INDIANAPOLIS — School officials and state legislators from around the state are searching for ways to keep the school buses running — and children safe on the streets — pending the loss of millions of dollars for school transportation.
More than 50 school districts in Indiana stand to lose at least 20 percent of their revenues for transportation, new buses and other big-ticket projects under a new law that requires them to first pay off their debts.
The law, slated to go into effect later this year, comes as many cash-strapped districts are still struggling to adjust to property tax caps passed by lawmakers in 2008.
The new law would severely impact the schools in counties that saw dramatic drops in the value of their commercial and industrial bases last year – a drop that has already cut deeply into the taxes they collect to keep buses running and repair leaky roofs.
Goshen Community Schools, for example, stand to lose 47 percent of their revenue for transportation and capital projects, or a $3.5 million loss. School officials, who’ve already seen a 20 percent drop in property tax revenues due to the tax caps, have cut back bus routes and informed more children they’ll have to walk or find another way to get to school.
School districts across Indiana were affected when tax caps limited revenues to pay for a range of services and projects. Under current law, school corporations can spread those losses over several funds, including debt service, school pension debt, capital projects, transportation and bus replacement.
But the new “protected levy” law, passed in 2012 and delayed until this July of this year, removed that flexibility. It requires districts to apply their property tax revenues to debt payments before other expenses.
The Legislative Services Agency, the non-partisan research arm of the General Assembly, found the new law impacts school districts differently. About one-third of school districts won’t see immediate reductions in revenue available for transportation and capital projects when the new law goes into effect this summer. But the LSA report also noted that an increasing number of school districts may face this funding dilemma in years to come as the tax caps continue to erode school revenue.
Reasons vary as to why some schools are impacted more than others.
Sen. Luke Kenley, R-Noblesville, the powerful Senate Appropriations chairman who backed the protected levy law as a way to protect bondholders, said some districts got themselves into this fix by overbuilding and taking on too much debt before the tax caps cut into their revenues. Other districts, he said, suffer from poor financial management.
Some state legislators looking for a solution for the problem said poor financial management isn’t the only reason for the districts’ woes. Schools confronting declining property values and a large share of residential taxpayers – who proportionately pay less in property taxes than business – also find themselves in a pinch.
State Sen. Carlin Yoder, R-Middlebury, whose district includes Goshen, points to a nearly 10 percent drop in assessed value of property in Elkhart County between 2010 and 2012. It resulted in almost $815 million less in taxes for local governments, libraries and schools.
There’s no consensus yet on what the fix needs to be. State Sen. Randy Head, R-Logansport, has proposed creating a grant program, administered by the state Department of Education, that would help hard-hit schools replace revenue lost by the property tax caps.
Other proposed legislation would give schools more flexibility in paying off debts by easing some of the restrictions imposed by the new protected levy law. Some school officials, meanwhile, are asking legislators to create another local-option income tax to funnel more money directly to school districts.