Senate Democrats: Tax caps threaten schools; Kenley promises to address issue

BY PATRICK GUINANE, Times of Northwest Indiana
pguinane@nwitimes.com

INDIANAPOLIS | Senate Democrats postponed Monday an attempt to shield schools from $154 million in spending cuts that would be forced by the tax caps Gov. Mitch Daniels is pushing.

A few hours after holding a morning news conference to draw attention to the issue, the Democrats scuttled their own amendment to insulate schools from the caps. The move came after Sen. Luke Kenley, a Republican fiscal leader from Noblesville, pledged to address the education funding crunch later this legislative session.

"The schools really have no way of helping themselves" make up shortfalls caused by the caps, Kenley said. "We will try to take care of the schools as best as we can."

The governor wants to limit tax bills to 1 percent of assessed value for homeowners, 2 percent for landlords and 3 percent for businesses. But his so-called circuit breaker provides relief by restricting the property tax revenue that flows to local government, with schools expected to shoulder roughly a quarter of the $599 million in losses forecast for 2009.

The impact would be most severe in areas with the highest tax rates, which often are a reflection of low property values. Those phenomena help explain why high-poverty schools in East Chicago, Gary, Hammond and Indianapolis face the starkest spending cuts.

"We want our students to succeed. We hold our schools and our teachers accountable," said Sen. Earline Rogers, D-Gary. "But continually cutting funding for schools in Gary and throughout the state is counter-intuitive to that priority."

Gary Community School Corp. would have to cut $9.2 million in 2010 to live within the governor's proposed tax caps. School City of East Chicago would have to slash $11.7 million, and Hammond schools would have to shed $13.6 million, or roughly a third of the property tax revenue the district is expected to receive in 2010.

Darren Washington, a Gary School Board member, said he didn't know how the district would even begin to implement such severe budget cuts. He said East Chicago, Gary and Hammond schools need to host public forums educating residents on what the circuit breaker would do to school funding.

But poor school districts aren't the only ones threatened by the tax caps. Portage and Valparaiso schools each would lose more than $1 million in 2010, as would Crown Point, Griffith, Hobart, Lake Ridge, Merrillville, Munster and Whiting schools.

Other local government units, including cities and counties, could push for local-option income taxes to restore some of the millions they would lose to the circuit breaker. But schools do not receive funding from local income taxes.