Opinion and Economic Analysis

Hicks: Hoosiers voting to pay for better public services

May 17, 2014

I have long argued that Hoosier taxpayers are willing to spend more in places where they can see results. The results of the recent election suggest I am right about that.

Since the passage in 2008 of House Enrolled Act 1001, better known as property tax caps, I have prophesied a day in which local governments became more adept at their fiscal management and local taxpayers more supportive of higher taxes. The May elections suggest that day is coming.

In this election cycle, only one of 10 school corporations saw their referendum fail. Nine others won additional property taxes for a variety of construction and operations efforts.

Of the 10 school corporations asking for referenda, seven had above-average raw performance or student-growth scores in the most recent year. All seven won their referenda.

Of the three schools with below-average achievement and student growth, two asked for operating funds, primarily for transportation. They both won.

Madison Consolidated Schools asked for a large tranche to build a gymnasium and choral rooms along with other infrastructure improvements. Unfortunately, Madison had arguably the worst school performance of the 10 seeking referenda and there’s not much to suggest they are improving. Three of four voters opposed the measure.

We should draw two lessons.

First, the vigorous reforms of 2007 through the present, including the Tea Party movement and numerous small constituencies across the state, were never really an anti-tax movement. They were something altogether bigger and more important. What we have seen in Indiana and elsewhere is broad frustration over the value of government, not simply its cost.

Second, the corporations that won their referenda on average performed better than those that lost. I also think they did a better job of explaining their needs to taxpayers, but this is only a hypothesis because we cannot directly measure that.

These lessons have potentially enormous implications for the future of Indiana local government.

The much-better state and local tax burdens we have since 2007 are not the end to grass-roots efforts to improve the value of state and local government. Anti-tax zeal will (I hope) be replaced with the far more difficult effort of holding state and local leaders accountable for value in public goods and services.

This is critical because the gravest challenges to prosperity in many communities are not high taxes but low-quality public services. Any effort to foster growth through public policy will have to come primarily from better public services, not from tax cuts.•

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

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