Cash-strapped school districts eye bus service cuts

School districts across Indiana could find themselves risking parental wrath by getting out of the transportation business as they struggle with shrinking revenues and property tax caps.

The Franklin Township school district in suburban Indianapolis angered thousands of parents a few months ago when it contracted with a partner that's now charging families what will amount to more than $400 per child this school year for bus service. And lean times could force other districts in similar straits to take a hard look at bus service.

Indiana's attorney general is poised to issue an opinion on the legality of Franklin Township's move.

District Superintendent Walter Bourke said a decision against Franklin Township could force the district to eliminate transportation entirely. But he expects legislators next year to consider a law that would require school districts to transport students — a law he said could force struggling districts into bankruptcy if it passes.

"If you look at what requiring transportation would mean to districts statewide, it would be millions and millions of dollars," Bourke said.

That's money many stressed districts just don't have, due in large part to property tax caps passed by the Legislature in 2008. Schools' transportation budgets, along with school bus replacement and capital projects, are funded entirely from property taxes.

Officials in the Mount Vernon school district just east of Indianapolis find themselves in the same boat, as the district's assessed value has dropped 22 percent since 2008. A financial consultant earlier this month outlined potential areas to cut expenses, and one option was eliminating bus service except for transporting special needs students as required by law.

"We're running out of options," said Mount Vernon Superintendent Bill Riggs.

Bedroom communities like Franklin Township and Mount Vernon are especially hard hit by the tax caps, which are lower for homes than they are for industrial property. Bourke said he has compiled a list of 15 districts hardest hit by tax caps — including districts in Gary, Anderson and Muncie — all of which may feel pressure at some point to make some sort of transportation cuts.

Charging for transportation isn't unique. Thousands of school districts across the country already do it, and dozens more have started charging for bus rides as they deal with shrinking revenues, said John Musso, executive director of the Association of School Business Officials International in Reston, Va.

But it's a new phenomenon in Indiana, where school districts have traditionally provided free bus service to and from school even though the state doesn't require districts to provide transportation.

Bourke and Dennis Costerison, an education lobbyist and executive director of the Indiana Association of School Business Officials, said Indiana school districts that are struggling with tax caps have some things in common. Most have heavy debt loads, often from building programs that were enacted to keep pace with population growth, and most are bedroom communities without much of an industrial tax base. He said many also have declining property tax assessments.

Sooner or later, all will likely face hard choices on transportation, Bourke said.

"If you look at the other districts following us, you see them lining up down this path," he said.

But what other districts can do to cope with their financial problems depends to some degree on what Franklin Township is allowed to do. Attorney General Greg Zoeller has already said the district cannot charge directly for transportation, as it originally intended. In response, the district sold its buses to the Central Indiana Educational Service Center, a cooperative of school districts that includes Franklin Township, so it could take over transportation and charge parents a fee beginning this fall. Now, Zoeller is considering whether even that is legal.

State Rep. Mike Speedy, one of two lawmakers who asked the attorney general for the new legal opinion, believes it will say that it isn't legal. The Indianapolis Republican said he expects the attorney general will determine that the Educational Service Center is an agent of the school district, and that charging the bus fee is still illegal.

"So many people consider the bus fees a back-door tax increase," Speedy said. He noted that Franklin Township officials came up with the transportation fee idea in 2010 after losing a referendum that would have allowed the district to raise property taxes outside the caps. Mount Vernon officials lost a similar referendum.

The attorney general's opinion isn't binding, and it isn't clear what would happen if the bus fee is found illegal again.

"I would hope they would reimburse parents and fund this year's transportation out of the rainy day fund," Speedy said.

Bourke said his 8,000-student district has about $17 million in its rainy day fund. But about $2 million to $4 million of that is earmarked for capital projects, and transportation would take another $2 million or so, he said. With that type of drain, the rainy day fund would be depleted in a few years, and Franklin Township would be back to square one, Bourke said.

Another option would be to "drop transportation for everyone" and leave it up to all parents to ferry their children to and from schools, he said. About 2,400 students currently ride the buses.

The district could also ask a judge to rule on the legality of the bus fees.