Indiana school districts are bracing for the impacts of a property tax measure recently signed into law by Gov. Mike Braun. Exact revenue cuts vary wildly from district to district, but some school officials say their districts will face significant losses, even if they’re not yet sure of the full extent.
SEA 1 restricts traditional public schools’ revenue in three ways: It further cuts property taxes, which make up a significant amount of schools’ funding; it prohibits county governments from sharing local income taxes with schools; and it requires some districts to share their property tax revenue with local charter schools.
Scott Bowling, executive director of the Indiana Association of School Business Officials, said schools are not the only local government units that will lose money, but they’re in a unique position because they can’t raise or even receive local income taxes to recoup costs.
“We don't have any of that,” he said. “And so, looking forward, it's going to present some big challenges for school districts.”
Lawmakers said the tax cuts in SEA 1 decrease future property tax growth instead of making outright cuts. They called it a “decrease of the increase.” But some school districts are worried they will still lose significant revenue.
Brad Yates, superintendent at Bluffton-Harrison Metropolitan School District, said the district is working with financial analysts to understand how the bill will affect its funding. They expected a potential revenue increase of around $120,000 between 2025 and 2026 based on current projections. However, they expect losses from SEA 1 to total between $300,000 and $400,000.
“One could say it's a decrease of the increase, because you're still decreasing it, but it would turn into a full decrease,” Yates said. “All the increase would be decreased out.”
Some counties currently share local income taxes with schools, but the new law changes that in 2028. Avon Community Schools Superintendent Scott Wyndham said that is an additional blow to his district. Avon stands to lose more than $2 million from the loss of local income tax alone.
Wyndham said that money pays for things like utilities, insurance and transportation — which are the three most expensive fixed costs for Indiana schools.
“Anytime there's an impact of millions of dollars, we've got to take a really hard look at where we would make those cuts,” he said.
Bowling added that schools in areas that lean heavily toward one property type like residential, farmland or business will be hit particularly hard.
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Wyndham said Avon is especially vulnerable to tax caps because its tax base is heavily residential. Residential property taxes are capped at lower rates than businesses and farmland.
Yates said his district receives a three-year average of about $250,000 in local income taxes. He said the district is in good shape financially, but they may have to analyze their expenses and find areas to reduce costs.
“It's difficult to maintain the same level of services and expectations from our community with less dollars coming in,” he said. “So the logical approach that we will have is to look at dollars coming in and determine what services can be provided for our community. We strive to operate on a balanced budget to ensure that we're not spending more than we're bringing in.”
Wyndham said the most challenging part of preparing for the new property tax law to take effect is all the unknowns. He said the bill is so complicated, the district isn’t yet certain of its full impact.
“The town, the township, the library, we're all really concerned," he said. "But there's just so much unknown in this bill, and I'm not sure that the reports that we were looking at when this was being considered a week or two ago really capture the true impact of what we're going to feel.”
Bowling said many schools will struggle to keep up with inflation and will likely put off things like important maintenance and building repairs.
“You do have some communities out there that, that where the situation is dire in terms of not being able to have money to provide adequate facilities to educate their kids,” he said.
Kirsten is our education reporter. Contact her at kadair@wfyi.org or follow her on Twitter at @kirsten_adair.