News From Terre Haute, Indiana

March 2, 2014

Debt bill may offer relief for some schools

Tax caps have drained $642 million since 2010

Maureen Hayden
CNHI

INDIANAPOLIS — Legislators are closing in on a way to help some school districts that stand to lose millions of dollars in transportation funds.

A proposal in a school debt service bill essentially stalls for three years a law that requires schools to pay their debts before spending money on buses, building repairs or other big-ticket items.

The delay helps only districts that will lose at least 10 percent of their transportation funds because of the new “protected levy” law — or fewer than 100 of the state’s 294 districts. Schools losing less than that amount must absorb the cuts or dip into operating funds — which pay for salaries for teachers and administrators — for transportation or other needs.

The 10 percent benchmark is seen as a victory by some. An earlier version of the bill set the cutoff at 20 percent.

“We’ll be able to help a lot more schools,” said Sen. Randy Head, R-Logansport, who helped negotiate the new limit. Under the protected levy, Logansport Community Schools stand to lose more than 17 percent of the funds used to keep their buses running — almost $200,000.  

Legislators and school officials have spent weeks trying to devise a plan to relieve school districts that have already lost millions from their transportation and capital funds from property tax caps approved in 2010. Losses vary by district, but, overall, the caps have cost schools more than $642 million over the past three years.

Current law allows school corporations to spread such losses over several funds, including those for debt service, school pension debt, capital projects, transportation and bus replacement. But the protected levy law, which passed in 2012 and takes effect this July, removes that flexibility. It requires districts to apply property tax revenues to debt payments before other expenses.

The House has already passed the proposal to give schools hitting the 10 percent benchmark more time to comply. The Senate voted Thursday to support an amended version.

Sen. Brandt Hershman, R-Buck Creek, chairman of the Senate Tax and Fiscal Policy Committee, said the protected levy was meant to safeguard bondholders from districts making irresponsible decisions. It had unintended consequences, he said, hitting schools in places still recovering from the recession, which brought steep declines in property values and tax revenues.

“We’re trying to provide them a responsible way to transition to a different fiscal arrangement,” Hershman said. 

Maureen Hayden covers the Statehouse for CNHI, the Tribune-Star’s parent company. She can be reached at maureen. hayden@indianamediagroup.com. Follow her on Twitter @MaureenHayden.