Parents of Danville Community School Corporation (DCSC) students are likely to be in for a shock next week when a public notice will be printed in the newspapers. That notice will announce that the school board is filing a petition with the Indiana Department of Education, alerting them to their intention to cease bus transportation in 2017.
Do. Not. Panic.
I attended a public meeting last week at Danville South Elementary that was led by school superintendent Dr. Denis Ward and assistant superintendent for finances Tom Johnson. They showed us a news story from FOX59 in November and explained that something called “protected tax levies” are going put a serious crimp in the school corporation’s ability to provide bus transportation, beginning in 2014.
I am a world-class dummy when it comes to understanding taxes and levies and school funding and such, so I took a lot of notes and asked a few questions at that meeting so that I made sure I understand things correctly.
Here’s what I got from it.
The DCSC gets its money, for the most part, from six major funds.
The general fund makes up roughly 59 percent of the corporation’s budget and is used for things like supplies, utilities, salaries and benefits for teachers, administrators and support staff, etc. This fund is supported by state tax dollars – sales tax, income tax, gaming tax and the like – and is not impacted by property tax caps or protected tax levies.
The other five funds are impacted by this issue: the debt service fund, the school pension debt fund, the capital projects fund, the transportation fund and the bus replacement fund. These five funds – plus a one-time 2013 state general fund loan repayment fund that corrects a mistake on the state’s part in 2012 – total about $9.4 million.
Here’s how each fund broke down in 2012, according to information prepared by the Legislative Services Agency:
CIRCUIT BREAKERS AND PROTECTED TAX LEVIES
We’ll get back to the six funds in just a moment. First, it’s important that we all understand some terminology here. I didn’t understand any of this stuff before last week’s meeting, so in the off-chance that you’re in the same boat, here’s what I learned.
Most of us know what circuit breakers are in relation to electricity, right? If the flow of electricity into your home becomes too great, a circuit breaker flips and shuts everything down to keep your house from burning down or blowing up or doing whatever it would do from too much electricity.
The same concept applies when we’re talking about property taxes. Every homeowner must pay a portion of the home’s value in taxes, but if that portion becomes too large – more than 1 percent of the net assessed value of your home – the circuit breaker flips to keep your wallet from burning down or blowing up. Your tax rate tops out at 1 percent.
That’s great for the homeowner who gets property tax relief. That’s not so great for the schools, which lose funding as a result of the reduction in tax dollars available to them.
In the case of the DCSC, the circuit breaker loss is about $793,111 per year in funding. Ouch.
In 2013, the corporation has been able to spread that $793,111 loss across every fund – minus the general fund, which you’ll recall is not supported by property taxes – to the tune of 8.5 percent per fund.
Here is the circuit breaker loss in each fund, then, for 2013:
Protected Tax Levies
The state legislature has enacted a new law that will take effect in 2014 that protects the debt service fund and the school pension debt fund from being reduced as a result of circuit breakers. The thought process behind this law is to force schools to pay their debts first before funding other programs.
How does that affect Danville schools? In 2014, the DCSC will only be able to spread that $793,111 circuit breaker loss among three funds, rather than six, at a rate of 26.6 percent per fund.
Remember: the 2013 state general fund loan repayment fund will be gone in 2014. The two funds relating to debt will be protected from circuit breaker loss.
Here is the projected loss in each fund for 2014:
Everyone with me so far?
THE TRANSPORTATION ISSUE
In one year’s time, then, the transportation fund will fall from $1.2 million to $885,002, thanks to the circuit breakers and the new protected tax levies. This fund pays for the salaries of the bus drivers and maintenance on the buses. One can’t reasonably expect the DCSC to be able to keep the same number of drivers and the same level of maintenance on buses with less than three-quarters of the original funding at its disposal.
The bus replacement fund will drop from $262,531 to $192,694. This fund, as you might guess, pays for new buses.
You might be thinking that a solution is to not purchase any new buses. That won’t work, though.
State law requires every school corporation to replace its entire bus fleet every 12 years. Danville schools have 42 buses in their fleet, so to abide by state law, they must replace three or four buses per year.
Buses cost between $90,000 and $130,000 a piece. Recall that in 2014, the school corporation will only have $192,694 at its disposal. That’s a problem.
State law also prohibits moving money from one fund to another, so the corporation can’t take money from, say, the debt service fund and put it in the bus replacement fund. That, in the finance world, is what they call “illegal.”
THE PLAN OF ACTION
State Senator Pete Miller and Representative Jeff Thompson already recognize the damage that will be done by protected tax levies and are working on drafting an adjustment of that new law’s implementation.
Rep. Thompson feels confident that such an adjustment would pass the House of Representatives, but he’s concerned about its ability to make it through the Senate.
The DCSC – like the vast majority of corporations around the state – will not be able to properly fund transportation if the protected tax levies are not adjusted. People will lose their jobs. Buses won’t be properly maintained or replaced. Bus routes will disappear.
School corporations cannot just pack it in and stop providing transportation, however. They must give the Indiana Department of Education three years’ notice that they plan to petition to end transportation.
So what the school board has done is vote to start that three-year clock right now by filing notice with the DOE. The corporation is still in one heck of a bind through 2017, but at least there is an end in sight to the money hemorrhaging.
Does the DCSC actually want to stop offering transportation to its students? Not at all.
What the corporation wants is for the protected tax levies to be adjusted, thus allowing them to spread the $793,111 loss over five funds in 2014, rather than over three funds.
The beauty of this notification process is that a school corporation can rescind its notice at any time during the three-year period, which is exactly what the DCSC plans to do if the protected tax levies are adjusted by the state legislature.
In the meantime, however, the DCSC must do its due diligence and exhaust all possible ways to resolve this issue. That includes notifying the DOE that this is a very serious problem in Danville – the schools are not just crying wolf.
Dr. Ward and Mr. Johnson have asked us all to contact Sen. Miller and Rep. Thompson to thank them for taking this issue seriously and for already working on adjusting the protected tax levies.
Then the DCSC will sit back and wait to see if the politicians are successful by March of 2014 before deciding what to do next.
If the protected levies are not adjusted, the DCSC plans to hold public meetings to determine the best course of action from there.
So when the papers hit the newsstands next week, take a deep breath instead of panicking. Then spread the word to your friends and family who are panicking: this is a step in a process, not the ultimate death blow to bus transportation for Danville schools.
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