A Purdue University economist describes the environment surrounding a proposed Vigo County school tax referendum this fall as “a wild card.”
And that’s not just because voters will also be asked on Nov. 5 whether a casino should be permitted in the county.
The casino referendum will be a factor, and potentially a major one, said Larry DeBoer, a professor of agricultural economics who studies government budgets and taxes.
But tax-funded spending issues not on the ballot are likely to be on voters minds, including the still-raging debate over plans for a $60 million jail to be funded by increases in local income taxes, which the County Council passed last fall.
Local income taxes will also cover $20 million of the estimated $30 million cost of a new convention center. Though no local income tax increase was needed for construction, a new food and beverage tax was imposed and the innkeepers’ tax was raised.
School officials have for years been examining building needs with an eye toward a future capital projects referendum so last month’s news of a proposed operating fund increase may have come as a surprise to many.
All those factors create “such a wild card, one wonders whether past referenda results will be very indicative of future results,” DeBoer said.
Factors that work in the school corporation’s favor, according to DeBoer, are a relatively low proposed increase of 16.22 cents per $100 of assessed value, a modest impact of $43.32 more per year for a home valued at the county median of $90,700 and lack of any organized opposition.
Also, urban/suburban places “have done a little better than rural places,” he said.
Working against the referendum, based upon DeBoer’s years of research, first-time referendums “fare a little worse,” November referendums are less likely to pass than those conducted in May and communities wealthier than Vigo County are more likely to approve school tax increases.
But when it comes to the pairing of a casino referendum with a school tax referendum there is no history in Indiana.
The casino question comes first and that could work against passage of a school tax increase, DeBoer said.
“Will people think, well, gee, we’re going to get all this money from the casino, why do we need a school referendum?” he said.
“With all the other new taxes, what will people think? Will they relate this tax increase to all the other tax increases?
Legislation allowing a Vigo County casino specifies the school corporation will receive 15 percent of tax revenue generated by the facility. A financial analysis by the Indiana Legislative Services Agency estimates the school district would receive $400,000, beginning in fiscal year 2021.
Bill Riley, director of communications for the school corporation, noted that amount is about 7 percent of the amount of property taxes the corporation was unable to collect this year because of state tax caps.
“We’ll obviously welcome new tax revenue to help our cash balance situation, but our needs are more immediate than revenue for a potential casino will provide,” Riley said.
If the property tax referendum passes, the school district would receive increased funding beginning in 2020.
Since November 2008, about 40 percent of Indiana’s 289 school corporation’s have combined for 198 referendums, with 120 for operating expenses and 78 for capital projects, according to data from DeBoer. Voters have approved 124 referendums for a success rate of 62.6 percent.
While local governments have come to rely more on income taxes during that period, the state’s overall property tax burden remains low at 42nd in the nation, according to an April ranking by Wallet Hub.
Indiana’s current property tax caps have been in place since 2008 when the sales tax was increased by 1 percent. In 2009, the state assumed the full cost of school operating expenses.
Since then, “we were going in the wrong direction for per pupil funding and our ranking in the nation declined significantly,” said Terry Spradlin, executive director of the Indiana School Boards Association.
In the mid 2000s, the state ranked in the middle of the pack but by 2018 it had fallen to 36th, with per pupil spending at $9,529, compared to $11,454 nationally, according to the National Center for Education Statistics.
“We’ve really lagged behind inflation so it’s not been a good scenario,” Spradlin said.
But this year Gov. Eric Holcomb and the Indiana General Assembly approved a budget that provides more than $736 million in new money over two years for K-12 education.
“That’s the best increase we’ve had in more than a decade,” Spradlin said. In addition, state reserve funds are being used to reduce an unfunded liability in teacher pensions and there were increases in several categorical grants, he noted.
“It was a good session for public education,” Spradlin said. “Hopefully it will be sustained … (and) in 10 years we will catch up over where we have been over the last 10 years.”
But Vigo County school officials say more money is needed now for investment in safety, student health, transportation, technology and competitive teacher salaries. They also note that federal funding for schools serving students from low-income families has also declined, by $1 million, since 2010-11.
The state has also changed its formula for allocating additional funds to low-income schools “so it’s not as favorable and doesn’t generate as much money,” Spradlin said.
While Vigo County is not losing state funding, “it’s not going up at a robust number, either. It’s modest increases … at best.”
Enrollment has declined by more than 1,300 students during the past 10 years and is projected to fall by 1.3 percent next year to 14,169, a loss of 194.
The district is establishing a virtual school in an effort to get back at least some of the 367 students attended such schools. That translates to a revenue loss of more than $2.3 million.
A requested school tax increase of 16.22 cents per $100, a rate that would remain in place for eight years, “seems modest … and they’re planning to make $4 million in cuts,” Spradlin said.
“That seems to show that they realize they can’t keep up with current expenditures and need to make adjustments,” he added. “But at the same time they want to make sure they’re meeting their obligations to provide high quality educational programs and services to students.”
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