Chesterton Tribune

Tax referendum among options as Duneland Schools face deepening state cuts

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How deep and broad is the community’s commitment to the Duneland Schools?

The Duneland School Board could try to answer that question in the primary election on May 8, in the form of a referendum on a new property tax.

The School Board has made no decision yet but Superintendent Dirk Baer told the Chesterton Tribune on Thursday that the choice comes down to this: either an additional revenue stream to make good on a multi-million dollar shortfall in the state’s funding of the General Fund—the “heartbeat” of the Duneland School Corporation, which pays salaries—or the elimination of numerous programs and the teachers and staff who run them.

The public will have two chances next week to hear the case for a referendum and then to offer input on it: at 7 p.m. Monday, Feb. 6, and at 7 p.m. Thursday, Feb. 9, at the Chesterton High School auditorium, 2125 S. 11th St.

After a presentation on the issue, attendees will be broken into small groups in the cafeteria and their comments and questions recorded. Those records will then be tabulated and the results released at a later date.

But the School Board—if it opts to pursue a referendum—must do so no later than its meeting on Monday, Feb. 13.

The Crisis

At issue is the General Fund (GF) only, 86 percent of which pays for faculty and administrative salaries, 6 percent for special education, and the balance for basic operating costs, like utilities and classroom instructional supplies. “It’s the ‘people fund,’” as Baer put it.

Until 2008, the GF was funded chiefly through property taxes. But in a public policy shift that year, the Indiana General Assembly enacted legislation under which the State of Indiana funds GF’s itself, the idea being to unburden property owners.

GF funding is now done according to a funding formula based on “average daily membership” and “free or reduced lunches,” both of which measures put the Duneland School Corporation (DSC) very nearly at the bottom of all school districts in the state, Baer said.

The average amount paid by the state per student in the most current year is $5,664. Compare that average to the amount paid per student in the Gary schools: $8,411.

Now compare it to the amount paid per student in the Duneland schools: $4,971. That figure puts the DSC in the “bottom 5 percent” of all schools in the state, including charter schools, Baer said.

But the real crisis hit in January 2010, Baer said, when the state—giving only 30 days’ notice—told the DSC that its GF would be cut by 4.56 percent or $1,569,219.

The DSC scrambled last year to make the cuts, Baer said. Through attrition it reduced staff by more than 30, including administrators, teachers, and support staff. It restructured the Alternative Education and Positive Life Programs. It reduced hours for classified staff and put 12-month employees on furlough. It reduced professional development and travel expenses. It ended DSC’s subsidizing of full-day kindergarten and summer school. And it reduced instructional supplies. Meanwhile, salaries have been frozen since 2008-09.

But the long-range projections are awful, Baer said, despite the fact that the DSC’s teachers have agreed to a salary-schedule freeze through 2016.

Utility costs will escalate, as will healthcare costs, and in 2012 the 2010 deficit of $1.5 million is expected to increase to $3.35 million; in 2014, to $3.96 million; in 2016, to $5.41 million; in 2019, to $8.4 million.

And so, then, there’s the choice faced by the School Board, Baer said: to make “Draconian cuts” to the programs “for which the Duneland schools are known for,” like speech and debate, music, and advanced placement.

Or else to raise revenue, in the only way permitted by the General Assembly: through a property-tax, which the voters in the Duneland School Corporation would have to approve in a referendum.


If the School Board opts to pursue a referendum, it would probably look like this on the ballot on May 8: “For the seven calendar years immediately following the holding of the referendum, shall Duneland School Corporation impose a property-tax rate that does not exceed 22 cents ($0.22) on each one hundred dollars ($100) of assessed valuation and that is in addition to all other property tax levies imposed by the school corporation.”

What would the actual impact of a 22-cent per $100 of assessed valuation (AV) be?

Baer answered that question by noting—first of all—that the owner of a home with an AV of $100,000 does not pay any property-tax—municipal, county, etc.—on the full $100,000. That $100,000 AV is first cut to $55,000 by the homestead deduction, then to $35,750 by a supplemental deduction, then in some cases to $32,750 by an additional mortgage deduction.

So a home with an AV of $100,000 would actually pay—if the referendum is approved—a property tax equal to this formula: 22 cents multiplied by $327.50—that is, $32,750 divided by $100—for a total tax in a given year of $72.05.

Or, Baer broke it down still further, around $6 per month.

The owner of a home with a median AV would pay a property tax for the GF of $185 per year or $15.39 per month. The owner of a $200,000 home, a tax of $215 per year pr $17.92 per month. The owner of a $300,000 home, a tax of $358 per year or $29.84 per month.

Now, property owners—right now—continue to pay property taxes to the DSC. In 2011 they paid a total rate of $0.8552 for several line items not covered by the General Fund: debt service; capital projects; transportation; and bus replacement.

But over the next several years, the DSC will finish payments on two debts in particular: a $13 million loan secured in the wake of the Bethlehem Steel Corporation bankruptcy; and a bond issued to fund teacher pensions. The loan—which accounts for a tax rate of $0.03 per $100 of AV—will be retired at the end of this year. The bond—which accounts for a rate of $0.09—will be retired in 2017.

And the practical consequences of those debts being retired is this: that a new property-tax rate of $0.22—if approved by referendum—would, in effect, hit property owners beginning in 2013 as one of $0.19 and then in 2017 as one of $0.10.

Nuts and Bolts

Baer noted that, if the Duneland School Board opts to pursue the referendum and it fails in the May 8 primary, it would have to wait another year before trying one again.

And because 2013 is not an election year, the DSC would have to pay for a special election.



Posted 2/3/2012