 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. SIX FUNDS 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. Circuit Breakers 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. WHAT’S NEXT? 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.
15 Comments
Charlotte
12/13/2013 03:01:55 am
You took a difficult issue and made it easy to understand! Thank you!
Marcia Lynch
12/13/2013 05:32:14 am
This is a perfect example of the "unintended consequences" that came with the sweeping tax changes that Mitch Daniels was so proud of. Cities, towns, schools and libraries are all dealing with large cuts in funding caused by the tax caps. The Town of Danville is fortunate because of non-tax revenues received from the landfill have helped fill the gap so we have not had to cut staff as many cities, towns and schools have had to do. So when you hear about tax referendums and other methods to raise funds for transportation it isn't because of poor management on the schools part it is because the state has mandated that less money goes to the local entities while the state enjoys a comfortable surplus. I would encourage all to contact the legislators listed above to voice your concerns. And for those that don't have kids in school, it is an issue for essential town services as well such as hiring additional police and fire staff.
Margie Williams
12/13/2013 05:39:49 am
Eric - Thank you so much for making all of that so much easier to understand! Hopefully, it will allow people to realize the problems that our schools (and local government agencies) face today.
Melissa Denton
12/13/2013 11:52:58 am
Michael Young
12/13/2013 06:08:52 pm
Not the way I heard Tom Johnson explain it. Eric is spot on. Those five line items are property tax dollars, the ones we pay Hendricks County every May and November. How the CB is distributed, the state is now trying to control. The bottom dollar is not changing. As Tom said, he's not asking for any more money right now. He could work with 8.5% CB across the board; but 26.6% is quite another story over three funds. The beef with the state is, it wasn't broke; please don't try to fix it. It's sad the school board had to take this action, but I believe it was the right play at this time. We've got to show the state our hand, and let them know how serious this is. And how simple the fix is.
Scott Flood
12/14/2013 06:45:39 am
Melissa, Eric and Michael are both correct (I'm a school board member in another community). The five funds are primarily supported by property tax. The sixth fund, the General Fund, comes from the state. It covers salaries/benefits, instructional costs, insurance, and utilities. The General Assembly determines how much each school district receives each year through a complex formula. The school boards determine how much they'll receive through the other five funds, albeit with significant limits and rules from the state (like the tax caps). School finance in Indiana is complicated, with many misunderstandings.
Melissa
12/15/2013 03:45:05 am
Thanks Michael and Scott for the replies. It is important for our communities to understand how budgeting and funds are set by our state and local government entities.
Scott Flood
12/17/2013 04:31:48 am
Actually, Melissa, the budget doesn't automatically increase each year. The General Fund formula is based on enrollment, so if enrollment drops in a given year, funding can fall, too. And the state has never fully restored the cuts made during the Daniels administration, so on a per-student basis, many Indiana districts are receiving less money than they did 5-6 years ago. Sadly, costs for things like electricity and insurance have climbed substantially during the same time period. Even a low rate of inflation adds up pretty quickly.
Melissa
12/22/2013 12:24:51 pm
Ah- I stand corrected. Thanks Scott... ;)
kathy crane
12/13/2013 06:20:54 pm
Thank you Sen Pete Miller and Jeff Thompson for your support.
Stephanie
12/14/2013 02:16:10 am
Eric,
Patty Bowman
12/14/2013 02:19:04 am
One thing that people need to consider though is once they have the ability to raise our taxes what is going to stop them from continuing to raise them again and again. Who is going to decide when we have been taxed enough. Why aren't they looking at reform of the laws that state the busses have to be replaced every 4 years. If the busses pass a thorough inspection why can't they stay in service. Maybe instead of automatically telling the people to pay more they should look at where they can cut waste. I'm sick and tired of the automatic response to every problem the government faces is to throw more of my money at it rather than looking at better and smarter ways to solve the problem.
Gary Simpson
12/14/2013 04:47:29 am
My reading of Indiana Code IC 20-46-5-8 is as stated below:
Mariam Murphy
12/14/2013 03:59:03 am
Thank you Dr. Ward for holding the informational meeting the other evening. Thank you Pete Miller and Representative Thompson for seeing the problems/difficultites this places on our school corporation as well as others. Thank you for your support in trying to get the legislation changed. I as a parent and employee of our school corporation appreciate the heads up from our superintendent and the support of some of our area representatives. Thank you!!
Ron
12/14/2013 05:35:36 am
This upsets me. Our Govt. cannot see its way to do what need to be done for teaching our kids. But they can give tax funds to buuild new seats and further update the track, colts stadium and etc. Why is it our elected officials cannot get their kpriorities straight. Without education for the kids, there will be no need of a race track, stadium or anything els. Maybe we need to elect some new officials. Your comment will be posted after it is approved.
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