INDIANAPOLIS — A small group of debt-laden school districts that lost millions because of property tax caps may get some fiscal relief under the new state budget, but only if they secure taxpayers’ blessings first.
A provision added late in the budget process would let about 30 of the state’s school districts refinance their long-term debt to free up cash that could go toward non-salary items, like replacing school buses or upgrading classroom technology.
But to do so, those districts would have to put the matter to voters, either through a referendum or a petition and remonstrance process; the latter is a mechanism that allows property owners to support or stop a project through a petition drive.
In addition to that voter-approval caveat that legislators slid into the budget bill, state lawmakers also approved legislation that limits school personnel from promoting a referendum during school time and using school resources. The bill, authored by Rep. Cindy Noe, a Zionsville Republican, was prompted by concerns that teachers and administrators in some districts had used students to push for yes votes on past referendums.
Lawmakers who supported those two pieces of legislation say they are aimed at increasing public scrutiny of how school districts are spending taxpayer dollars while keeping students out of the fray.
“There's a push to make sure there is a full vetting of the process that goes on when school districts are deciding how to spend money,” said state Sen. Ed Charbonneau, a Republican from Valpraiso. He was the Senate sponsor of Noe's bill that addresses what school districts can and can't do to promote a “yes” vote on referendums to raise money for operating expenses.
Rep. Jeff Espich, the Uniondale Republican who chairs the House Ways and Means Committee, was responsible for adding the voter-approval caveat to the budget language that will allow some schools to refinance their debt. His reason: “If we’re going to let schools bend the rules, there needs to be some public scrutiny involved.”
The rules to which Espich refers involve the state law passed in 2008 that capped local property taxes, and in doing so, reduced tax revenues to some school districts. The law also let voters decide whether to provide more funding to their local school districts by voting on it through a referendum.
Opponents of the referendum process say school districts too often end up as the losers. Of the 33 school referendums statewide on last November's ballot, only 14 passed. Of four school referendums on primary ballots Tuesday (MAY 4), only one was approved.
Rep. Clyde Kersey, a Terre Haute Democrat and retired school teacher, said school districts around the state have been struggling to deal with a double dose of financial cutbacks over the past two years: Property tax caps which reduced local dollars coming into their coffers, and a $300 million cut in state funding to K-12 education. “The deck is loaded against school corporations,” Kersey said.
Rep. Sheila Klinker, a retired school teacher and Democrat from Lafayette, said getting a referendum to pass is “a very tough process” and one more likely to succeed than fail.
Espich disagrees. “I'm a great believer in referendums,” Espich said. “It gives the people the power to decide.”
Here's how that “power” may be exercised for the school districts eligible for debt-restructuring:
The amendment tagged on to the state’s two-year, $28 billion budget bill will allow school districts that lost 30 percent or more of their property-tax revenues due to the property-tax caps to refinance their long-term debt and extend their payments an additional 10 years.
About 30 school districts with a combined debt of $3.2 billion are eligible. Refinancing the debt will lower the monthly payments to free up more cash, but also means paying what state budget officials estimate to be about $150 million more in interest payments each year, if all the eligible school districts opt to refinance.
School districts that lost 45 percent or more of their property-tax revenues due to the caps are subject to a lower bar of public approval. Their decisions are subject to the remonstrance-petition process, which allows voters to oppose the debt-restructuring by gathering a certain amount of signatures on a petition. Supporters of the debt-restructuring would have to gather more signatures than opponents.
School districts that lost between 30 to 45 percent their property-tax revenues must put the question on a ballot for voters to decide. The soonest they could do that is November.
Districts that are eligible are located around the state. They include urban school districts like the ones in Gary and Anderson, which have seen a decline in both students and tax base. But also eligible are suburban districts like Zionsville, outside of Indianapolis, which has seen an increase in students but has a tax base of mostly homeowners, who pay the lowest tax rate under the property tax caps.
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