Mahendra L. Joshi, John C. Bliss, and Conner Bailey

Industrial recruitment has been at the heart of Alabama's rural development strategy since the end of World War II. The Cater Act of 1949 and the Wallace Act of 1951, the two principal policy tools designed to recruit industry to Alabama, offered incentives of bond financing and property tax relief on industrial facilities.

Researchers in the School of Forestry and the Department of Agricultural Economics and Rural Sociology recently assessed impacts upon public education funding of property tax abatements granted to the pulp and paper industry in the state.

Various Alabama state and federal agencies supplied secondary data on public education funding levels and tax abatements. Primary data were collected through a mail survey of counties in which pulp and paper mills are located. The survey population frame included 15 pulp and paper mill executives, 15 chairs of local industrial development boards (IDB), 13 chairs of county commissions, and 22 public school superintendents. A total of 65 individuals were sent questionnaires, 47 of which were returned completed for an overall response rate of 72%. Interviews were then conducted with a subset of survey respondents in Choctaw, Clarke, Dallas, Escambia, Marengo, Monroe, and Wilcox counties: the heart of the state's pulp and paper industry and some of the poorest counties in Alabama.

In 1993 alone, Alabama abated $78.5 million in property taxes to industries and businesses, approximately one third of which were school tax abatements. The pulp and paper industry received 39% of total abatements. Eight out of the state's top 12 beneficiaries in 1993 were pulp and paper companies, each receiving more than $1 million in abatements.

In the seven interview counties, 91% of abatements were granted to the industry, and the $4.4 million of school tax abatements received by the industry constituted 94% of the total school taxes abated by those seven counties (Table 1). The abated school revenue represented about one-half of the current school revenue generated from property taxes. School tax abatements exceeded total school revenue in two counties.

Survey respondents were asked to assess the overall quality of local public education (Table 2). Whereas all superintendents and most county commission chairs rated the overall quality of education in their schools “good,” only a minority of mill executives and IDB chairs shared that view. In interviews, most pulp and paper mill executives expressed dissatisfaction with the quality of education in their counties, reporting that local education is not preparing students adequately for employment with the industry.

Table 2. Perceptions of Quality and Funding of Education in County Public Schools

Statement	Response category	Pulp and paper mill executives (n= 12)	Industrial development board (n= 12)	County commission chairmen (n= 8)	School superintendents (n=13)	Total (n=45)
a. Overall quality of education	GOOD	41.7 %	33.3 %	62.5 %	100%	60.0%
	POOR	58.3	37.5	0.0	0.0	37.8
	DON'T KNOW	0.0	8.4	0.0	0.0	2.2
a. Local public schools have the resources necessary to provide quality education to their students	AGREE	25.0	41.7	33.3	7.1	25.6
	UNDECIDED	16.7	16.6	22.2	7.1	14.9
	DISAGREE	58.3	41.7	44.4	85.8	59.6

Recognizing the financial needs of their local public schools, most pulp and paper companies in Alabama make voluntary contributions, ranging from occasional donations of used furniture, computers, and mobile homes, to substantial annual cash contributions. However, only two companies made contributions approximating their school tax abatements. About one half of the companies in the seven-county study area reported contributions of less than $100,000 in 1995.

Alabama's industrial recruitment strategies were formulated during a period when the state was desperate to spark economic activity in its impoverished rural counties. Recruitment of the pulp and paper industry marked the beginning of a new economic era in rural Alabama, founded on the area's bountiful forest endowment. However, continuing abatement of school tax dollars to pulp and paper companies has a direct, substantial, and negative impact on funding for local public education. Poorly-funded education systems produce graduates who are poorly prepared to enter the workforce, thereby hurting the ability of existing industries to hire locally, and making it difficult for communities to attract new employers. The failure to adequately invest in human capital resources is severely curtailing future development opportunities of many of these rural communities.

The forest products industry has benefited greatly from Alabama's generous property tax abatements and low property tax rates. As their voluntary contributions indicate, many pulp and paper companies are responding to the needs of local public schools. Perhaps a more effective and lasting contribution would be to engage the state's political leadership in serious discussion of education and educational funding reform.