State school districts seeking referendums in June face higher stakes, steeper challenges

The last time voters approved two property tax increases for Beech Grove City Schools five years ago, volunteers knocked on 5,000 doors.

With the state under a stay-at-home order—and with social distancing practices likely to continue during the coronavirus health crisis—that in-person outreach isn’t possible this time around. And it could end up costing the Beech Grove district $22.4 million.

“We can email things out. We can make phone calls to people. But what’s really going to be missing is that personal touch of going door-to-door,” said Superintendent Paul Kaiser.

Around the state, school finance experts are unsure what the coronavirus will mean for new property tax referendums to fund local schools. According to the Indiana Department of Local Government Finance, 14 districts will put a referendum on the ballot in the primary.

It’s a critical moment for Indiana districts to pass a referendum, as school systems face down the economic fallout from the coronavirus.

With the May election postponed until June 2, school leaders have more time to rally support. But the coronavirus has put a halt to in-person campaign efforts, causing concern that voter turnout will be low. Meanwhile, convincing voters to agree to a tax increase may be a tougher sell as the state’s unemployment numbers reach a new peak.

“In times when you’ve got potentially 18% unemployment, when you have a lot of people who aren’t working, are they going to go out to have their taxes increased?” said Dennis Costerison, Indiana Association of School Business Officials executive director. “The circumstances have made it harder to have a referendum pass.”

School budgets rely heavily on state sales and income taxes, which experts said leaves schools particularly vulnerable after the coronavirus closed much of the local economy. Property taxes are more stable, and passing a referendum allows districts to boost their collection above the state cap.

A district that has passed a referendum will be in a better position if the state later makes cuts to education funding, Costerison said. But many schools have found they aren’t easy to pass. Even under friendlier economic circumstances, only 77 of the state’s more than 300 districts have successfully passed such an increase, and less than half have tried at all.

If both the construction and operations questions pass, Kaiser said Beech Grove, a Marion County district with about 3,000 students, will build a new early childhood center, hire additional school safety officers and give teachers a $2,000 raise.

“This may be the only raise [teachers] get in the next two years, which is going to be really hard for teacher retention,” Kaiser said. “It’s even more critical now that we win. But we also know it’s now going to be more difficult because people are out of jobs, and people don’t want to go to the polls.”

If it fails, state law requires districts to wait at least a year before putting another referendum on the ballot, and they can’t make the same ask twice.

Referendums typically are more successful in May, according to Indiana University Center for Evaluation, Policy, & Research data. Purdue University professor Larry DeBoer, who studies school referendums, said he believes that’s because November elections are often more high-profile, and therefore draw more voters who know little or nothing about the school referendum question.

That means districts’ success in June could depend heavily on who shows up to vote and how easy it is to get mail-in ballots, DeBoer said.

Given the ongoing health crisis, everyone in Indiana is allowed to request an absentee ballot, which allows them to vote by mail. The deadline to request one is May 21. Marion County will spend around $1 million to automatically mail ballots to each registered voter in the county.

How likely people are to approve a tax increase during a recession, is less clear. The current system for school referendums, which now sees a success rate as high as 73% when on a May ballot, was just beginning during the last recession about a decade ago. So DeBoer said it’s impossible to tell whether the majority of referendums—15 out of 21–failed in 2009 because the economy or simply that these asks were unfamiliar for schools and voters.

“We’ve got an experiment now,” he said. “We are going to find out.”

South Bend Community Schools, serving more than 16,000 students, is asking voters to approve two referendums that would bring in $54 million for updates to career and vocational schools and around $166 million over eight years for day-to-day operations, including teacher salaries.

It’s the district’s first attempt at a referendum. Superintendent Todd Cummings said it is essentially asking voters to keep their property taxes steady, rather than seeing a drop as the state cap goes into effect in St Joseph County this year. It was one of two high-poverty counties that was given a 10-year adjustment period before caps went into effect.

If the referendum fails, Cummings said it will mean fewer teachers, larger class sizes, and closing more schools.

“It’s pretty bleak,” he said.

That’s on top of any cuts that could come if state funding is lowered. State officials have repeatedly said they will continue with the 2020 budget with no plans to suddenly change education funding. But if the state revenue drop is as steep as experts are predicting, it will be difficult to avoid cutting education funding when the state sets its next two-year budget in 2021. Education funding makes up around half of the state budget.

The state missed its March revenue forecast by $70 million and has started dipping into its $2 billion reserves, which experts say could quickly be depleted if taxes continue to come up millions short each month.

And districts like South Bend, where there are a large number of low-income students, could lose more. Nationwide, high-poverty districts have been hit harder during recessions as state funding disproportionately goes to poorer areas–and that funding is being cut.

In South Bend, 68.8% of students rely on free or reduced-price lunch, a common measure of poverty. Cummings said administrators are trying to prepare for a “worst case scenario” of funding cuts, looking at what cutbacks would be least harmful to students. The referendum money will be used as promised, he said, and wouldn’t be enough to offset a drop in state funding.

“We’re going to keep those cuts as far away from teachers and students as possible,” Cummings said. “We plan for a worst case scenario, but right now that’s a crystal ball that not even the governor has.”

Chalkbeat is a not-for-profit news site covering educational change in public schools.