Property-tax reform may force cutbacks in urban school districts

Summer usually is a time for Wayne Township kids to catch up. About 500 elementary students in the west-side Indianapolis
school district attend classes between June and August. Some are there to learn English as a second language. Others simply
have fallen behind their peers.

Thanks to the property tax reform measure approved by the General Assembly and signed by Gov.Mitch Daniels, they now will
have to improve on their own. The district, which has 17 schools and 14,500 students, is slated to lose $3.2 million in annual
funding by 2010, according to estimates from the Indiana Legislative Services Agency. The loss represents 1.6 percent of Wayne
Township's $200 million budget.

The district is one of many in central Indiana that say they have no choice but to brace for cutbacks in areas like school
repairs, computers and transportation. Though the reductions are outside their general funds, which cover teacher salaries
and other classroom expenses, districts say students will be affected nonetheless. Wayne, for example, says elementary summer
school is near the top of its cutting list because of the high cost of air-conditioning.

Homeowners are thrilled with their new property-tax caps, which will keep bills from breeching 1 percent of any residence's
assessed valuation. But the residential cap, along with higher caps imposed on rental and business properties, will have the
effect of slashing $89 million from annual Hoosier public school funding by 2010. And nearly $36 million of that will come
from the nine-county central Indiana region.

"I don't think parents understand the trade-off yet," said Tom Langdoc, director of school/community services
for the Metropolitan School District of Wayne Township.

On the southeast side, Franklin Township Community School Corp. Superintendent Walter Bourke worries the caps eventually
could force his 17-school, 8,600-student district into bankruptcy.

"I don't know if there's a bake sale that could raise the $3 million plus we'll need," he said. "It
keeps me awake at night."

Urban schools will be hit hardest. Of the 47 public school districts in the Indianapolis area, 11 are expected to lose at
least $1 million by 2010. Eight of those are in Marion County. Indianapolis Public Schools will feel the greatest impact,
losing $10.8 million, or nearly 2 percent, of its $553 million budget.

Under the tax reform plan, the state is picking up teacher salaries and other general fund costs, but districts remain saddled
with funding capital projects and transportation expenses with property taxes.

And while cities can get relief from caps by increasing local option income taxes, schools can't get additional money
unless they conduct a voter referendum and prevail.

To adapt to the new realities, school districts intend to start replacing buses every 12 years instead of 10. They say they
plan to delay replacing outdated classroom computers and put off fixing leaky roofs until they can't be ignored. Some
schools also hope to squeeze savings out of their property insurance and utility bills.

IPS Superintendent Eugene White said he's disappointed that urban schools will see the greatest hit. If the impact had
been more profound on the suburbs, he said, the hue and cry would have been louder.

"It hit a disproportionate number of districts that serve poor kids in this state. It was almost a have and have-not
situation," said White, whose district has 79 schools and 35,338 students.

"Our children are not to blame because they happen to be in a district with a lower assessed valuation and higher tax
rate than some of the more affluent areas of the state. There's no equity in this, and we think it is totally unfair."

Higher sales tax

The reductions would have been even larger had Indiana not hiked its sales tax from 6 percent to 7 percent to soften the
cap impact. The higher rate is expected to raise $620 million annually. But if that estimate turns out to be too high, schools
could lose even more funding.

Adding to unease among school leaders is the fact that sales taxes are much more volatile than property taxes, particularly
in a recession. Superintendent of Public Instruction Suellen Reed said she worries full-day kindergarten, which was approved
by the Legislature only last year, could face cuts.

"We're talking about our schools and the fact they are now totally dependent on the ability of the General Assembly
to see that they're supported in a time when education has never been more important," Reed said. "Of course
it is a cause for great concern."

State Rep. Gregory Porter, D-Indianapolis, hopes to restore some urban school funding in next year's budget-writing session
of the General Assembly.

He said lawmakers knew the tax overhaul would hit urban districts especially hard. But legislators were in a tough spot,
he said, since those districts were in areas where taypayer outrage was greatest.

In central Indiana, 18 lucky suburban schools are slated to lose only $100,000 or less by 2010. Hamilton Heights School Corp.,
for example, is expected to lose just $91,182 to property tax caps. Carmel Clay Schools will lose $55,690.

"We knew there was a true disparity. But … we were told we're going to have to fix it in an upcoming year,"
said Porter, chairman of the House Education Committee. "Marion County, Lake County, Madison County, Crawford County,
Delaware County were all screaming about property taxes. Let's be real about this.

"It is incumbent on us to cap property taxes," Porter continued. "But it's also incumbent on us to find
the dollars and fund those schools appropriately in future years that were hit by property tax reform."

The state has set aside $400 million in a rainy-day fund that can be tapped if sales tax collections are lower than expected,
said Sen. Teresa Lubbers, R-Indianapolis and chairwoman of the Senate Education & Career Development Committee.

Legislators also earmarked $120 million–$50 million in 2009 and $70 million in 2010–to reimburse school districts that
take the biggest hit under property tax caps.

Without that extra money, the impact on central Indiana districts would have been far worse. Its 47 school districts would
have lost a combined $65 million by 2010, with $47 million coming from Marion County. Without the state replacement money,
IPS would have suffered a whopping $20 million in cuts, according to LSA's estimates.

Lubbers warned that schools can't be exempt when everyone else in the state is belt-tightening.

"Even during budget cycles with no surplus dollars, we still funded schools at the highest levels we possibly could,"
she said. "I'm not a doomsayer. But if you actually hit a really tough recession, everybody is going to participate.
We'll do the best we can.

"We fund schools by taking money out of people's pockets. To the extent there's less money to take because people
are losing their homes and jobs, all of us will share in that a little bit."

Referendum option

And individual school districts can get extra money if they can persuade residents it would be a good investment, pointed
out Rep. Robert Behning, R-Indianapolis and ranking minority member on the House Education Committee.

"They're going to have to do a better sales job to the community," he said. "It appears from the research
that I've seen that Indiana schools spend more on brick and mortar than a lot of our neighboring states. Is that logical?
Is there any reason why? It's not like we're building them more energy-efficient."

Lawrence Township Superintendent Michael Copper said he worries districts will be cornered into making up for shortfalls
by charging students fees for bus transportation or technology access. His 18-school, 16,000-student district will lose $2.3
million, or about 1.4 percent, of its $160 million annual budget.

"People are pleased about the fact that the General Assembly was able to reduce their [property tax] payments. [But]
those of us who serve with those dollars are going to have less resources overall," Copper said. "The resource of
education shouldn't be looked at as an expensive area, but as an investment.

"I don't think property taxpayers made that link."