The history of referendums in Indiana is closely tied to the state's tax policy. School referendums were less common before 2008.
(FILE PHOTO: Justin Hicks/IPB News)
High property taxes impact how much funding Indiana public schools get from their local tax base. School officials and a state tax expert say some districts use operating referendums to fill the gaps.
The history of referendums in Indiana is closely tied to the state's tax policy. School referendums were less common before 2008. However, longtime Indiana property tax expert Larry DeBoer said in a recent study that they increased in popularity after former Gov. Mitch Daniels enacted property tax reform.
Part of the 2008 tax plan required school districts to fund large capital projects through referendums.
Districts asked voters to approve tax increases 54 times between 1976 and 1999. Since 2008, Indiana school districts have asked voters to approve more than 275 school referendums – 184 specifically to support their operating costs.
Even though less than half of public schools in Indiana have asked for referendums, DeBoer’s study said operating referendums added $472 million to school budgets this year.
Property taxes still have a significant impact on school budgets.
Indiana's property taxes are currently capped at either 1, 2 or 3 percent, depending on the type of land. When property taxes increase more than those percentages, landowners receive tax credits.
DeBoer said tax caps limit the money that goes to local government units like schools.
“The taxpayers gets the credit. But it's an unfunded credit, meaning nobody is replacing the money from anywhere,” he said. “It is just a loss of revenue for the local government.”
DeBoer added that the effect of those tax caps often depends on city and county property tax rates.
“The rate that matters for tax caps is the rate that the taxpayer pays. The rate that the taxpayer pays is the sum of the county and the township and the city and the school and the special district and the library rates all added up together,” he said. “A school might have just a normal $1 rate. But if the city and the county have high rates, that will push all units of government into tax cap credit territory and they will all end up losing revenue.”
Join the conversation and sign up for the Indiana Two-Way. Text "Indiana" to 765-275-1120. Your comments and questions in response to our weekly text help us find the answers you need on statewide issues and the election, including our project Civically, Indiana.
Some schools don’t see much change. But some, like Lake Station Community Schools in Lake County, see a significant drop in funding from property tax caps.
The Indiana Legislative Services Agency said Lake Station lost nearly $6.8 million to tax caps between 2019 and 2023. Lake Station Superintendent Tom Cripliver said that number to date is closer to $7.4 million.
The district is asking voters this November to approve an operating referendum for $1.4 million per year. Cripliver said many schools are using referendums to replace funding lost to tax caps.
“They need to go back and look at the tax credits,” he said. “They need to take a second look at that, because that is what is hurting not only public schools, but it’s also taking away funds from other governmental units.”
He said lawmakers ultimately need to reconsider how tax caps are used because of their effect on schools and local governments.
Cripliver said it is Indiana’s job to fund public education, and if lawmakers won’t address tax caps, they must increase funding to public school districts.
“Get public education funded on an equitable basis with charter schools and with vouchers, or perhaps reduced the funding for charter schools and vouchers in order to make the funding more equitable,” he said.
