As schools look to finalize their 2015 budgets within the next couple of months, one variable continuing to affect school finance is revenue lost to circuit breaker caps.
The current circuit breaker property tax cap, which went into full effect in 2010, has cut anywhere from $47,000 to $7.95 million from area school corporations’ budgets in the past five years, according to the Indiana Department of Local Government Finance. Each district is impacted differently, and even five years in, some still are struggling to compensate for the lost revenue.
“It’s a very large inequity,” said Stanley Hall, director of finance and operations for Peru Community School Corp., which has lost out on $2.32 million since the circuit breaker went into effect. “The schools north and south of us have typically twice as much to spend per student on transportation.”
Schools rely on property taxes for their transportation, bus replacement, capital projects, debt service and pension debt funds. State money is distributed on a per-pupil basis to corporations’ general funds, which cover salaries, classroom supplies and other expenses.
The circuit breaker limits the amount people can pay on property taxes to 1 percent of the assessed value for homestead properties; 2 percent for residential properties, agricultural land and long-term care facilities; and 3 percent for nonresidential properties and personal property.
All entities collecting property taxes from an area – which can include the county, city, townships, schools and libraries – must keep the total amount they levy within the circuit breaker cap. Schools in city limits are usually hit harder by the circuit breaker cap because there are more entities vying for the limited sum that can be levied.
In Howard County, Kokomo School Corp. has lost the most revenue to the circuit breaker – $7.95 million in five years. Tipton Community School Corp. has been hardest hit in Tipton County, losing more than $660,000 in five years; by comparison, Tri-Central Community Schools missed out on just over $107,000 in the same period. Peru Schools has seen the most loss for school districts in Miami County.
Operating with an average of $460,000 less annually since the circuit breaker was enacted, Peru’s transportation fund took a 17 percent cut across the board, Hall said. The corporation now runs 12 bus routes instead of 17, and drivers make about $17 an hour instead of $22.
Peru will not levy anything for its bus replacement fund in 2014 in an effort to leave more money for other funds. About $295,000 was taken from the general fund to maintain a minimal balance in the debt service fund.
Reduced revenue due to the circuit breaker cap and declining enrollment has already led to staffing cutbacks, mostly through attrition, Hall said.
On average, Kokomo Schools is operating with $1.6 million less a year because of the property tax caps. In 2014, the revenue loss jumped up to $3.03 million for Kokomo Schools, which is a 17.8 percent reduction from the full amount the corporation was certified to levy that year.
"Kokomo Schools has reduced expenditures on construction-related projects paid for from our Capital Projects Fund,” said Dave Barnes, director of communications for the corporation.
Tipton Schools has not had to make any drastic cuts to adjust to the lower revenue, said Superintendent Kevin Emsweller.
“Compared to some of the larger urban areas, it’s been minimal,” he said. “It’s not a big impact for us.”