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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Session could have been worse for education

The 2022 session of the Indiana General Assembly produced plenty of bad news, but at least there’s this: When it comes to education, it could have been worse. Much worse.

Republican legislators failed in their all-out effort to ban the teaching of what they misleadingly call “critical race theory” in schools. They also fell short in their efforts to politicize school board elections, encourage book-banning, and make public schools share funding with charter schools.

Indiana Statehouse
Indiana Statehouse

Their one truly harmful action regarding schools was the approval of House Bill 1041, which prohibits transgender girls from playing girls’ sports. This cruel legislation was designed for one purpose only: to toss a bone to the GOP’s right wing. Maybe – hopefully — Gov. Eric Holcomb will veto it.

Other than that, Republicans wasted people’s time and energy with lots of sound and fury about education, but it ultimately signified almost nothing.

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‘Follow the money’

A political action committee that favors more funding for charter schools gave $50,000 in December 2021 to the Indiana House Republican Campaign Committee and one of its favored candidates.

Weeks later, House Republicans introduced and began supporting legislation to require public school districts to share funding from property-tax referendums with charter schools.

Is there a connection? Hoosier Republicans have long been ideologically predisposed to school choice in all its forms. They argue state education tax dollars should “follow the child,” whether parents send the child to a public, charter or private school or a for-profit tutoring service.

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Indiana falls short on school funding effort

Indiana just doesn’t try hard enough. That’s a key message from an annual report on school funding from the Albert Shanker Institute and the Rutgers Graduate School of Education.

When it comes to “fiscal effort,” one of the report’s measures of K-12 funding, Indiana lags behind most other states. We spend just 3.06% of our gross state product on K-12 education, compared to a national average of 3.45%. Indiana ranks 36th among the states for fiscal effort.

It wasn’t always that way. In 2007, Indiana spent a respectable 3.73% of its economy on K-12 schools, the report says. Then came the Great Recession. Under Gov. Mitch Daniels, the state slashed funding for schools. Superintendent of Public Instruction Tony Bennett declared this was a “new normal,” and schools should just get used to it. Indiana fell far behind its peers for teacher pay.

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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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No more excuses to not fund schools

Indiana legislators will have to work hard to find excuses to underfund K-12 schools now that a state revenue forecast showed they will have a lot more money to spend.

The forecast, which dropped Thursday, says the state will take in about $2 billion more than anticipated in the two-year budget cycle that starts in July. That’s enough to make significant investments in education while doing a better job of meeting other state spending needs.

Lawmakers may argue otherwise, but the evidence is overwhelming that Indiana schools are poorly funded – and that the lack of money means Indiana teachers are underpaid compared to their peers.

  • Ball State economist Michael Hicks has pointed out that Indiana’s per-pupil school spending has declined by 7% since 2010 in real terms. If we had just kept pace with inflation, he wrote, we would have spent an extra $1.3 billion on education last year.
  • A recent school-funding analysis by the Shanker Institute and the Rutgers Graduate School of Education found that Indiana ranks near the bottom of the states for “fiscal effort,” the percentage of its economic capacity that it spends on schools.
  • A teacher pay commission appointed by Gov. Eric Holcomb found that Indiana needs to find $600 million a year in revenue or savings to raise teacher salaries to the same level as surrounding states.
  • A 2019 study commissioned by the Indiana State Teachers Association was even more pessimistic, concluding Indiana needs to spend $1.5 billion more per year to catch up.

Prior to Thursday’s revenue forecast, the Indiana House and Senate had approved separate versions of the budget that included only minimal increases in K-12 spending. The House budget would direct nearly 40% of the increase to an expansion of Indiana’s private school voucher program. The Senate version dialed back the voucher expansion but still committed significant funding to private schools.

The voucher expansion seems certain to happen, despite massive opposition from supporters of public schools. The only questions are how big it will be and how much it will cost.

But overall funding for K-12 education is now an open question. Advocates say the surprise jump in revenue should make this a no-brainer. The Indiana State Teachers Association is calling on budget writers to “go big on K-12 funding and do what’s best for our schools.” Assistant Democratic Senate Leader Eddie Melton said, “We are now within reach of implementing Gov. Holcomb’s teacher pay commission recommendation to put $600 million a year in the school funding formula.”

Republicans, who dominate the legislature, were already starting to drag their feet. They will claim the positive revenue forecast results from their own “fiscal discipline,” but it’s also due to the $1,400 stimulus checks and the additional child tax credits provided by the feds via the American Rescue Plan. And they won’t expect that to last.

Senate President Rod Bray said legislators must “be wary of the day when the economy begins to turn, because we dare not expect this economy to last forever.”

It’s the same old song from Indiana’s Republican politicians: When times are bad, we can’t spend money on schools, because we don’t have it. When times are good, we can’t spend money, because good times won’t last. You would almost think that education isn’t a priority.