Referendum results show flaws in school funding

Eight Indiana school districts asked their voters to approve more funding for education in Tuesday’s election. Four were successful and four weren’t. A quick look suggests what’s wrong with Indiana’s philosophy of relying on local property tax referendums to give schools the money they need.

The four districts where referendums were approved were Southwest Allen County Schools in the Fort Wayne suburbs; Westfield-Washington Schools in the northside Indianapolis suburbs; Monroe County Community Schools in Bloomington; and Southern Wells Schools in northeastern Indiana.

The districts where referendums failed were rural or small-town districts: Brown County Community Schools, Delphi Community Schools, Medora Community Schools and Wabash County Schools.

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Just say yes to school referendum

If you live in an Indiana school district where a school funding referendum is on the ballot … just vote yes. If your school district is asking for your vote, it needs the money. There’s nowhere to get it except through your local property taxes.

It’s never a slam dunk that your neighbors are going to pass a referendum. The question is near the bottom of the ballot, so many voters won’t scroll down far enough to vote. Some will think they don’t know enough to choose wisely; typically, there won’t have been much news coverage. And the wording on the ballot, dictated by the state, is bureaucratic and confusing.

It’s worse than confusing; it’s misleading. In the Monroe County Community Schools district, the ballot tells voters they are approving a 35% increase in their school property taxes. In fact, the increase will be no more than 15%, as I explained in a previous post.

Simplified, school funding in Indiana works like this: The state provides the money for operating expenses, including teacher and staff salaries; and school districts rely on local property taxes for construction, building and transportation costs.

But the state doesn’t provide enough money for schools to operate effectively, so it gives school districts an option: They can ask residents to vote to increase their own property taxes to provide more operating funds. Eight school districts – Brown County, Delphi, Fremont, Medora, Monroe County, Southern Wells, Southwest Allen and Westfield Washington – are doing that in the Nov. 8 election. A ninth district, Wabash County, is asking voters to approve a tax increase to pay for a school construction and renovation project.

I’ve heard several arguments for voting against the referendums. One is that the state, which has a $6 billion budget surplus, should be paying more to fund the schools, not local taxpayers. That may be true, but it’s not going to happen. Indiana legislators have shown clearly that their priority is keeping taxes low, especially for businesses and high-income individuals, not funding services.

Another argument is that local school districts aren’t spending their money wisely, so why give them more? In Monroe County, for example, some voters may quibble with the money that goes to athletic facilities. But facilities and building improvements are paid for from separate property tax funds. Districts couldn’t have used that money in the classroom even if they wanted to. And if you don’t like the district’s priorities, you can vote for different school board members.

Finally, some people will say they’re already paying too much in taxes and can’t afford more. That’s understandable, given the pressure that inflation is putting on family budgets. But Indiana remains a tax-averse state where officials tout low taxes as a reason businesses should locate here. The conservative Tax Foundation, which generally opposes tax increases, ranks Indiana ninth for its tax climate.

This doesn’t mean voters should give their schools a blank check to spend more money. For referendums, we should expect clear and through explanations of how the money will be spent. The Monroe County Community Schools district (where I live) wants voters to extend referendum funding that would otherwise expire Dec. 31. If approved, it will fund salary increases for teachers, hourly wage raises for support staff and programs for students.

The support staff pay increase is crucial. The district pays its paraprofessionals – who do crucial work in the classroom, especially with special-needs students – as little as $12 or $13 an hour.

Fortunately for Monroe County taxpayers, we can approve the referendum and still pay some of the lowest school property taxes in the state. The overall MCCSC property tax rate, if the referendum is approved, will be no more than 84 cents per $100 assessed property value. In the nearby Richland-Bean Blossom school district, which has a reputation for conservatism, the current rate is $1.08.

The problem with school funding referendums – and this is a real problem — is that they aren’t equitable. Only a minority of Indiana districts manage to pass them. Most don’t try, probably because they know they would fail. The system favors districts with a lot of valuable property on the tax rolls.

But that’s a reason to improve the state funding system, not a reason to vote against your local referendum. Voting yes will make life better for teachers, staff and – most importantly – students. That’s the reason to just do it.

School referendum language is ‘a lot misleading’

When I go to the polls this November, I will vote in a school funding referendum that – according to the language that appears on the ballot – will increase my property taxes for schools by 35%.

That would be a hefty increase if it were accurate, but it’s not. Not by a long shot.

"Vote Yes Nov. 8" banner
Detail from a Monroe County Community School Corp. referendum flyer.

The actual increase – the difference between the property tax rate that I now pay to the Monroe County Community School Corp. and the rate I will pay next year if the referendum passes – is about 15%.

But a 35% increase is what MCCSC officials have to advertise under legislation approved in 2021, and an interpretation of that law by the Department of Local Government Finance. Voters are getting misleading information, and school funding referendums could be harder to pass as a result.

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Referendums give districts an edge on teacher pay

The Indiana legislature is calling on school districts to spend at least 45% of their state funding distributions on teacher salaries. Some districts will find it easier to meet the goal than others. One reason: referendums that let districts supplement state funding with local property taxes.

According to a December 2020 report from Gov. Eric Holcomb’s Next Level Teacher Compensation Commission, teacher salary costs as a share of state funding vary widely. In 2020, they ranged from about 30% in some districts to over 60% in others.

The report found that 109 of Indiana’s nearly 300 school districts paid less than 45% of their state funding for teacher salaries in 2020. (The figures are in Appendix 15). Those districts will have to increase teacher salaries – in some cases, significantly – or cut other spending to meet the legislature’s target. Collectively, they fell $52.4 million short of paying enough for teacher salaries in 2020.

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Good results for school referendums

Unemployment is at record levels in Indiana, with hundreds of thousands of Hoosiers out of work. A recession is coming, likely to be deeper than the last one. It seems like a bad time to call for a tax increase.

But voters in 12 school districts approved referendums Tuesday to raise money for school operating expenses and building projects. Yes, they said, raise our property taxes. Because we want to support our students.

Four of the districts passed both operating and building referendums. In all, 16 of the 18 referendums that were on the ballot won approval.

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No clear pattern to high- and low-spending school districts

It’s an article of faith in Indiana that school districts serving large populations of poor students spend more money than affluent districts. At one level, it’s true. When it comes to state funding, high-poverty districts get and spend a little more, per pupil, than low-poverty districts.

But when you consider total spending – including funds from state, federal and local sources – a different picture emerges, according to the Census Bureau’s Annual Survey of School System Finances.

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Referendums help school districts, but not all of them

Voters in 10 Indiana school districts will go to the polls Tuesday to decide whether to raise their own property taxes to help fund local public schools. It’s another sign that Indiana has become a referendum state, with districts turning to local taxpayers to do the job that legislators haven’t done.

'Vote Here' sign near polling place.But only some of them: 60% of Indiana school districts have never attempted a referendum.

That’s approximately 180 districts that haven’t turned to the voters for funding in the 10 years that Indiana has had school funding referendums. Maybe they haven’t needed the money; or maybe superintendents and school boards didn’t think the local voters were ready.

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School referendums may be reaching limit

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. Continue reading

Indiana voters back school funding

This blog specializes in bad news. But here’s some good news for public education from this month’s elections: Nine of the 10 Indiana school districts that asked voters for permission to raise local property taxes to support education were successful.

Prior to this year, fewer than half the referendums that took place since Indiana’s current school-funding laws went into effect in 2008 won public approval. With the May 2014 results, schools have finally topped the .500 mark: 52 of 102 have succeeded.

School-funding referendums in Indiana come in two varieties: They can raise taxes to build schools; or they can augment state funding for a district’s general fund, which pays teacher and staff salaries and other operating expenses. Over the years, the mix has been about half-and-half between construction and general-fund referendums. But this year, eight of 10 were to boost general-fund spending. All those proposals passed. Some were close, though; three passed with 51 percent or less of the vote.

In at least two – White River Valley in Greene County and Eminence in Morgan County – local officials said losing would force the district to close and consolidate with a nearby school district. Voters didn’t want that to happen. The Eminence measure passed with 87 percent of the vote; WRV with 54 percent. Continue reading

State funding for schools no guarantee of progress

Cynthia Brown, vice president for education policy of the Center for American Progress, argues in a recent Education Week commentary that we should stop using local property taxes to fund schools and shift fiscal responsibility for K-12 education to the states.

Indiana’s experience suggests advocates for equitable school funding should be careful what they wish for. Relying on state revenues to fund schools may result in a simpler, fairer system. But it may also mean that schools are less likely to get the money they need.

Brown builds from the work of the U.S. Department of Education’s Commission on Equity and Excellence, of which she was a member. Its report, issued in February, concluded that efforts to improve the schools should start with equity, including equity in funding.

“States should adopt a state-based system of school financing,” she writes, “one in which states provide all nonfederal resources for education, and districts no longer have the power to raise funds from local property taxes.”

Indiana switched to state-based K-12 funding 2009 as part of a larger “property tax reform” initiative. Generally speaking, the state now pays school general fund expenses, including instruction and most salaries. Local property taxes are used to pay for buildings and transportation. (Voters can choose in a referendum to raise their own property taxes to supplement state dollars for the local school district’s general fund).

No sooner had the switch taken place than the economy hit the skids, state tax revenues nose-dived and then-Gov. Mitch Daniels cut school funding by $300 million to keep the state in the black. Schools are still suffering from that cut, Continue reading