State Public School Funding — How Does Monroe County Stack Up?

I along with other local government officials from around the state just had the opportunity to hear Dr. Larry DeBoer, professor of agricultural economics and renowned expert on local government finance, give his annual update on the Indiana State Budget (for budget years 2015-2017), sponsored by the Purdue Cooperative Extension Service. Here are the handouts from Dr. DeBoer’s presentation: Deboer State Budget 2015-2017 Presentation.

While the entire presentation is incredibly well-done and invaluable for anyone interested in understanding discussions in the media and in the statehouse on state budgetary issues, I wanted to call attention in particular to his discussion on K-12 funding, on pages 13-15 in his presentation, and compare his numbers overall to Monroe County’s in particular.

I’m not going to go into the long and tortuous history of school funding in Indiana. However, I recommend that anyone and everyone read a blog posting that appeared in Chalkbeat Indiana in January: The basics of school funding in Indiana: Difficulty defining fairness.

In brief, funding for the operations (i.e., general fund) of public school corporations is provided by the State of Indiana. Other funds, including transportation, school bus replacement, capital projects, debt service, and pension debt are still provided entirely by local property taxes. In addition, communities that have passed operating referendums (such as for the Monroe County Community School Corporation) also contribute local property taxes as well.

The amount of funding that the state provides to local school corporations is made up of three parts:

  • the basic tuition support (which used to vary wildly from school corporation to school corporation based on the history of funding for the corporation, but are now varies much less, through a process called “transition to foundation revenue”). Eventually the goal is to have every school corporation receive the same basic tuition support per pupil.
  • categorical grants, which include the:
    •  honors grant (for each student who received an academic honors diploma or a Core 40 diploma with technical honors),
    • special education grant (based on the count of students enrolled in special education programs)
    • career and technical education grant (based on the number of students enrolled in career and technical education programs that are addressing areas of labor market demand)
    • full day kindergarten grant
  • complexity grant, which is distributed to schools based on the numbers of low-income students who attend. This grant used to be based on the number of students who participated in the Federal free and reduced lunch program; however, it is now based on the number of students who receive textbook assistance (a state measure, rather than a federal measure).

As Dr. DeBoer’s graph on page 14 shows (and I have reproduced below), almost all the overall variation in school funding per pupil is now based on the complexity grant. The basic tuition support and categorical grants are largely even from the highest-funded to the lowest-funded public school corporations in Indiana.

DeBoer School Funding 2015

So my real purpose in writing here was simply to try to show where we are here in Monroe County with respect to state funding. Dr. DeBoer was kind enough to provide me with the raw dataset that he received from the Indiana Department of Education. Below are the funding amounts for the Basic Tuition Support, Categorical Grants, and the Complexity Grant per pupil for the three school systems in Monroe County: the two traditional public school corporations, Monroe County Community School Corporation and Richland-Bean Blossom Community School Corporation, and the Bloomington Project School, our only charter school in Monroe County.

I also included the school corporations with the highest and lowest per-pupil funding in the state for comparison, as well as the average and median total funding amounts per pupil. Interestingly, although our relatively low complexity grants for our schools in Monroe County put us below the average and median per pupil funding overall in the state, within Monroe County our complexity grants are relatively similar, and our categorical grants actually separate us a bit more. In addition, one can see here that the Bloomington Project School has the lowest complexity grant in the county (again, based on number of students eligible for textbook assistance) and MCCSC has the highest, although RBB’s is very similar.

Per Pupil 2015 State Funding in Monroe County
Per Pupil 2015 State Funding in Monroe County

Finally, I essentially re-created Dr. DeBoer’s stacked bar chart (above) to show where the three Monroe County school corporations stood visually, compared to the rest of the state. Like Dr. DeBoer, I excluded charter schools from the chart, EXCEPT that I included the Bloomington Project School.

2015 State Funding Per Pupil for Indiana School Corporations, with Monroe County Systems Labeled
2015 State Funding Per Pupil for Indiana School Corporations, with Monroe County Systems Labeled

Hope someone finds this visual representation of where state K-12 funding for Monroe County systems stack up useful. And thank you to Dr. DeBoer for providing his state funding dataset.

Update 2015-02-27

A reader asked for more detail on the categorical grants, and wanted to find out if the special education grant explained the larger per-pupil funding received by the Bloomington Project School. Indeed, that is the case. Here is the detail:

2015 Categorical Grants for Monroe County School Systems
2015 Categorical Grants for Monroe County School Systems

And here is the same data in a stacked bar chart form:

2015 Categorical Grants for Monroe County School Systems
2015 Categorical Grants for Monroe County School Systems

This also makes intuitive sense, since parents often choose charter schools because their children are experiencing difficulties in the traditional public school corporations (indeed I made that choice myself as a parent for my son for 7th and 8th grades).

Circuit Breaker (Tax Cap) Impacts for 2014: Part 2

Courthouse Fish
Courthouse Fish

Last week I wrote about the impact of the circuit breakers on Monroe County  — Circuit Breaker (Tax Cap) Impacts for 2014, Part 1 — which summarized the overall impacts on Monroe County (an overall revenue loss of $819,507 for 2014, an increase of $272,558 over 2013). This reduction in revenue for local governments is spread across all units of government in Monroe County that receive property tax revenues (the County, all three municipalities in Monroe County, the two school corporations, 11 townships, the public library, the Perry Clear Creek Fire Protection District, the Solid Waste Management District, and Bloomington Transit). In this post, I’ll break the $819,507 revenue loss by unit of government.

Circuit Breaker Losses for Monroe County Units of Government

The data for all units of government in Indiana for 2014 is available here:

The following table shows the circuit breaker losses for each unit of government in Monroe County. In addition to the 2013 and 2014 circuit breaker losses, I added two columns to compare the circuit breaker losses to the overall property tax levy for each unit of government.


2014 Circuit Breaker Impact by Taxing Unit in Monroe County
2014 Circuit Breaker Impact by Taxing Unit in Monroe County


Overall, both in terms of absolute values and percentages, the impact on units of government in Monroe County (with a couple of exceptions) is relatively minimal. This means that, in 2014 at least, the circuit breakers are not harming local governments too severely; alternatively, this can be rephrased to say that the circuit breakers are delivering minimal reduction in property tax to the taxpayers.

Ellettsville and Richland-Bean Blossom

The two exceptions appear to the be the Richland-Bean Blossom School Corporation, in which the $127,271 circuit breaker loss represents 1.6% of their overall property tax levy, and the Town of Ellettsville, in which the $100,002 circuit breaker loss represents a substantial 6.0% of their overall levy. Why is this?

The primary reason that both of these units took a relatively large hit from the circuit breakers is that the overall tax rate for the taxing district referred to as “Ellettsville Town” (the portion of Ellettsville that is located in Richland Township) is relatively high — $2.4241 per $100 of assessed value. This is the highest tax rate in Monroe County (in comparison, the tax rate for the portion of the City of Bloomington in Bloomington Township is $2.0762). The Ellettsville Bean Blossom taxing district (the portion of Ellettsville in Bean Blossom Township) is only slightly less, at $2.4220. The reasons why taxes are so high in Ellettsville are a topic for a different day!

From Tax Rates to Circuit Breakers

A tax rate of $2.4241 (essentially 2.4241%), is naturally going to generate some circuit breaker impact, and the reasoning is intuitive. Since the circuit breaker limit for non-homestead residential properties is 2% of assessed value, any tax rate of over 2% is bound to affect non-homestead residential properties. Similarly, any tax rate of over 3% will affect business properties. Since Monroe County has no tax rate over 3%, we should not expect to see any business property affected by the circuit breakers (and indeed we are not seeing any affect at all from the 3% circuit breaker). Note that homestead properties (the 1% circuit breaker) are more complicated — the homestead deduction and supplemental homestead deduction ensure that homestead properties are taxed at a net assessed value substantially less than their gross assessed value.

So we know that the (relatively) high tax rate of the Ellettsville Town (and Ellettsville Bean Blossom) taxing districts will ensure that the circuit breakers will impact some taxpayers in those two taxing districts. So how is that circuit breaker loss allocated to the units of government that serve that district? Let’s consider an example: a rental property in Ellettsville Town, assessed at $100,000. The tax rate of $2.4241 would result in a property tax liability of $2421.10 for the owner. However, the circuit breaker for non-homestead residential properties is 2%, which would mean $2000 for our example. This means that the circuit breaker would reduce the owner’s property tax liability by $424.10 (note that this doesn’t reduce the property owner’s demand for government services!!).

So how does that reduction in revenue of $424.10 get doled out to the units of government that serve that property? In proportion to the contribution of each unit of government to the overall tax rate. Again, consider our example for Ellettsville Town. The tax rate for Ellettsville town is the sum of all of the tax rates of units of government that serve that district. The following table shows those individual tax rates:

2014 Tax Rates for Ellettsville Town
2014 Tax Rates for Ellettsville Town

So from this table, you can see that 37% of the tax rate comes from the Town of Ellettsville, and 42% of the tax rate comes from the Richland-Bean Blossom School Corporation. This means, for our hypothetical property owner, that about $156.91 (37% of the 424.10 circuit breaker) comes out of Ellettsville and $178.12 (42%) comes out of the Richland-Bean Blossom School Corporation. This jibes with the overall circuit breaker impact for Ellettsville of $100,002 the slightly higher impact for Richland-Bean Blossom School Corporation of $127,271.

So How Bad Could it Be?

Let’s just consider the case of the Richland-Bean Blossom School Corporation. A hit of $127,271 on a school corporation that is already, like almost every other school district, starved for resources, will never be easy to absorb, and certainly will mean real cuts. Remember that the circuit breakers do not in any way reduce the demand for or cost of services; they only reduce the resources that the governmental unit has to provide those services!!

However, there are other school corporations that have been hit much harder. For example, consider the Hamilton Southeastern School Corporation. Their circuit breaker impact for 2014 was an enormous $3,141,623 — over $3M to cut from the school budget just in 2014 as a result of the tax caps! Per the National Center for Educational Statistics, the Hamilton Southeastern School Corporation has around 19,053 students — meaning a $164.89 cut per student from the tax caps. In comparison, the Richland-Bean Blossom School Corporation has 2770 students, meaning that the circuit breakers cost only $45.95 per student.

In conclusion, we are fortunate in Monroe County to have high property values and low tax rates, which work together to keep the impact of the circuit breakers low — even in the more highly-taxed Ellettsville taxing districts. However, even a $100K cut — essentially a $100K unfunded mandate — can seriously hurt. And we should stand behind our fellow school districts, and other units of government, that are facing backbreaking unfunded mandates that can seriously jeopardize their ability to provide basic services.

School Corporations Get a Short-Term Reprieve on School Bus Funding

Protected Taxes and School Transportation

In January, I wrote Circuit Breakers, Protected Taxes, and Idled School Buses, about the Indiana statute that required schools who have lost revenue from the circuit breakers (including the 1%-2%-3% tax caps in the Indiana Constitution) to prioritize debt funds over  any other fund when applying the losses from the circuit breakers. This is due to what in the statute are called protected taxes.

The legislation underlying protected taxes measn that school corporations facing circuit breaker losses had to first fully fund debt funds, even beyond the amount needed to make required debt service payments, which typically meant that capital projects and transportation funds had to bear the full brunt of the circuit breaker losses. This has even led to some school corporations considering ending school bus service entirely.

HEA 1062 Gives a Temporary Reprieve

This week, however, the Indiana General Assembly passed, and the Governor signed, House Enrolled Act 1062, giving school corporations hit heavily by circuit breakers a three-year reprieve. HEA 1062 allows school corporations that are experiencing at least a 10% hit to their transportation funds due to circuit breaker losses to apply circuit breaker losses proportionally to all funds, rather than funding debt service first, for the years 2014, 2015, and 2016.

Rearranging the Deck Chairs?

Welcome as this statute is, it is only a short-term fix for what will be an ever-growing crisis for school corporations around the state. All this action does is give school corporations a little flexibility in how they arrange the deck chairs on the Titanic. In 2013 (the latest year for which the numbers have been determined), the circuit breakers sucked $245M of funding out of our school systems, a number that will undoubtedly increase in years to come, and is nearly impossible to reverse, given the fact that the 1%-2%-3% circuit breakers have been enshrined in the Indiana Constitution.

Just for an illustration of the harm that the circuit breakers are doing to our schools, I pulled together some of the higher circuit breaker cuts for various school corporations around the state (for 2013).  I also included their 2014 amounts budgeted for transportation for comparison.

2013 School Circuit Breaker Losses
2013 School Circuit Breaker Losses

We are fortunate in Monroe County that, due to our relatively low property taxes and high assessed values, our school corporations have been relatively insulated from the effects of the tax caps.  Just for comparison, here are the same numbers for our two Monroe County school corporations:

2013 MC Circuit Breaker Losses
2013 Monroe County Schools Circuit Breaker Losses

However, we can’t assume that we will always be insulated from this erosion of revenue. The 2014 circuit breaker numbers will be released shortly, and we will be able to assess the impacts on all local units of government.

Note: the sources for these numbers were:

Circuit Breakers, Protected Taxes, and Idled School Buses

Very interesting article in the Indiana Business journal this week about the negative impact of recent changes in Indiana property tax legislation on schools:

A little background first: Indiana school corporations are funded through several different property tax levies, none of which are (with a few exceptions) interchangeable. Ever since the property tax circuit breakers (AKA “1%-2%-3% property tax caps”) were put in place, these levies have been divided into two categories: exempt and non-exempt. Exempt levies are those that are are outside of the circuit breaker (i.e., not subject to the circuit breaker tax caps), and consist of operating levies and debt service levies passed by referendum.  Non-exempt levies are all of the rest: debt service, pension debt, capital projects, transportation, and school bus replacement levies.

When all combined levies for a particular taxpayer exceed the circuit breaker limits (1% for homestead owners, 2% for multi-family residential and agricultural, and 3% for business), the overage must be cut from the levies of all of the taxing units that contributed to the combined levies (i.e. county, city, township, school corporation, public library, etc.).  Until 2012, taxing units had some flexibility as to which levies they applied the circuit breaker losses to. For schools, this meant that they could spread the circuit breaker losses among their various funds. Note that all debt payments still had to be made first before funds were allocated anywhere else — but the school corporation still had the flexibility to spread the circuit breaker cuts among all of the levies as long as the debt payments were made according to the terms of the bonds.

Legislation in 2012 created a new category of property tax levy: protected. Debt service and pension debt levies (both of which are non-exempt, meaning that they are subject to the circuit breaker caps) are now considered protected, meaning that these levies must be fully funded before any circuit breaker cuts are applied.  This greatly reduces the flexibility that school corporations have had in spreading the circuit breaker losses among their various levies to minimize the disruption to operations of the schools. Further, this legislation doesn’t actually accomplish anything — schools were already required to prioritize debt payment before anything else — it simply makes school corporations overfund debt service levies at the expense of non-protect levies: capital projects, transportation, and school bus replacement.

This article describes the impact of this change on a number of Indiana school corporations, who now have to face the very real possibility of reducing or eliminating school bus service, or deferring critical maintenance on school properties in order to fully fund debt service levies even beyond what is actually necessary to make debt payments.

There is some hope that the General Assembly might address this issue of protected taxes during the 2014 session; several bills have been filed in both the House and Senate to address this issue. However, these school districts mentioned in the article are merely fighting for the ability to mitigate the impact of these state-mandated cuts to their budget. The bigger story is the impact of the circuit breaker itself on school budgets. Despite all of the rhetoric about the criticality of education to the economy of Indiana, no legislators seem to be interested in making a serious attempt to roll back these property tax caps that have devastated many of our schools in Indiana.

Per Pupil School Funding in Indiana

This post comes out of a brief online discussion among several participants in the Parent Community Network of Monroe County about the financial impact on a local school corporation of a child moving from the public school corporation to a charter school. Someone had heard that a local school corporation loses about $500K for every 100 students who leave to attend a charter school and wanted a source for that figure. As you will see here, that figure makes a good rough estimate of the hit that local public schools take when students leave for charter or private schools (now funded by vouchers).

Although the details are arcane and have changed several times over the years, Indiana’s school funding formula has based the tuition support (the amount of funding provided to a local school district by the state) on the number of students attending the school district, based on a once-per-year (in September) count of students called the Average Daily Membership (ADM) (the ADM count was changed to twice a year starting in 2013). For example, Monroe County Community School Corporation’s tuition support per student for 2013 is approximately $5231 and Richland-Bean Blossom’s is approximately $5160 (there is some uncertainty in these numbers because of the expiration of the school funding formula).

In recent years, Indiana has moved even more aggressively to a “funding follows the child” model for school funding. In 2012, changes in the legislation eliminated some protections that school districts had from rapid fluctuation in enrollment (a process oddly-named “re-ghosting” adjusted ADM numbers based on a 5-year average of enrollment increases or declines) and also incorporated charter schools into the funding formula. In essence now, when a student leaves the public school corporation for a charter school, the public school loses the funding associated with that student, and the charter school gains the funding associated with that student. Using the above numbers, if 100 students leave MCCSC for a charter (or private) school, MCCSC loses around $523,100.

While a “funding follows the child” approach has a patina of fairness, this loss of funding when parents flee the public schools can do real harm to the public schools. Public school corporations operate under substantially greater regulatory burdens than do charter and public schools, have substantially greater fixed costs, and must serve all students in the district. The losses to charter and private schools tend to be spread out around the district, covering multiple schools and grade levels. The public school corporation can’t therefore simply eliminate a few positions to compensate for the loss. Instead, it puts an even greater burden on the entire system, which is already straining from increased demand and stagnant funding.

On a personal note, I do believe that parents should have choices. My own child attended the Bloomington Project School (a public charter school), and I cannot say enough good things about it. But alternatives like the Project School need to exist on top of a base of public education that is well-funded and available to all.  The funding formula needs to ensure that these basic needs are met first — that the public schools are funded well and that every child in every public school in the state has access to a high-quality public education. But our general assembly has been moving in exactly the opposite direction.

Here is a summary of the (estimated) 2013 per-student tuition support for each school district in Monroe County:

School District 2013 Estimated
Tuition Support
Monroe County Community School Corporation $5231.35
Richland-Bean Blossom School Corporation $5160.05
The Bloomington Project School $5101.74

SourceReport from Indiana Department of Education, Office of School Finance

Note: NPR’s StateImpact Bite Sized Breakdown: How Are Schools Funded? provides a brief summary of several of the changes made by the General Assembly during the 2012 Session. During this session, the existing school funding formula was set to expire on July 1, 2013, and there are still some outstanding questions about exactly how much schools will receive during subsequent school years.