The Herald Bulletin

January 22, 2014

New law threatens school bus service

State law would force schools to address debt

By Maureen Hayden CNHI Statehouse Bureau
The Herald Bulletin

---- — 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.

“You have schools where somebody hasn’t managed money well in the past and now they’re in a jam,” Kenley said.

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.

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.

Kenley, meanwhile, said he’s confident that a temporary solution will be found during the short, legislative session that must wrap up by March 15. But he also expects legislators will return next year, during the longer budget session, to re-examine larger issues of school funding.

Maureen Hayden covers the Statehouse for the CNHI newspapers in Indiana. She can be reached at maureen.hayden@indianamediagroup.com. Follow her on Twitter @Maureen.Hayden.

 

Local impact A state law, intended to force school corporations to pay off debt, set to go into effect July 1 will further reduce the amount of money Madison County area school districts can use to provide bus service. This table shows the original levy amount for transportation, how much of that money was taken out of the transportation levy by "circuit breaker" limitations on property taxes last year, and how much money will be taken out under the new law. Corporation Levy Previous Law New Law Total loss Alexandria $438,537 -$32,258 -$45,875 11% Anderson $5,300,060 -$1,577,427 -$3,069,863 58% Daleville $358,684 -$14,383 -$32,321 9% Elwood $507,822 -$152,477 -$444,044 87% Frankton-Lapel $1,367,516 -$229,739 -$723,835 53% Madison-Grant $687,468 -$2,438 -$3,862 1% Shenandoah $677,273 -$8,940 -$13,329 2% South Madison $1,685,491 -$260,834 -$913,257 54% Source: Indiana Legislative Services Agency