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BOHANON & CUROTT: Muncie school-funding problem is about control

March 23, 2018

Economic Analysis by Cecil Bohanon & Nick CurottOne casualty of the Great Indiana Legislative Meltdown of 2018 was House Bill 1315. It would have, among other things, facilitated Ball State University’s taking a primary role in managing the distressed Muncie Community Schools system.

Bohanon and Curott are neutral on HB 1315. Not against it (it’s our home team) but not exactly for it, either. In our view, the district’s problems illustrate a larger issue: How should different levels of government work together to provide K-12 education?

There is no question that Muncie Community Schools’ finances are a mess. Declining population led to declining enrollment that led to decreased school funding, a common story in Midwest industrial towns. In 2014, the district floated a $10 million general obligation bond for building repairs and improvements. The funds got used for operating expenses. This is a classic case of “eating the seed corn”—a cardinal sin in the fiscal management of any organization.

In December of last year, the state of Indiana declared the district to be a distressed unit and appointed an emergency manager. Ball State University then offered to step in and manage the system. Under the plan, BSU would select a board, leverage its name, and use its resources to help turn Muncie Community Schools around. Although no BSU funds were to be allocated to the district, it is clear university resources would be redirected from current uses toward improving Muncie schools. Would this work? Many on and off campus were understandably skeptical.

A major objection to HB 1315 is that handing responsibility of the district to BSU effectively ends local control of Muncie schools—and that’s undemocratic. But this is more of a posture than an argument. The state is constitutionally required to provide a “system of Common Schools.” For better or worse, it’s state taxpayers, not local taxpayers, who pick up 85 percent of the district’s tab.  

The old adage “He who pays the piper calls the tune” comes into play. The normal process for resolving school-funding conflicts—elected school board oversight—failed in Muncie. No one was willing to make the hard calls, so the district needs an outside “Dutch uncle” to do this. Unquestionably, the Dutch uncle—whether a BSU-appointed board or an emergency manager—must consider the interests of all parties.

Dutch uncle should strive to return local control as soon as possible. But common sense tells us the Muncie Community Schools budget must first and foremost be sustainable and balanced.•

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Bohanon and Curott are professors of economics at Ball State University. Send comments to ibjedit@ibj.com.

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