To the Editor:
The law of unintended consequences is alive and well at the Indiana State House.
Back in a 2010 referendum, Indiana voters passed an amendment to the State Constitution which made permanent changes to our Indiana local property tax formula. These changes limited local property tax rates to 1 percent for residential homesteads, 2 percent for commercial property and second homes, and 3 percent for industrial and agricultural property.
Indiana public schools are funded via property taxes. Because of the reduction in how much the state can levy for property taxes, much of the funds schools had counted on for their budgets are no longer available to them. This reduction in funds is referred by legislators as tax cap losses or “circuit breaker losses.”
To make matters worse, in 2012, the Indiana General Assembly passed language changing how school districts can use some of the money they receive from that reduced pool of money. With the best of intentions, lawmakers created a protected tax statute which changed the rules on how a school district must manage its Debt Service Fund.
Sounds pretty good, right? Guide schools districts in responsibly managing their debt service. What’s wrong with that? Absolutely nothing. And many school districts have been managing their debt service funds wisely and well for many, many years.
Unfortunately, and likely unintentionally, this language change is having some potentially dramatic consequences to the services our schools can provide.
Prior to the language change, the tax cap losses could be evenly divided between the Debt Service Fund, Transportation Fund, Capital Projects Fund, and School Bus Replacement Fund. Now, the protected taxes statute allocates all available property taxes (after the tax cap losses) to the Debt Service Fund.
In other words, each school district’s Transportation Fund, Capital Projects Fund, and School Bus Replacement Fund may be dramatically impacted.
The Indiana Association of School Business Officials (IASBO) recently shared data with state legislators showing that from 2012 to ‘13 the number of school corporations negatively impacted by protected taxes has grown (48 to 58 with a levy loss of 20 percent or more; 14 to 18 with a levy loss of 50 percent or more; 4 to 7 with a levy loss of 80 percent or more).
The IASBO made it clear that this is a rural, suburban, and urban issue all across the state. Thirty percent of all counties and 32 percent of the total students in the state are impacted by protected taxes and these changes to the language of the statute.
If there is no remedy by the General Assembly, the protected taxes law will begin on Jan. 1, 2014. And the number of kids walking to school or sitting on the lap of a senior on the bus could dramatically rise.
My view aligns with that of the IASBO. They have asked the General Assembly to address this issue by eliminating protected tax language and allow school corporations to allocate tax cap losses using current practices.
The sooner the better.