Analysis

Analysis: Sin Taxes, Children’s Funds, Community Benefit Agreements — How Local Leaders Use Creative Financing to Benefit Kids & Education

By Jennifer Davis | January 14, 2020

What responsibility does government have to ensure that basic human needs are met? What is the right balance between a market-based economy and government intervention? These are some key questions being debated at the national level today. In the meantime, local leaders are focused on rebuilding social safety nets that eroded during the Great Recession. This new localism has mayors and community leaders leading the charge to ensure that our children are safe, healthy and educated. Pioneering communities are finding innovative ways to bring together the public, private and nonprofit sectors to finance and expand needed services for children and families.

Research by Nathaniel Hendren and Ben Sprung-Keyser provides important evidence that certain government investments yield high returns. This is particularly true for the expansion of health insurance for children, funding for preschool and K-12 education and policies that increase college attainment.

The Education Redesign Lab at Harvard’s Graduate School of Education has been working community by community to support local leaders in breaking down silos and building public-private partnerships in order to expand programs and produce positive outcomes for children and families. To do so, communities have needed to generate new resources and identify innovative strategies for addressing the diverse needs of their stakeholders.

In partnership with The Children’s Funding Project, we recently published a report, Innovative Financing to Expand Programming and Services So Children Can Thrive, to illuminate some of the more creative options for generating resources and become pioneers for expanded children’s services. Across the U.S., communities are setting up new funds to assist children using revenue from voter-approved tax increases, including “sin” taxes on tobacco, marijuana, alcohol and sweetened beverages, as well as sales and property taxes. In 2018 alone, a diverse group of municipalities passed measures to establish children’s funds in Jackson County, Missouri; San Francisco; Kent County, Michigan; and Alachua County, Florida. Other methods tap into business development projects through negotiations with builders to create community benefit agreements, or with local or national banks through the Community Reinvestment Act.

Pittsburgh provides a good example of a locality that successfully implemented an innovative method to fund youth services. In 2008, the One Hill Coalition, a diverse group of 100 community groups in the city, brokered a community benefit agreement with the developers of the new Pittsburgh Penguins arena. The agreement included a plan to create a community center and provide $8.3 million in funding, most of it to support neighborhood families with benefits such as reduced or no-fee memberships at the new community center and family-sustaining jobs with health coverage.

Similarly, Memphis Mayor Jim Strickland mandated the use of a commercial property tax, generated from expiring tax incentives, for a pre-kindergarten fund for low-income children. These funds will generate $6 million annually toward pre-K funding by 2022.

In cities where significant land is owned by nonprofit organizations, hospitals and/or universities, PILOT payments — Payments in Lieu of Taxes — are being directed to fund early childhood education, health and mental health services, afterschool and summer enrichment programming, and college and career access services. In Boston, these payments are augmenting the traditional K-12 education system and helping to prepare low-income children to build middle-class lives.

Families with resources are investing more than ever in their children’s future, but not all can afford educational summer camps, SAT prep courses and cultural travel that broaden educational experiences. While the federal and state governments will remain critical funding partners, local leaders are better positioned to go to their voters and make the case for increasing supports for children. They know that investing early in children’s health, education and well-being will have tremendous economic payoffs in the future, requiring fewer investments in social safety net programs and the criminal justice system.

Enlightened local officials know that the future of their communities will ultimately depend on the success of their children. We are hopeful that this movement will grow, with more leaders and activists adopting these pioneering revenue-raising strategies. The nation must shift its priorities away from meeting the bare minimum of basic needs toward providing ample opportunities for success for our next generation of leaders, workers and heads of household.

Jennifer Davis is a former Clinton administration education official, a nonprofit leader and senior adviser at Harvard’s Education Redesign Lab. 

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