I’ve written a lot about winners and losers in Indiana school funding, usually focusing on budget decisions made by the state legislature. But there’s another important divide when it comes to funding schools: between districts that pass local property-tax referendums and those that don’t.
And judging by this month’s elections, the number of referendum winners may be nearing its limit. Only six of the 10 school referendums that were on the May 7 ballot were approved. That’s a far lower rate than the 88% that passed between 2016 and 2018, according to data from Purdue University.
Under Indiana’s system of funding schools, money to pay teachers, staff and administrators and to fund most day-to-day operations comes from the state, appropriated by the legislature in the two-year state budget. Money for buildings and transportation comes from local property taxes.
But if schools need more operating money than the state provides, they can turn to local voters in a referendum. And success can really make a difference. In my local district, Monroe County Community Schools, a six-year referendum approved in 2016 boosts operating funding by about 10%.
This works fine for communities that approve referendums, but that’s the minority of them. Only about one in five school districts have approved a school operating referendum, according to records from the Center for Evaluation and Education Policy at Indiana University. Most haven’t tried.
Why don’t more districts try? Probably because school boards and administrators know their local communities and conclude that passing a referendum is an uphill battle.
That may be because districts don’t have a lot of property wealth on the tax rolls. To generate enough revenue to be worth the effort of a referendum, they would have to impose a large increase in the property tax rate. And voters would likely balk at that.
Voter approval is also required to raise property taxes to pay for school construction and renovation projects. Some districts may decide that keeping their buildings from falling apart is a more urgent priority raising teacher pay or hiring more teachers.
An analysis by Purdue University agricultural economist Larry DeBoer, an expert on school funding, found that referendums were most likely to pass in districts with high property value per student. As he pointed out, that creates an issue with equity.
“If wealthier districts pass referenda more frequently,” he wrote, “they’ll have newer buildings, smaller class sizes and higher-paid teachers than less wealthy districts.”
That’s an obvious problem for schools in poorer districts that don’t pass referendums and, as a result, will have older buildings, larger class sizes and lower-paid teachers. More importantly, it’s a problem for children who attend those schools. A far better approach would be for Indiana to fund schools adequately, across the board, so referendums were not needed.