of the district’s single high school. So far, according to God, 140 students have received scholarships.

The money that made this possible came from a $ 35 million deal the school district signed with a wind farm company in 2005. This was part of the massive growth of that sector in Nolan County and Texas.

The spread of wind power in rural America has been a financial boon for school districts like Blackwell. However, due to the complexity of school funding, the impact on student performance is limited. This comes from a new study we conducted as researchers in the fields of public finance, educational economics and energy policy.

Wind tax blows

Nolan County – one of three counties served by the school district – has 1,371 wind turbines that generate a maximum of 2,097 megawatts, or enough to supply half a million Texas households with electricity per year. These include the 585-megawatt Sweetwater wind farm and the 735-megawatt Horse Hollow project, which was the largest in the world when it went online in 2006.

Over the past 25 years, wind power has grown in the United States, rising from less than 2 gigawatts in 1995 to over 110 GW last year, enough to provide more than 7% of the country’s total electricity supply. It provides more than 10% of supply in 14 states and more than 40% in two of those states – Iowa and Kansas.

By 2020 there were over 1,600 commercial wind turbines consisting of almost 68,000 individual turbines. The industry continues to grow rapidly. A further 200 gigawatt projects for grid connections will be applied for by the end of 2020.

With all of this rural development comes property tax revenues. Wind projects paid an estimated $ 1.6 billion in property tax revenue to state and local jurisdictions in 2019.

This is undoubtedly a welcome source of income for school districts in rural areas that are sometimes struggling to generate local tax revenue. But as researchers we wanted to know: How do school districts use the income from wind farms? And does this money help improve student performance?

To find out, we collected data on new US wind turbines from 1995 to 2017 and the development of tax revenues in school districts. We then checked whether new wind farms had led to significant changes in the school budget and how the school districts spent their money, e.g. B. for new buildings, the hiring of more teachers to reduce the class size or the increase of teachers’ salaries.

We found that wind turbines resulted in a large increase in local revenues for school districts. Schools increased spending on capital expenditures such as buildings and equipment dramatically, but only marginally increased their operating budgets, such as hiring more teachers to reduce class size.

When priorities and guidelines collide

Numerous studies have shown that smaller class sizes lead to better student performance. Why are districts investing new tax revenue in investments rather than class size reductions?

We believe this is due to state and county level school funding formulas and tax laws, as well as the incentives they offer school administrators.

As the wind grew, it expanded from just 16 school districts in 1995 to 900 districts in 38 states in 2016. At the top are rural areas of the West, Midwest, and Texas.

The amount of tax revenue a school district receives from a wind turbine depends on state and local laws, and how those laws interact with state school funding formulas.

States are taking a variety of approaches to taxing wind farms, ranging from normal property tax treatment to full exemptions. Sometimes wind farms make “payments instead of taxes”, so-called PILOTs.

Kansas, for example, exempts wind projects from property tax for the first 10 years. Some wind companies make PILOT payments to hosting counties, but individual school districts are often excluded from these deals. Wyoming has a central system of school financing, so that all income from wind projects is fully recorded by the state and redistributed to the schools according to a formula.

Texas, the No. 1 wind energy state, has a complicated system of local taxation on wind farms. Due to the state school financing system, a large part of the additional property tax income from wind turbines can be recorded by the state.

Texas uses a formula to take money from school districts with high property tax revenues per student and pass it on to poorer districts.

However, this does not apply to local property tax receipts to pay down Texas debts. So school districts have a strong incentive to borrow money by selling bonds to fund capital improvements and then using the proceeds from the wind farms to repay the bonds.

As a result, Texas school districts tend to invest wind tax revenues in buildings and facilities rather than teachers and businesses. For example, Blackwell School District has spent $ 15 million on a new soccer stadium and academic complex in addition to its scholarship fund.

Effects on school finances

The growth in wind energy development over time and across the country provides an ideal framework to examine how wind energy – or really any external increase in funding – can affect the finances of the school district and, therefore, student performance.

Our sample comprised 638 school districts in which a wind turbine was installed at some point between 1995 and 2017. Unsurprisingly, these “windy districts” tend to be smaller and more rural than the average school district.

We have found that new wind farms lead to a large increase in local income per student with only a small cut in state aid. We also saw large increases in spending per student. Texas in particular collected and spent more than other states.

However, we found that most of these new expenses were being used for building improvements or new facilities rather than operational or “ongoing” expenses. District spending on buildings increased by as much as 73%, while operating expenses increased only marginally by around 2%.

Formulas in the game

This allocation appears to be due in part to the formulas used by states to support local school districts. States usually reduce the amount of money they send to a district where local tax revenue is increasing to offset expenses.

In some cases, however, this only applies if a district spends more on day-to-day operations, not if it encourages building improvements or new construction. To avoid losing state aid, districts use new local income from wind farms for new construction or repairs rather than operating costs.

That is exactly what we saw in our study. While school facilities and equipment undoubtedly improved, new wind farm income resulted in little or no change in class size or teacher salaries. Consistent with previous research showing that better lower student-to-teacher ratios were clearly related to student performance, we saw little change in student outcomes.

While new developments from wind energy can significantly boost rural economies and tax revenues, decisions about how the money is used are still made under local school funding policies and laws.

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