8% Of schools miss state goal
04 Jul 2021 — Journal Gazette
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Katie Fyfe | The Journal GazetteFort Wayne Community Schools, which includes Memorial Park Middle School, spent just 7.1% of state education money on operations.
Niki Kelly

INDIANAPOLIS : About 8% of Indiana's school corporations failed to meet state targets in 2020 because they transferred too much money out of the classroom : landing them on the state's first naughty list.

The 23 districts don't face any penalties, but they did have to report the data and explain why they shifted so much money from education to operations. In comparison, 10 districts didn't transfer any dollars to operations.

"There are a lot of metrics we are being forced to use," Huntington County Community Schools Superintendent Chad Daugherty said. "It is what it is, and we will do our best."

After years of providing billions to fund K-12 schools, legislators in 2019 established a guideline that districts shouldn't transfer more than 15% of the tuition support dollars sent by the state to the operations fund. That was because they had been accused of not giving enough money for teacher pay raises.

"It was a simple piece of legislation about oversight," said Sen. Jeff Raatz, R-Richmond. "The 15% was somewhat arbitrary. We needed a starting point."

The highest transfer rate was 28.2% by Cannelton City Schools in Perry County : one of the smallest districts in the state.

Now that a baseline has been established Raatz said state and local education officials can begin to watch for problems. "If we are transferring too much does it indicate there is something wrong with the district? Are they heading in the wrong direction?" he said.

Generally, the education fund focuses on classroom expenses and consists largely of teacher salaries and instructional materials. Operations involve things from busing and utilities to sanitation and food costs.

Last year was the first full year to track the data, and the Indiana Department of Education calculated the transfers to come up with a list of districts above the 15%.

"This shows the vast majority of the school districts are doing well," said Dennis Costerison, executive director of the Indiana Association of School Business Officials. "Every school district has a story. It's not an 'oh my God.'"

Many districts that transferred too much said it was necessary because property tax caps limit their local funding.

In the Fort Wayne area, Huntington schools had the highest transfer percentage at 16.8%. The explanation filed with the education department said the district "suffers from extreme tax cap loss" : over $2 million : and "will always hover around that transfer percentage."

The district also felt last year it needed to establish a Rainy Day Fund due to the uncertain times of the pandemic, and it lost 60 students, which affected its revenue stream.

"We have made our board and our community aware of the list and will plan to address this in 2021," the letter said. "We will be more aware of the percentages, however, this does not reflect the financial health of our district."

Marion Community Schools had a similar response : stating revenue loss due to property tax caps and a pension debt issue cost $2.8 million in 2020.

"The 15% maximum transfer threshold, however, is impossible for some corporations to meet, and is due almost entirely to circumstances beyond the school's control," said Bob Schultz, chief financial officer for Marion schools in a letter to lawmakers.

He said the calculation only takes into account expenditures and not revenue. When local revenue is compromised, schools count on state funds.

Schultz said if tax cap losses weren't there, the district's transfer would have been only 12.3%.

He made a few recommendations for changes to the law, including keeping the names of the districts confidential until after districts are allowed to explain. And more importantly, he said the issue of tax caps must be addressed.

"Although many schools realize limited impact, circuit breaker losses are devastating to a growing number of school corporations. Revenue must be considered in all legislation that impacts school budgets, and the extreme loss of revenue caused by property tax caps cannot continue to be ignored," Schultz said.

Kathy Friend, chief financial officer for Fort Wayne Community Schools, said tax caps likely contribute to districts being affected unevenly by the transfer issue. While that's out of districts' control, other factors, such as how much transportation a district offers, could influence the transfer amount.

"But those are choices," Friend said.

Raatz's response is that schools can raise money from property tax referendums if they need it.

The School Corporation Fiscal and Qualitative Indicators Committee finished its review of the districts above the benchmark on June 15 and chose not to take any further action.

Some districts, meanwhile, didn't transfer any state funds to cover operations, including DeKalb Eastern Community Schools and Fremont Community schools in northeast Indiana.

"We make every attempt to live within the confines placed upon us by the state budget. We use the Education Fund for faculty and staff expenses while focusing Operation Funds for authorized expenditures," DeKalb Eastern Superintendent Shane Conwell said. "With the revenue provided by the recently completed General Assembly, we believe we will maintain our level of financial efficiency over the next two years."

William Stitt, who is both superintendent and chief financial officer at Fremont, said the more money that stays in education the more "it's helping our kids."

He acknowledged that operation expenses are necessary but said "it's a better correlation" to spend money in the education fund.

One way to cut operations expenses is to reduce administrative costs : such as eliminating the chief financial officer.

Stitt said Fremont does has a referendum in place. "Our goal was to improve teacher salaries and bring back programming we had lost," he said. 

Raatz said overall he found the first year's transfer data "pretty positive. ... Now we are building history."


This story is provided free courtesy of The Fort Wayne Newspapers.
"8% of schools miss state goal" Journal Gazette 04 Jul 2021: A1