Tax caps cost schools hundreds of millions

It seemed like such a good idea at the time. Indiana legislators enacted property tax caps over a decade ago. Then, in 2010, we added them to the state constitution by a referendum vote of 72% to 28%. I don’t recall much talk at the time about consequences for school funding, but we’re seeing them now.

In some school districts, the consequences look to be devastating.

According to data from the Indiana Department of Local Government Finance, public schools are losing about $268 million in revenue this year as a result of caps. That’s over one-tenth of their total levy, the amount of property tax revenue the districts would otherwise be able to raise.

The impact of the caps varies widely, with big losses for some large and urban school districts: $18.3 million for Indianapolis Public Schools, $17.7 million for Gary Community Schools and $12.3 million for Wayne Township (Indianapolis) schools.

Chart showing schools with biggest tax cap losses.

School districts with the largest losses from property tax caps. Source: Indiana Department of Local Government Finance.

Gary schools are losing almost half of their potential local property tax levy.

When it comes to lost revenue per pupil, the biggest losers include Gary Community Schools, $3,535; Muncie Community Schools, $,1,620; Beech Grove School Corp., $1,450; Anderson Community Schools, $1,298; and Westfield-Washington School Corp., $1,134.

It’s probably no accident that Gary and Muncie are the two Indiana districts to be labeled financially “distressed” and taken over by the state. Muncie was later transferred to Ball State University.

Chart of school districts with largest property tax cap losses per pupil.

School districts that lose the most money per pupil from property tax caps. Source: Indiana Department of Local Government Finance.

Terry Spradlin, executive director of the Indiana School Boards Association, noted that the state’s 290 school corporations have lost nearly $1 billion to tax caps in the past four years. The legislature has provided districts some flexibility for managing the losses, but it’s still a struggle.

“These are significant issues that are long-term, and there are no easy solutions,” Spradlin said.

Under Indiana’s school funding system, the state pays most school operating costs, including salaries and benefits for teachers and other school employees. But school corporations rely on local property taxes to pay for transportation, capital projects and construction debt.

Continue reading

Senate budget is better but not by much

UPDATE: The Senate budget bill now includes the same expansion to Indiana’s voucher program that the House approved last month. The Senate added the voucher provision as an amendment late Monday. It approved the budget today. Differences between the two versions will be worked out in a House-Senate conference committee.

The Indiana Senate took some modest steps in the right direction with the state budget that it approved last week. For education, it improves on the House-approved version on several counts.

  • The Senate budget bill allocates more money for K-12 schools: an increase of 2.7% in the first year of the biennium and 2.2% in the second year versus 2.2% each year for the House version.
  • It keeps more of the funding with public schools and brick-and-mortar charter schools, spending less on virtual charter schools.
  • It provides a little more money for “complexity,” the factor in the funding formula that gives more money to schools serving disadvantaged students.

Continue reading

Takeover of Gary, Muncie, could spell problems for other schools

It’s tempting to think Indiana House Bill 1315 is a concern only for people in Muncie and Gary. But if state officials can abolish local control of Muncie and Gary community schools because of financial problems, they could do the same for your local district.

“There are real stakes here for a number of districts,” said Terry Spradlin, executive director of the Indiana School Boards Association. “They’re seeing that, even though we’re not Gary or Muncie, what happened to them could happen to us.”

HB 1315 doubles down on 2017 legislation that enabled the state to intervene in the Muncie and Gary districts and turn their operation over to emergency managers appointed by a state board.

Most dramatically, it would hand the operation of Muncie Community Schools over to Ball State University and turn it into a charter-like district exempt from state laws on curriculum, transportation and collective bargaining for teachers. In Gary, the bill would convert the elected local school board to an advisory committee that could meet no more than four times a year.

Legislative Democrats and teachers’ unions have been pushing back against the bill, which has been approved by the House. But Ball State and the Republican supermajority seem to strongly support it. The best hope for slowing it down may be via amendments this week in a Senate committee.

Continue reading