Opinion and Economic Analysis

HICKS: Good local governance will support schools

April 17, 2010

As in all 50 states and most countries, a good many school districts in Indiana are facing budget cuts this year. We can rest easier knowing that cuts in Indiana are small compared with those in most other states, leaving us with about the national average in spending per student.

There is much confusion about what is happening to schools. As of two years ago, the state paid 85 percent of school costs, with local property taxpayers funding the remainder. Property-tax reforms in Indiana shifted the last 15 percent of school funding to the state budget. So, except in a few places, all money spent on schools comes from the general fund.

The budget cuts most schools are feeling are really a result of the school-funding formula and the recession, not property-tax reform. There are some great lessons here.

School-funding formulas around the country move resources from taxpayers in richer and more urban places to residents of poorer and more rural places. Indiana’s does so as well. This is right and good. The problem is that rural places are losing population, while urban places are growing.

This is especially true among families of school-age children. As a result, school districts with a shrinking population have schools that were designed for student bodies twice the current size. The funding formula for declining places will appropriately shrink the total dollars these places receive. Dollars follow students to faster-growing places. We might well quibble with the particulars of the formula, but in essence this is what must happen.

Reorganizing school districts is difficult, but we Hoosiers have done so before. The first time came with the advent of school buses, the second as farm employment shrank dramatically in the 1940s through 1960s. Our experience today is tame by comparison.

Ironically, shrinking school districts get three distinct advantages. First, they already have more than enough school space. Second, they are already disproportionate recipients of school funding and, finally, there’s a comfortable time lapse in the application of the formula. Challenges in rural places are far less than in urban and suburban communities. It is the fast-growing places where the resource challenge is most dire.

Successful and growing communities must always play “catch-up” with school funding. These are also places where tax dollars in general flow to poorer, typically rural regions of the state. It is easy to sense the frustration of a growing, successful community.

I had the fortune to visit such a place–Hamilton County–late last year. I spoke at a Chamber of Commerce breakfast on the eve of a key referendum vote on supplemental school funding. I made a bold prediction that the referendum would pass easily. It did, with an overwhelming majority.

The reason was simple: School officials explained their needs clearly and effectively, and had a track record of fiscal prudence. There’s a lesson here. Effective local government will always find willing voters to pay for more of it.•

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Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at cber@bsu.edu.

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