Referendum is a long process

As Jay School Corporation tries to get its fiscal house in order, the focus has been on cutting costs.

But is there a way for school corporations to increase general fund revenues?

The answer is yes. But the process is a long shot at best, and it would be years before any additional tax revenues might be collected.

Given Jay Schools financial straits, there simply may not be enough time.

Superintendent Jeremy Gulley’s budget control framework calls for studying “the applicability, feasibility, process and timeline” of a referendum on raising property taxes to boost the district’s general fund.

Right now, he believes a referendum isn’t a likely solution to the school corporation’s red ink.

“Not in the near term,” Gulley said this week. “We’re in the process of getting efficient.”

If a time comes at some point in the future that a referendum proves to be necessary, it’s important that taxpayers know the corporation is making the most of its dollars, he said.

Historically in Indiana, property tax revenues were a major part of funding public schools. But that began to change in the 1970s, with state revenues from sales and income taxes funding a larger and larger share of the burden.

By the 2000s, the state share of general fund revenues was about 85 percent, with only 15 percent coming from local property taxes.

And in 2009, the funding system changed even more after an overhaul by the Indiana General Assembly.

Since that time, about 98 percent of a school corporation’s general fund has come from state revenues and only 1 or 2 percent from property taxes.

But when it changed the funding mechanism, the legislature did provide one option for school corporations that wanted to spend more than the state was providing. It’s called a general fund referendum.

How does it work?

If a school board comes to the conclusion that it cannot “carry out its public educational duty” unless it raises property taxes, it can approve a resolution and submit it to the Indiana Department of Local Government Finance for review.

The resolution spells out the specific language that must be on the ballot as a referendum question: "For the __ (insert number) calendar year or years immediately following the holding of the referendum, shall the school corporation impose a property tax rate that does not exceed _____________ (insert amount) cents ($0.__) (insert amount) on each one hundred dollars ($100) of assessed valuation and that is in addition to all other property taxes imposed by the school corporation for the purpose of funding _____________________ (insert short description of purposes)?”

The maximum number of years allowable is seven, but there’s no specification on what the tax rate per $100 may be. Some have been in the range of 28 cents. A general fund property tax rate of 10 cents in Jay County would raise nearly $1 million a year based upon the most recent total assessed valuation.

A number of school corporations have gone this route with mixed success.

About half of the districts that have put general fund referenda on the ballot saw them voted down.

Last year, six school corporations — including neighboring Southern Wells — won approval from voters for a tax increase. It was the second time around for Southern Wells, which passed its first referendum in 2009 and renewed the general fund tax rate for another seven years in 2016.

Trouble is, even if the Jay School Board were to take this approach, the earliest a referendum could be on the ballot is the May primary in 2018. And even if voters approved it, the collection of the additional taxes would not begin until 2019.

Meanwhile, the corporation’s cash balance is likely to be even smaller by then. And with enrollment dropping by an average of 49 students annually over the past 10 years, “The burn rate is predictable,” said Gulley.