Explaining the ABC’s of ZCS’s Funding Crisis

Writer / Janelle Morrison . Photos / JJ Kaplan

According to the superintendents of several large suburban school districts, Indiana’s current school funding formula jeopardizes the long-term sustainability of their schools. Despite a common misconception, the presence or absence of robust commercial development within these communities plays no more a part in the schools’ funding crisis than the day of the week affects the day’s weather pattern. As a result, school systems in communities that have experienced explosive commercial development in the past few years, such as Carmel and Fishers, are suffering from the same financial shortfalls as Zionsville.

So why are the schools in some of the state’s most affluent communities, paradoxically, experiencing a funding shortfall while school systems in other areas of the state are doing much better? More importantly, what are the respective superintendents doing to alleviate the problem?

To find answers to these questions, I recently sat down with Scott Robison and Mike Shafer, the superintendent and the CFO respectively for the Zionsville Community Schools.

In order to understand the funding problem, it is helpful to have at least a general understanding how schools are funded in Indiana. Indiana’s school funding is a complex arrangement where specific funds are created and they are typically restricted for specific uses by law. For example, a school’s ability to use its general fund money for costs associated with capital improvements such as, new buildings or their upgrade, is generally prohibited. Likewise, local property taxes generally cannot be contributed to increase the general fund. (see slide a)

Slide A
Slide A

“We are the one of the lowest funded school districts in the state of Indiana,” Robison explained. “We’re talking about the general fund, the life blood fund that pays for teachers and the core mission. Because of the funding formula we do not receive anything more than a bit above the foundation level. The foundation level is not a sustainable budget for a school district.”

Shafer explained even further.

“The funding formula [for the General Fund], as it is currently set up, is made up of two major components,” Shafer said. “One of them is that foundation that Dr. Robison referred to and is equal to about 80 percent of the funding that goes to school corporations statewide. The other piece is a variable piece called the ‘complexity grant’ that is designed to provide about 20 percent of the money that goes to school corporations. However, it [complexity grant] is variable so each school corporation gets a different amount of money and therefore a different percentage of financing from that complexity piece. The way that the funding formula is set up, that works for the majority of the school corporations in the state but there are a number of us who are actually getting far less money that we really need to survive and operate.”

Shafer continued his explanation of the funding formula. “In our particular case, we are getting the least amount of complexity money per pupil in the entire state of Indiana. When you look at the total amount of money per pupil, we are tied for third least. School corporations like Carmel, Westfield, Zionsville, Southwest Allen, Hamilton Southeastern, etc., we are all pretty much down at the bottom receiving several hundred dollars, per pupil, less than the state average as a result of the issues with the way that the funding formula is set up and how it operates. If you multiply $800 per pupil, which is the ball park we’re talking about for us that we’re below that state average by, times our enrollment which is 6,200, then you see right away that the difference is around $5 million dollars a year for us. That is also the approximately the amount of the last referendum that we did. The funding formula causes a funding short fall, which forces us to go back to a referendum to be able to make ends meet. In regards to federal funding, we get about $30 per pupil and in contrast IPS gets about $2,200. The high poverty school districts receive much more money from the [Indiana] funding formula and are getting more money from the federal government than Zionsville is getting from the state. Additionally, they are receiving over $2,000 per pupil in complexity money while Zionsville is getting approximately $120” (see slide b)

Slide B
Slide B

The previous referendum was passed in 2012. It is a three-year referendum that finishes with the last tax distribution in December of 2015.

“Obviously, we are hoping for legislative change to the funding formula in an effort to reduce the size of or eliminate any future referenda,” Robison said. “The members of this community pay a disproportionately high share of income and sales taxes. When those monies go into the state funding formula they get redistributed and we get among the lowest shares. We don’t suspect that we’re ever going to see the exact same amount for every school district and we don’t believe that we should. We believe in differentiation of funding for districts in poverty, however the skew has become so absurd that it leaves schools like Carmel near last and a lot of communities around Indiana that pay a disproportionately high share in, can’t make ends meet. They have to lay off teachers, cut programs and it creates great instability.”

The shortfalls from the current funding formula is impacting programs that Zionsville offers students.

“We had to cut our elementary science special program, our elementary physical education, some of our music and art programs, library science at the elementary levels and some at the middle level,” said Robison. “We lost our international baccalaureate program at the high school level. The IB program is a program that turns the heads of college admissions folks. Something that we’d like to have that we don’t currently and what is becoming a staple in Indiana, is Project Lead the Way. This is very much an engineer-aimed town. We have a lot of engineers that live here and have children in our schools and yet this world-class level, pre-engineering program is unavailable to our students because we can’t staff and pay for it because of our general fund scarcity.

“Zionsville is a relatively affluent community with a very poor government entity in its schools. There are so many rules and regulations related to those funds that come and they receive among the lowest per pupil in the state and the only way at law, that they can elevate that is to go back to the taxpayers and do a referendum for that when the taxpayers are already paying among the highest shares of income and sales taxes in the state and that is a paradoxical situation to be in.”

With respect to the misconception of this being a commercial tax base issue, Robison stated, “Back in the day when, by law, the school funding formula included a levy piece that was in local property taxes, we floated our own boat to the tune of about 64-65 percent every year,” Robison said. “The state kick-in was 30-35 percent and while we were fine in that regard it did foster higher taxes than in most places. Then we got tax reform that set that 1 percent cap, 2 percent and 3 percent and take all of that I just said about property taxes and throw it out the window because we’re no longer talking about property taxation. It is now illegal to have property taxes in your general fund unless you go the ballot. We’re handcuffed with this money that comes through the redistribution of which we get amongst the smallest shares.”

In order to fix the problem, Robison outlined several measures that he and similarly situated superintendents are undertaking. “We’re going to be reaching out to all of our special groups in the schools, the booster clubs and the folks that are active in our schools and begin educating them, again. We did this before when we went through our referendum about why this is happening and so we’re going to educate them as the session gets started. We do have a website that is up, indianaschoolfunding.org and it has some key documents and facts that people may want to review. We will have activities with small groups learning about this and will be asking for some folks to do letter writing to contact legislatures and so on.”

In May, Robison and Shafer convened with representatives from 30 school districts from around the state to introduce the “Indiana Fix-It Coalition” initiative.

“We found that going in and speaking with legislators on our own just as a couple of guys from Zionsville, legislators would have that perplexed look like ‘well you’re from Zionsville so why would we need to talk to you’?” Robison explained. “Many of the legislators didn’t even know, in detail, about how the funding formula impacted us so Mike and I determined that we needed some geographic diversity, folks from other towns who are in a similar condition and that’s why we have Batesville, Avon, Center Grove, Brownsburg, Southwest Allen and Northwest Allen County, Munster, Fairfield, Porter County Schools, etc. involved so that this is spread around a bit.”

“Currently, there are 41 school corporations in the state that are affected just like us,” Shafer pointed out. “Those are the people who we see as our natural allies and are attempting to enlist them into our coalition. They are the school corporations that will be benefited if we can get a fix in the funding formula.”

“We’ve proposed three solutions,” Robison said. “Mike Shafer from our district and Mike Reuter, CFO of Hamilton Southeastern Schools, have worked with Chris Himsel, superintendent of Northwest Allen County schools to develop three proposed solutions. One solution is a performance grant, the second is to create a floor on the complexity grant and the third is reform of the complexity grant that elevates the outlier-low funded school districts without harming others.”

“We looked at the school corporations and we plotted the amount of money that each school corporation receives on a per pupil basis versus their ISTEP scores,” Shafer explained. “Not that we’re big proponents of ISTEP, but it is a uniform benchmark where you can get data across the board for all of the schools in the state and one of things, ironically, when we’re talking about the schools that are disproportionately underfunded you’re also talking about schools, that for the most part, are high performers. The highest performers in the state are those that are worst affected by this problem with the funding formula. If you take the top 25 performers in ISTEP, 21 of them are in this group.” (see slide c)

Slide C
Slide C

“One of our best allies in this effort is Scott Fadness, the new mayor of Fishers,” Robison said. “Fadness has essentially said that he doesn’t want to be the mayor of a town that has a declining school district. He knows that attracting business and continuing to prosper as Fishers has, really depends on excellent schools. Several Hamilton county mayors and town/city councilors support the schools in these efforts.”

If the school funding formula is not changed by the legislature, according to Robison, in the future class sizes will skyrocket again and the schools will have to be back in the decision-making process of what will they have to cut. Will they cut additional world language programs, as they lost German the last time they were here.

“We’ve been here before,” Robison warned. “We closed our science labs at high school because our class sizes were so large that we didn’t meet the safety requirements for doing experiments. We must contemplate class sizes that skyrocket and programmatic decision-making. When we lose staff, which programs will that impact?”

Shafer explained the simple economics of the situation. “Without a legislative fix, Zionsville will continue to see a decreasing amount of money per pupil through 2018,” Shafer concluded. “This year we lost $83.48 per pupil and over the next two years we will lose about the same amount, each year, so when you add that up over three years, that is $250 a student and then multiply that by the 6,500 students that we’ll have then, we’re talking about real money.”

The money also impacts teachers. “The delta that marks the territory between our current per pupil funding and the state average is $832 for 2015, that’s about $5.2 million dollars, 75-80 teachers.” Robison calculated. “What could we do if we had the resources to put into these classrooms? We believe that differentiation of funding is appropriate and necessary but the skew has become so broad that we’re down to a level that we can’t operate and offer programs that students in this community deserve.”

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