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January 21, 2014

Levy redirects school funds

Law makes schools pay debts before other expenditures

TERRE HAUTE — If the new “protected levy” legislation goes into effect later this year, it would mean “a substantial reduction” in revenue for Vigo County School Corp. bus transportation, capital projects and bus replacement funds, according to the district’s chief financial officer.

Over the long term, it could mean cutbacks in bus transportation or the school district paying bus fuel costs out of the general fund, issues that would have to be addressed by the school board.

It could also mean fewer school buses and more challenges for the already hard-hit facilities budget.

“It’s getting difficult to budget for all these reductions,” said Donna Wilson, Vigo County School Corp. chief financial officer, who believes the new law is unnecessary.

The law was designed so schools would pay off their debts before they spend money on transportation, school bus replacement and capital projects.

“We won’t default on our debt, we never have and we never intend to,” Wilson said. In addition, if a district can’t pay it, that debt is guaranteed by the state. “We would never pass that responsibility on to the state. We recognize our responsibility to pay it.”

Last year, the school district’s property tax levy for the four funds (debt service, capital projects, transportation and bus replacement) was $27.1 million. From that, $4.2 million in revenue was lost to property tax caps — but that loss was distributed among the four funds.

But with the “protected levy” law, none of that reduction could be taken from debt service, so the property tax cap losses would be absorbed through the other three funds.

Last year, it would have meant a 21.4-percent loss to those three funds, if the law had been implemented.

 In transportation, the reduction would have gone from $821,050 to $1,141,485. The entire transportation levy is only $5.3 million, so under the protected levy law, the transportation revenues would have been reduced to about $4.2 million.

According to the transportation office, school buses travel about 5,600 miles each day taking students to and from school. About 11,000 students take the bus to school. The district has about 592 routes, both morning and afternoon, which includes special needs routes.

In 2012-13, the total miles driven for all events (regular routes, special needs routes, field trips, academic competitions and athletic events) was just under 1.7 million miles.

Implementation of the law was delayed so legislators could study the impact.

If the legislature doesn’t make changes in the new law and the three funds must absorb the tax cap reductions, then some tough discussions may have to take place, Wilson said.

At some point, the district might have to look at paying for bus fuel out of the general fund, which could eventually have a classroom impact — something the district doesn’t want to see happen, she said. The district might have to look at bus routes and walking distances.

But if cuts were made in bus transportation, the district fears some children might not be able to get to school, Wilson said. Longer walking distances can pose safety issues.

Currently under school board policy, transportation is generally provided for secondary students who live more than 1.5 miles from school and elementary students who live more than one mile from school, said Franklin Fennell, VCSC director of facilities and transportation.

Transportation might be provided for shorter distances if the superintendent recommends, and the school board agrees, the walking distance is “unreasonably hazardous” relative to the age of the students, according to board policy. Examples would be if a student would have to walk across a railroad track or a busy highway such as Third Street, Fennell said.

Wilson said if the bus replacement fund has further reductions, the district may have to consider cutting the number of buses it buys each year. Long term, that can pose safety issues, she said. Currently, the district levies taxes to buy 17 buses each year.

As far as the capital projects budget, the district currently pays utilities out of it. If the capital projects budget became too strained, the district might have to look at paying utilities out of the general fund, as was done in the past.

The district previously did $2 million to $3 million in renovation projects each year, something it can no longer do, Wilson said. Such projects are done less frequently and may involve alternative funding, such as short-term general obligation bonds.

The capital projects budget is very structured and includes about $1.1 million to $1.5 million in roofing projects each year, Wilson said. If the district tried to cut back on routine maintenance of facilities, that could be detrimental in the long run.

 Districts “are asking for more flexibility to take the [property tax cap] cuts where we can manage them best,” Wilson said.

In debt service, districts are allowed to levy for one year’s debt, but they also can maintain a cash balance that enables them to pay six months of debt the following year.

As a result, the VCSC can sustain a reduction in debt service revenues (from property tax caps), yet still stay pay the current year’s debt, Wilson said.

Fennell noted, “We review all areas in the school corporation for cost reduction. We have an active cost conservation plan, and we continue looking for ways to reduce costs in the transportation area.”

The transportation office has worked to make bus routes more efficient and with fewer stops, he said. Starting and stopping uses more fuel, Fennell said.

Sue Loughlin can be reached at 812-231-4235 or sue.loughlin@tribstar.com.

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