Senate Democrats want to shield schools from $154 million in tax cap in spending cuts

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

INDIANAPOLIS | Indiana Senate Democrats want to shield schools from $154 million in spending cuts that would be forced by the tax caps Gov. Mitch Daniels proposed.

The Democrats, perhaps as soon as this afternoon, plan to offer an amendment requiring that state government reimburse schools for any budget losses experienced under the Republican governor's tax caps. They announced their plan at a Statehouse news conference Monday morning.

Daniels 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 statewide budget shortfall forecast for 2009.

The impact of the caps would be most severe in areas with the highest taxing rates, which often are a reflection of low property values. That 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 doesn't know how the district would even begin to contemplate the budget cuts that would be required by the spending caps. He said East Chicago, Gary and Hammond schools need to begin having public forums to educate citizens on what the circuit breaker would do to school funding.

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.

The amendment Democrats plan to offer to Senate Bill 12 would keep the tax caps in place but would have the state cover the $154 million loss to schools.

The Democrats said they would be willing to consider exempting some school spending from the circuit breaker, which would mean less tax relief to property owners. And they also would consider giving schools a piece of whatever general state tax hike is tapped to fund property tax relief.

Daniels' plan calls for a penny sales tax hike, from 6 percent to 7 percent, to be used to take some school and welfare programs off property taxes.