This study discusses whether two tax programs instituted by local communities in Michigan to generate local economic activity have adversely affected local public elementary and secondary school financing. Analysis of the effects on school funding of The Plant Rehabilitation and Industrial Development Law of 1974 and its expansion in Act 255 of the Public Acts of 1978 is made difficult, according to the author, by inconclusive evidence as to the effectiveness of tax abatements in inducing growth of the tax base, and by the lack of an operational definition of what constitutes "impairment" of financial soundness. A general analysis of the Michigan Operating Aid Formula and of the situation for nine Kalamazoo County school districts indicates that while tax abatements do not appear at present to have impaired the financial soundness of most school districts, in the long run the question of impairment hinges on the state aid formula reflecting the increasing costs of public services. Continued reliance on the state aid formula to forestall impairment is, the author concludes, a poor substitute for a rational policy on the use of tax exemptions. (JBM)