Back on Election Day, May 6, nine out of 10 Indiana school referendums passed. Eight were tax referendums, where voters approved new taxes for school operating costs. Two were for capital projects, to raise money to renovate school buildings. One of those passed, and one failed.
Indiana has required referendums to approve big capital projects since November 2008. That was one of the changes enacted with the big property tax reform that year. Since then, school corporations have proposed 48 capital referendums, and voters have approved 21, which is 44 percent.
What makes school corporations propose capital referendums? Perhaps schools compare the facilities they need to the facilities they have. If reality falls too far short of need, voters are asked to approve new construction.
Enrollment growth probably creates need. More kids need more classrooms. If a school corporation outgrows its existing buildings, new construction might be necessary. Sure enough, about two-thirds of the capital referendums have been proposed by growing school corporations.
Ability to pay probably counts, too. Places with higher incomes can better afford to buy new facilities. Again, sure enough, about two-thirds of the capital referendums have been proposed in counties in the top half of per capita income.
Only seven of 48 capital referendums have been proposed by school corporations with falling enrollment in lower-income counties. All seven were defeated. This means, though, that there are about 150 school corporations with enrollment growth or higher income that have not proposed capital referendums. It seems like the number of capital projects referendums is pretty small.
Illinois, Michigan and Wisconsin make their school referendum data easily available, so let’s compare Indiana’s proposals and results to those states. From November 2008-November 2013, Illinois school districts proposed 98 capital referendums and passed 49 (that’s 50 percent). Illinois has twice as many pupils as Indiana and twice the number of referendums. Not much difference there.
Michigan school districts have proposed 293 capital referendums since the second half of 2008 and passed 186 (63 percent). Michigan has about 50 percent more pupils than Indiana does but proposed six times as many referendums.
Wisconsin school districts proposed 277 capital referendums during that time, passing 130 (57 percent). Wisconsin has about 15 percent fewer pupils than Indiana but many more referendums. Michigan and Wisconsin hold a lot of capital projects referendums. Indiana and Illinois hold fewer.
Michigan and Wisconsin districts not only propose many more capital referendums than those in Indiana, they pass a higher share. Michigan voters have passed 63 percent, and Wisconsin voters 57 percent, compared with 44 percent in Indiana. One reason might be that Indiana’s referendums proposals are bigger. The average capital project proposed in Indiana has been $47 million. The averages in Michigan and Wisconsin have been $20 million and $12 million, respectively. Bigger projects require higher tax rates, and higher tax rates cut the odds that voters will approve.
All three of our neighbors used to have many more capital referendums than they’ve had recently. From 1996-2002, Illinois averaged 84 per year. Since then, it has averaged 21 per year.
In Michigan, the 1996-2002 average was 60 per year; since then it’s been 30. And in Wisconsin, the earlier period saw 120 per year, and since then, 44.
Economic growth fell off in the 2000s in the entire Great Lakes region. That may be more evidence that lower ability to pay reduces the number of referendums proposed.
One of the purposes of requiring referendums for bigger capital projects in Indiana was to put a check on capital spending growth. It seems to have worked. From 2000-08, property taxes for school corporation debt service grew 8.7 percent per year. Since the referendums requirement came along, debt service taxes have grown only 2.6 percent per year.
The referendums requirement seems to have discouraged school corporations from proposing capital projects, and voters have approved less than half of those proposals. That’s good for taxpayers.
Of course, on the other side of the budget, less spending on construction may mean older, more-crowded, less-advanced school buildings. And if lower-income districts are reluctant to propose capital projects, and their voters are reluctant to pass them, we may find ourselves with a school equity problem.
Larry DeBoer is professor of agricultural economics at Purdue University. Send comments to firstname.lastname@example.org.