The Herald Bulletin

Morning Update

Local Business

January 22, 2014

New law threatens school bus service

State law would force schools to address debt

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.

In Madison County, the biggest losers will be:

◆ Anderson Community Schools, which stands to lose $3.1 million (58 percent) of its transportation levy.

◆ South Madison Community Schools, which will lose $913,000 (54 percent).

◆ Frankton-Lapel Community Schools, which will lose $724,000 (53 percent).

◆ Elwood Community Schools, which will lose $444,000 (88 percent).

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 affect 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.

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 July of this year, removed that flexibility. It requires districts to apply their property tax revenues to debt payments before other expenses.

Reasons vary as to why some schools are affected 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.

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