By ANNIE GOELLER, Daily Journal of Johnson County staff writer

State lawmakers' plan to reduce property taxes could mean longer waits for new buses and cuts to schools' transportation and maintenance spending in the next few years.

Some school officials already are planning for a drop in their budget, asking department managers to cut costs and trying to project how a loss in funding will affect their school districts.

Local school districts are projected to lose from $9,500 to more than $2 million in funding when property tax caps approved by state legislators go into effect in the next two years.

County districts that likely will be hit the hardest are Clark-Pleasant, projected to lose $2.04 million, Franklin, expected to lose $1.57 million, and Edinburgh, projected to lose more than $200,000, which makes up nearly 10 percent of the school district's budget.

"We're glad there's some property tax savings, and we're all for that, but that creates a problem for some school districts," said Steve Sonntag, Clark-Pleasant's business and finance director.

One leading legislator who worked on the property tax plan doesn't think schools will be underfunded but said they may need to rethink how much money they really need.

"It may cause schools to look a little more closely at their budgets," said Sen. Luke Kenley, a Republican from Noblesville who helped develop the property tax reform plan.

"The purpose of this whole exercise is to provide property tax relief to property taxpayers."

The plan approved by legislators this month has been called the most far-reaching in at least 30 years.

Included is immediate property tax relief for homeowners, removing schools' general funds from property taxes and phased-in property tax caps, capping the amount of taxes property owners will pay at 1 percent of homes' market values, 2 percent for rental properties and agricultural land and 3 percent for businesses.

The caps, which will be phased in by 2010, are where schools are expected to take the hit, said Larry DeBoer, a fiscal analyst and Purdue University professor.

In the past, owners of rental properties and businesses have not had caps or other measures to reduce their property taxes. When those caps are phased in, local governments are expected to lose money, DeBoer said.

According to a recent report, Johnson County local governments, which include schools, cities, towns and the county, are projected to lose $7.8 million in 2010, or 3.5 percent of their budgets, DeBoer said.

The state also took on the entire school general fund, which pays teacher salaries and benefits, taking those costs off local property taxes.

The funding distribution process has not yet been decided but likely will follow what has been done in the past, Kenley said.

Each school district is allotted a certain amount of money based on the value of properties in the district and student enrollment. They figure their budgets using that amount and receive monthly distributions to pay bills.

The state also set aside $120 million for relief to school districts with a shortfall of 2 percent or more of their total budget, with $50 million in 2009 and $70 million in 2010, Kenley said.

Three of the county's six school districts would be eligible: Clark-Pleasant, Franklin and Edinburgh schools.

At Clark-Pleasant, which is expected to face the largest projected shortfall in the county in dollars, the transportation department already has been asked to start looking at ways to cut budgets, Sonntag said.

With the general fund gone, schools' transportation, bus replacement and capital projects funds will take the hit, he said.

Debts must be funded, so any money owed in the debt service funds has to be in the budget each year.

Sonntag takes the school's debt service fund out of the equation, which would mean the shortfall would equal more than 20 percent of the school's overall budget, he said.

School officials have only begun discussing how to address the projected shortfalls and no one knows for sure what will happen when the new plan takes effect, he said. He expects it could be years before officials know how big of an impact the plan has.

Some schools are not being hit as hard as others, such as Center Grove schools, where the district is expected to lose about $237,000, or less than 1 percent of the school corporation's total budget.

The reason could be the amount of total market value in a district's taxing area, Sonntag said.

DeBoer said that is a possibility since a property owner's cap, or the total amount they are required to pay in property taxes, is closely tied to tax rates in their area.

When the total market value in an area grows faster than the amount local governments spend, that keeps tax rates lower, he said.

Paul Gabriel, Center Grove's chief financial officer, said he couldn't explain the differences, such as why Center Grove is expected to lose much less money than Clark-Pleasant.

Center Grove school officials have not yet talked about how to address the loss of funding, but he expects the money likely would come from the school district's capital projects fund, which had a budget of $8.4 million to pay for maintenance, some utilities, remodeling, renovations and repairs.

The state also has suggested replacing buses every 12 years instead of every decade, he said.

They are awaiting further analysis to see how the caps really would impact Center Grove, a figure that has fluctuated in the past months.

"A lot of people are still in studying mode and we really haven't gotten into specifics," Gabriel said.

School officials are more concerned about the impact the plan will have on governments borrowing money such as public referendums for projects of certain costs, since the district is looking at a long-term facilities plan, he said.