This story was published in partnership with the Atlanta Journal-Constitution.
Georgia has become a preferred destination for the multi-billion dollar, A.I.-fueled data center industry. This year, construction activity in the metro Atlanta area has even surpassed northern Virginia, which has the highest concentration of data centers in the world.
But the state’s schools are helping to pay the price for all that development.
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Because of sales tax breaks to OpenAI, Microsoft and other tech giants now building “hyperscale” warehouses in communities across the state, districts this year will give up roughly $300 million, according to a new analysis from Good Jobs First, a nonprofit watchdog group that focuses on the impact of public subsidies.
The organization estimates that the losses in some of the state’s school districts would range from $3.6 million in Newton County to $35.5 million in Gwinnett County, the state’s largest district.
“The development that has taken off from about 2015 to now has had real implications for schools,” said Anthony Elmo, who focuses on education issues at the organization. “We’re not talking about a paltry amount of money.”
The Georgia Department of Education declined to comment on the report, and the Gwinnett district didn’t respond to calls or emails. A spokesperson for the Cobb County district, which stands to lose about $18 million, said, “We have not seen impacts on our schools from data centers.”
Maybe the county doesn’t have a lot of data centers (one tracker puts the count at nine), but Heather Tolley-Bauer, a Cobb parent who co-founded a watchdog group focused on school funding, said the new analysis still shows they can hurt schools.
“We hear a lot about energy, water and economic development. We hear a lot less about what the tax breaks they get mean for our schools,” she said. “Cobb is already dealing with declining enrollment, growing senior tax exemptions and other economic development abatements, while state lawmakers continue to pass education mandates that aren’t always fully funded.”
The state this year also passed a law that caps how much local governments and school districts can collect in property taxes, which makes tax relief for data centers “an even bigger issue in many districts,” said Daniel Kanso, vice president of public policy at the Georgia Budget and Policy Institute, a left-leaning think tank.
“I think these things compound onto each other when the property taxes are the largest source of school funding in Georgia,” he said. “Now districts are feeling the most severe kind of mandatory constraint coming down from the state level.”
‘A gold rush’
Good Jobs First’s Georgia report follows earlier analyses it conducted on the use of similar incentives in other states. Last year, it calculated that the 24 St. Louis-area districts had lost a combined $380 million over eight years to economic development tax abatements. In April, it released a report showing that of the more than $1 billion Virginia lost in sales collections in fiscal 2024 from data centers, about $267 million would have been spent on schools.
Data centers can increase property values, which results in more revenue for schools, but the Georgia analysis notes that the structures are also exempt from local sales taxes, including those that districts collect to pay for school construction projects. Such sales tax losses could amount to a combined $645 million in the current fiscal year, according to their calculations. Elmo added that the revenue loss is likely an “undercount” because local development authorities sometimes negotiate tax exemptions to attract data centers.
“The counties think this is a gold rush and they have to take advantage of it while it lasts,” said Jessica Owens, the director of data at Science for Georgia, a nonprofit that tracks data center growth across the state.
The debate over data center campuses, which can be larger than some airports, has become a major focus of the midterm elections. President Donald Trump says anyone opposed to further expansion wants to be “backwards and poor,” and that as artificial intelligence rapidly advances, more data centers are needed to stay competitive with China. But with AI agents going rogue and trying to hack into government websites, even leaders of the industry argue that it’s time for some restraint.
In some states, such as Texas, Republicans like Gov. Gov. Greg Abbott have joined Democrats in calling to repeal sales tax exemptions and place new restrictions on development. To counteract negative public opinion, Microsoft is attempting to pay back the millions it’s saved in taxes to two metro Atlanta counties, and tech companies are working to polish up their image by highlighting ways data centers benefit local schools.
Meta data centers, for example, have helped fund the construction of an elementary school in DeKalb, Illinois, and teacher bonuses of up to $50,000 in Louisiana’s Richland Parish.
In Frederick County, Maryland, Rowan Digital Infrastructure, which builds data centers for major tech companies, has what Tim Alborg, director of government and community affairs, called a “symbiotic” relationship with the local school system. Opening STEM labs in elementary schools is one example, he said.
“A lot of public school classrooms are getting this pressure on their budgets. We’re trying to identify those places where school districts need support,” he said, “and trying to help them build their pipeline of educated workers that can one day potentially work on our projects.”
The company may also be an outlier when it comes to negotiating local tax breaks. While local deals can leave districts with less revenue, Rowan is “always paying full taxes the whole time to school districts,” said spokesman Nathaniel Brown.
The Frederick County school board, however, is still concerned about possible environmental impacts on Carroll Manor. Members voted in September to authorize a third-party evaluation that would include issues like air quality, noise and vibration.
In some cases, district leaders are joining with city and county officials to welcome developers to their community. Project Camellia, a $20 billion OpenAI project that takes its name from the colorful plant that grows throughout Georgia, will result in more resources and salary increases for school staff and greater opportunities for students, Yancy Ford, superintendent of the coastal Effingham County district, said on the project website.
“The Industrial Development Authority brought the school district leaders and board members into these conversations because everyone recognized that a project of this magnitude would impact school district funding,” said spokeswoman Tiffany Altman. “Collaboration allowed district leadership and board members to ensure it would positively impact the district.”
Like the ‘Manhattan Project’
According to the National Conference of State Legislatures, 38 states offer tax incentives to attract data centers. In heated community meetings, opposition often focuses on how close developers are building data centers to residential neighborhoods and schools. Others have criticized the financial impact.
“I’m very much annoyed with the Kansas government for passing these tax abatements,” Lux Claridge, an Emporia High School physics teacher, said about 2025 legislation that gives data centers a 20-year exemption from sales taxes. He made news in July when he was arrested at a city commission meeting for disorderly conduct and interfering with law enforcement after repeatedly clapping for speakers objecting to a proposed data center, despite a warning from the commissioners.
The commission took initial steps to accommodate the Flint Hills Digital Campus, in the form of favorable zoning changes. But voters in Lyon County, which includes Emporia, will have their say about the project’s future in November. In August, a district court judge ordered the county to place a referendum on the ballot that would put a moratorium on building large-scale data centers.
With declining enrollment, the Emporia district, Claridge said, doesn’t need to lose more money.
“We’re trimming the budget, trying to minimize things,” he said. The annual back-to-school gathering for teachers, he said, didn’t include breakfast this year. But that’s just a small example of where the district is cutting back. While it was able to avoid staff reductions, the district is closing an elementary school.
One challenge in estimating the long-term impact of tax breaks for data centers is that there is no precedent for the current pace of development, said Elmo, with Good Jobs First. He described it as “akin to the speed and the breadth of the Manhattan Project,” the government’s accelerated effort to develop nuclear weapons during World War II.
Virginia’s Loudoun County, the world’s largest data center hub with more than 250 massive structures, is held up as the example of how accommodating growth can pay off. The county spends more per pupil than neighboring districts even though it has lowered property taxes by about 30% over the past decade, eliminated vehicle license fees and plans to further cut personal property taxes on cars.
But Elmo noted that those benefits are a result of the county not only collecting real estate taxes from tech companies but also taxing them on the rows and rows of computer servers inside.
“Loudoun, in a smart way, basically offset the state sales and use tax exemption, by creating a county tax on business equipment,” he said.
‘Pay their fair share’
But in other states, school districts have yet to see an influx of data center revenue.
In West Virginia, where multiple schools are closing or consolidating because of declining enrollment, a law allows 70% of additional property tax revenue from data centers to flow into a special state fund, while 30% stays in the county. But it’s unclear whether school districts will share that income, said Kelly Allen, executive director of the West Virginia Center on Budget and Policy.
The group’s analysis shows that for every $20 billion in data center development, the state — and local schools — lose $1 billion.
“If data centers were going to locate in West Virginia, they could be a source of funding for schools at a time when it’s desperately needed,” she said. “But all these tax breaks are really standing in the way of making sure local communities and schools benefit from their development.”
A similar scenario is playing out in the west Texas city of Abilene. Local officials gave OpenAI’s Stargate data center a 10-year, 85% cut on local property taxes . Even with those tax breaks, the $3.5 billion project has already substantially boosted revenue, but the state, not the Abilene community, is capturing those extra dollars.
“This was a huge windfall of property tax revenue for the school district,” said Carrie Collier-Brown, an energy regulatory attorney in Texas who focuses on data centers. “But under the state formula, most of that goes back to the state where they just dump it into a piggy bank to do whatever they want with it.”
The Texas Education Agency didn’t respond to a request for comment.
Allen, in West Virginia, thinks any examples of data centers giving back to local schools “pale in comparison” to what they would pay in taxes. Tax revenue, she said, “benefits everybody,” while philanthropic donations or sponsorships allow corporations to “pick and choose the things that they want to fund.”
Experts suggest that for data centers, generous tax breaks, while helpful, are actually less important to developers than finding affordable land and connecting to the power grid. The Georgia report, citing research from the University of Georgia, notes that about 70% of the data center construction in the state would have happened even without the exemptions.
“Those tax breaks do them no good unless they can power the computers,” Collier-Brown said.
With all of the money in the industry — now valued at over $125 billion in the U.S. — there’s no reason why governments can’t structure deals that are attractive to developers while still getting “life-changing revenue for schools,” she said. “These are the richest companies that have ever been on the planet.”