School districts were watching the legislative session very carefully this year, looking for help with funding problems. There was nothing.
For Muncie Community Schools, the non-action translates into an inability to afford busing. The corporation is now left to find its own solution, which is why the board announced Friday it is planning to notify the state it will cut transportation in 2018. The board will vote Tuesday.
Muncie isn’t alone, it turns out.
Statewide, the lack of legislative action made the threat of having to cancel transportation for students suddenly become all the more real. In Indiana, 67 districts are using a state waiver to help manage their budgets. At least half of them are relying on it to keep transportation going, The Star Press has learned.
If new legislation doesn’t come about — many school administrators told The Star Press they are still hoping it will — the assistance from the current waiver ends in 2016.
Without the waiver, corporations statewide will be forced to cut down routes, extend the walking distance around schools, try to pass a referendum, or just cancel busing altogether. A handful of districts have enough money saved up to keep it going for a few years, but when the reserves run out, that’s it.
Considering it all, MCS has decided to vote on whether or not to notify the Indiana Department of Education that it will end transportation in three years, the minimum time required between notifying the state and actually discontinuing service.
Former MCS Chief Financial Officer Mark Burkhart looks at the notice as an act of advocacy, and he figures other districts will do the same.
“Do they want to send a message to Indianapolis?” he said.
He’s looking to the general assembly for help, he said, because it was recent legislation that put school districts in this position.
In 2013 state legislation passed that required school districts to put money toward debt first, then funnel any extra money to other funds: transportation, bus replacement and capital projects. It was called Protected Taxes, and the general purpose, proponents argued, was to ensure schools weren’t defaulting on loan payments.
The decision meant different things for different districts, depending on situation. For MCS, it meant 91 percent of the transportation fund would be gone, leaving just enough money to run a few special education buses.
And Muncie wasn’t alone. Early predictions showed 20 districts would lose more than 50 percent of their property taxes revenue, because of Protected Taxes. Franklin Township, Cannelton City and Beech Grove school corporations were going to lose all of their money.
So the legislature came up with a bandage, a waiver from protected taxes. Eligible districts were allowed to distribute losses evenly across the budget, including the debt services fund. It was set to last for three years: 2014, 2015 and 2016.
MCS has used the waiver for two years and plans to apply for a third. The waiver means Muncie Schools has $3.3 million in the transportation fund — the bare minimum needed — instead of just $400,000.
Many districts need similar help. In 2015, 67 of the state’s more than 300 districts applied and were eligible for the waiver.
The Star Press surveyed 55 of the districts using the waiver. All of them said their transportation funds were helped by the waiver to some degree. The majority, 31 of them, are relying on it to keep buses running.
“Without the waiver, we would have serious issues maintaining our current transportation operations,” said Brian Tomamichel, business manager at Mt. Vernon Community Schools.
River Forest Community Schools couldn’t run buses without it, either.
Western Wayne Community Schools would only have enough money for a couple of years.
Peru Community Schools would have to take money out of its general fund.
Greater Clark County Schools would lose about $2 million without the waiver.
The waiver helps districts from 36 different counties of all different sizes. It helps districts like Randolph Eastern Schools, with 932 students, Avon Community Schools, with around 9,000 students, and Fort Wayne Community Schools, with more than 30,000 students.
Some are from urban areas, some from suburban areas, some from affluent areas. In total — and granted, not all of them need or ride a bus — the districts currently using the waiver are responsible for nearly half a million children.
“This signifies a systemic problem,” said Rep. Sue Errington, D-Muncie, who helped create the waiver. “It’s not just three or four schools that don’t know how to manage their money.”
In many ways, and especially regarding transportation costs, Muncie Schools has become the poster child for financial trouble. At least five school business managers threw in, “We’re not as bad as Muncie,” when talking about their own situation with The Star Press.
During the nearly five months between when the Protected Taxes legislation passed and the waiver was created, MCS knew it wouldn’t be able to keep up busing.
In 2013 Muncie tried to pass a referendum asking the community to help pay for transportation costs. It did not pass. Then, the district asked the IDOE to cancel busing immediately instead of waiting three years. It was rejected.
If the waiver runs out, many districts in Indiana — not just MCS — will face incredibly tough decisions. There is no state or federal requirement for a district to provide transportation, but in Indiana districts must give the three years notice to end the service. And that means many schools — in the current situation with the waiver due to end in 2016 — would be obligated to provide at least two additional years of busing.
Since 2012, four schools statewide have given their notification. Three of them are using the protected taxes waiver, including Danville Community Schools in Hendricks County. They gave a notification to cancel busing in 2013.
“We were just doing it more proactively,” said Tom Johnson, assistant superintendent for financial services at Danville.
Without the waiver, Johnson said he doesn’t know what they would do. They’d either have to stop busing or get a referendum passed.
“We’d be bankrupt in two years,” he said. “I’ve been doing this since 1996 … This is serious.”
Sen. Luke Kenley, R-Hamilton, was one of the legislators that helped put together the protected taxes legislation.
After tax caps — which limit the amount Hoosiers have to pay in property taxes — were put into the state constitution, it became clear that action was taking away money from schools. Kenley said bondholders were starting to get nervous that districts would begin defaulting on loans.
The idea is that no matter how much a school is losing in taxes, the debt service and pension debt funds remain the same. Those two funds have to be filled 100 percent, then any extra money can go elsewhere. Districts have to pay their debt first.
Kenley said schools were also over-levying beyond their debt to use the money for school buses, which is not what the intention of taxpayers’ money.
No school districts were actually failing to pay bondholders, Kenley said, but the bondholders were still nervous. Some people have pointed to this fact to argue against protected taxes, including Errington and Burkhart.
“It’s an attempt by somebody in the general assembly to fix a problem that isn’t a problem,” Burkhart said.
Protections for bondholders were already in place in Indiana with the intercept law, which says the state is allowed to step in if a district defaults on its loan payments. The state pays the bondholder and takes the money out of the school’s general fund, which the state provides.
Kenley pointed out these are two different pots of money. The general fund is used for teacher’s salaries and benefits, so losing that money could directly affect the classroom.
Kenley said there was some “unfairness” when the protected taxes legislation passed since districts didn’t get much notice. He said they might have made different choices in gathering debt — like constructing a new building — if they had known about it ahead of time. The three-year waiver helps make that fair, he said, and gives schools some extra time to figure out how to cut down their spending.
“The message was: you have three years to get yourself straightened out here,” Kenley said. “We’ll give you an exemption for three years because you didn’t know this was going to happen to you.”
Errington isn’t so sure three years is enough. She is hoping to find a permanent solution to help schools. To her, the problem started with tax caps. They took away local district’s ability to manage their own money, she said. To her, putting them in the state constitution was “premature.”
“Now we are finding all kinds of things we have to work around,” she said. “We created the problem, we need to fix it.”
More schools will fall into “dire hardship” without relief, said Errington. She doesn’t want to see schools stop busing.
Because the majority of the districts in the state do not need the waiver and have been able to manage spending, Kenley said he would have to see a good reason to extend it.
Two districts in Kenley’s district, Westfield Washington Schools and Sheridan Community Schools are using the protected taxes waiver. Kenley said he hasn’t heard any concerns from them and they are working to get their budgets “straightened out.”
Giving a school district more leniency to access more taxes isn’t the answer and isn’t what taxpayers want, he said. Plus, Kenley said providing transportation is a “voluntary exercise” on the part of a school corporation, since the government does not require it.
“If they want to have it, they have to come up with a way,” he said.
Eric Grim, principal of Sutton Elementary School in Muncie, said losing busing would create an additional hardship for his students.
He, along with other faculty members, has already taken it upon himself to personally pick up students who can’t make it to school due to car trouble or weather.
“If the kids aren’t in school, they can’t learn,” he said.
Students can walk or take public transit, but that isn’t a good solution for elementary-aged students, Grim said.
“I don’t know that I would want a 5-year-old riding on a MITS bus,” he said.
Robert Shultz, chief financial officer of Marion Community Schools — which uses the waiver — is worried that this issue isn’t getting enough attention because it affects less than half of the districts in the state.
“It’s not as important of an issue as it needs to be to legislators,” he said. “It might not hurt a majority of schools, but the ones that are hit are devastated.”
Contact families & education reporter Emma Kate Fittes at 765-213-5845 and follow @EmmaKate_TSP
Muncie Community School is considering notifying the Indiana Department of Education that it will cut busing in three years. The school board will vote at the next meeting
When: 6:30 p.m. Tuesday, July 14
Where: Anthony Administration Building, 2501 N Oakwood Ave
In 2013, when the protected taxes legislation was passed, 20 schools were expected to lose more than 50 percent of their revenue. The waiver helped, but without it these districts would be in trouble again.
Here are the top five schools that face the greatest revenue losses without the waiver:
1. Franklin Township Community Schools (100 percent loss)
2. MSD Decatur Township Schools (92.1 percent loss)
3. Westfield-Washington Schools (91.3 percent loss)
4. Muncie Community Schools (88.6 percent loss)
5. Elwood Community Schools (87.4 percent loss)
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