News From Terre Haute, Indiana

November 14, 2010

Mark Bennett: If cash-strapped schools need additional funding, they have to ask voters through a referendum to go beyond tax cap

Mark Bennett
The Tribune-Star

TERRE HAUTE — Rough crowd, as Rodney Dangerfield would say.

On one line of the Nov. 2 ballot in Johnson County was the referendum to make Indiana’s property tax caps permanent. On the next line was a referendum asking voters to raise their local property taxes to shore up the Center Grove schools’ general fund.

Voters answered consistently.

They supported concrete property tax caps by a 72-percent majority statewide. And, they rejected the Center Grove schools referendum by a 60 percent to 40 percent margin.

“Voters are extremely hostile and angry,” said Terry Spradlin, who spent 600 volunteer hours as co-chairman of a citizens committee trying to rally support for the funding referendum.

Spradlin also well understands the big-picture fiscal issues facing Hoosier public education. He’s director of the Center for Evaluation and Education Policy (CEEP) at the Indiana University School of Education. The spate of school funding referenda on ballots around the state this fall is part of “a tsunami in public school funding right now,” Spradlin said.

School districts should get used to riding the waves. This storm won’t pass soon.

In the fall election, referenda in 13 Indiana communities asked voters for a property tax increase to boost the local school district’s operating budget. That’s how the system works these days. If a cash-strapped school system needs additional funding for operating expenses — in 2010, that usually means trying to avoid teacher and staff layoffs — it must ask voters through a referendum to go beyond the 1-percent tax cap. On Nov. 2, all but four of those referenda were defeated.

Funding changes and the recession have been a double-whammy for schools.

The districts have seen their general funds shrink since the Legislature changed the funding formula. In the past, a district’s operating budget came from state funds (two-thirds) and property taxes (one-third). Then, lawmakers pulled property taxes out of the mix. Today, school districts’ operating budgets are funded primary through less predictable sales and income taxes. In a recession, sales and income decline, and schools take a hit.

Seeking a property tax increase to make ends meet now requires a ballot referendum, thanks to the Legislature’s passage of Public Law 146 in 2008. Since then, 59 referenda — for both general-fund and construction needs — have been presented to voters. Only 24 have passed, according to CEEP. Voters were more inclined to replenish operating budgets (46 percent passed) than fund building projects (36 percent passed).

The odds, in both categories, grew steeper this fall.

Anderson voters soundly rejected a referendum seeking a jump of 55 cents per $100 of assessed valuation, with 70 percent saying no. In Elwood, 73 percent spurned a 50-cent increase. Even in affluent Zionsville, a 61-percent majority turned down a 29.5-cent property tax jump. Among the survivors was a 1-cent raise in Brown County, where 56 percent of voters approved the modest request. “The other way to look at it is, even though they asked only for a cent, 44 percent said no,” said Larry Deboer, an economist and public funding expert at Purdue University.

At Center Grove, the district implemented $2.1-million in cuts this year by dropping administrators, cost-cutting and closing an elementary school. With the defeat of the referendum, another $1.5 million will have to be cut. Families living within two to five miles of the school may have to provide their kids’ daily transportation. Teachers and central office staffers may be laid off. Students may have to pay to participate in extracurriculars such as sports or music.

“I’ve told superintendents and school board officials, you have to be braced for things to get worse before they get better,” Spradlin said.

Because of declining state revenue through sales and income taxes, Gov. Mitch Daniels implemented a $300-million cut to public schools last December. With a revenue shortfall of nearly $1 billion projected for 2011, another stiff cut may be coming.

Voters should expect to see more school districts seeking general-fund referendums.

“I would expect — for the next three, four or five years — we’re going to be seeing a lot of these [referenda],” Deboer said. “And maybe people will regard those as part of the school funding landscape.”

The prospect of a referendum for general-fund help isn’t on the immediate horizon in Vigo County. The Vigo County School Corp. still has a $14-million cash balance, which amounts to approximately 13 percent of its operating budget, said Superintendent Danny Tanoos. That balance, though, has dwindled since the state cuts hit, he added.

“For now, we are in OK shape,” Tanoos said. “[But] if we get cut severely, I could see that we’d have to make drastic changes.”

A more pressing possibility is that the corporation would pursue a construction referendum to pay for renovations to Terre Haute North Vigo and Terre Haute South Vigo high schools. Both schools are now 37 years old.

“We would have to go to the taxpayers through a referendum locally, if we were able to renovate Terre Haute North and South,” he said.

As the school referenda votes statewide show, such attempts aren’t guaranteed success. Spradlin suggests that school districts fully answer every possible public question about a funding referendum. “They have to be very transparent,” he said.

The referendum format has politicized the funding of schools, Tanoos lamented. To seek a property tax increase, superintendents have had to form political action committees, lobby citizens door-to-door and pass out buttons, he said.

All of those efforts may not persuade voters to raise their own taxes in behalf of the schools.

“Even with a lot communication and transparency,” Spradlin said, “it’s still going to be a hard sell.”

Mark Bennett can be reached at (812) 231-4377 or