In communities across West Virginia, the topics of public school funding and data centers are receiving ample attention. And while often viewed as separate and unrelated, the issues are more intertwined than most might think. The multi-million dollar tax breaks that data centers and other economic development projects receive come directly at the cost of the largest sources of public school revenue, eliminating public dollars that could otherwise help school districts make critical investments in our schools and our children’s futures.
To understand how data center tax breaks impact our public schools, it’s important to know how public schools are funded. In West Virginia, state and local funding make up the bulk of public education dollars at about 80 percent. At the state level, the funding comes from the general revenue budget, which is funded through income taxes (personal and corporate), sales taxes, and a few other sources. At the local level, the funding comes from property taxes (the taxes people pay on the value of their homes and vehicles).
The WVCBP has published several pieces on how the state’s current funding formula, which determines the funding school districts receive for staffing, transportation, services and other needs, has failed to keep up with the true cost of providing high-quality services to our students. Lawmakers have repeatedly failed to update the school funding formula despite broad acknowledgement that it is necessary, often citing cost constraints.
Despite community pushback, some state lawmakers, led by Governor Patrick Morrisey, have sought to incentivize data center developers to locate in West Virginia with two strategies: deregulation and tax incentives.
The primary action related to deregulation has been via 2025’s HB 2014, which eliminates the legal jurisdiction of counties and municipalities over “High Impact Data Centers” except for narrow, explicitly granted areas including municipal fire and police protection and collection of nominal local fees and taxes. In essence, the legislation completely prohibits local governments from regulating High Impact Data Centers and permits unregulated microgrids. The West Virginia Department of Economic Development advertises this to potential developers as “unlimited microgrid freedom” and “state preemption of local barriers creat[ing] a welcoming environment for investment.”
The elimination of local control raises a number of unanswered questions covered in more depth in our previous publication, particularly given data centers are unlikely to locate in a municipality. Can county law enforcement enforce laws at data centers? Can county health departments regulate water or sewage disposal? Can counties regulate storm water runoff or illicit discharges into surface or ground water?
Tax breaks and loopholes in state law allow multi-billion dollar data center developers to dramatically reduce or even zero out their tax liability. They get to avoid paying sales tax on the expensive equipment that fills their data centers including computers, servers, software, and other purchases; pay a heavily discounted rate on their tangible personal property taxes on the value of that same equipment; and dramatically lower their income tax liability if they create just 10 jobs.
These tax incentives aren’t just special treatment that run afoul of best practice tax principles like neutrality (that the tax system should not discriminate between types or sources of income)–they also undermine the sources of revenue that make up four-fifths of public school funding and could cost the state tens of millions of dollars in tax revenue per data center per year. Just one of the tax incentives, the salvage value property tax discount, would save a data center with $2 billion of servers and other personal property $24.1 million annually in property taxes.
One clear consequence of HB 2014 is that property tax collections will be significantly lower due to special tax treatment for data centers. But beyond this, HB 2014 created a mechanism by which the state will seize most of the remaining property taxes generated, meaning public schools won’t receive them at all.
Under this law and its “Special Rules for Tax Distribution of High Impact Data Centers,” found in §11-6N-4, property taxes generated by regular tax levies (including state, county, board of education, and municipal) and voter-approved bond levies on data center sites will not all go to those levying bodies to provide local public services–as all other property taxes do–but instead are redirected to state government coffers and priorities.
Normally, property taxes are a local revenue source, with over 99 percent of property tax revenue going to local entities including county commissions, city councils, and school districts. The West Virginia Constitution explicitly creates an overall limit on levy rates, as well as a strict limit of one cent per $100 of property taxes the state may levy and collect. In Mingo County, where a High Impact Data Center is under consideration, 55 percent of property tax revenue goes to the county school district, 44 percent to the county, and less than one percent to the state.
Under HB 2014, property tax revenue generated from the High Impact Data Center Development will be treated under the Special Rules for Tax Distribution instead, with 70 percent going to state priorities and just 30 percent going to the county—compared with more than 99 percent of property tax revenue from any other source of development or industry.
Ambiguity in the drafting of the law has raised significant questions about whether school districts will receive any of the 30 percent of property tax revenue that stays in the county where the data center is located or if it all goes to the county commission. That said, a plain reading suggests that the entire share will go to the county commission, leaving school districts with nothing from the property taxes generated by High Impact Data Centers in their district absent an excess levy if they have one.
What is evident is that the funding seized by the state will take away a key source of local funding that could otherwise have gone toward strengthening our neighborhood schools and other public services. And instead of going into the general revenue fund that could still make its way to public services that benefit all residents, the property taxes seized will go to a myriad of state special interests, the largest of which is a Personal Income Tax Reduction Fund. Typically, about two-thirds of any personal income tax reduction goes to the state’s highest earning households (the wealthiest 20 percent). So even if large amounts of data center property tax revenue are directed toward income tax cuts, the typical household in West Virginia would see only minimal savings; for every $100 million in property tax revenue seized and redirected to personal income tax cuts, a middle-income household would see a tax cut of about $54 per year (or about $1 per week).
When politicians or developers promise that data centers will bring billions in investments, it’s worth reminding ourselves who will benefit. These billions aren’t going to public budgets or even to West Virginians but to private companies for out-of-state profits.
The time is now for communities, school districts, and local governments to demand that if data centers are going to locate in our communities, they must pay their fair share. Polling shows that Americans believe data centers have harmful effects on the environment, utility costs, and local quality of life. The one thing the public supports is the local tax revenue, but state lawmakers have drastically diminished and seized that benefit from our communities.
We must fix this before it is too late. An analysis in neighboring Virginia found that data center tax breaks now cost the state $1.6 billion per year. Of the portion that would have gone to schools, they project the state has