Tax Caps Limit Available Resources in School District Funding

  • In 2008, the Indiana General Assembly passed property tax relief legislation; this action lowered homeowners’ property tax by approximately 30%. In November 2010 Indiana voters elected to include property tax caps into the state’s constitution, making property tax caps permanent. While only 22% of homesteads statewide qualify for tax cap credit, nearly 60% of homesteads in Hendricks County qualify. Why a higher percentage in Hendricks County? This is because the average home assessment in Hendricks County is $166,000.00 compared to the $125,000.00 average statewide. This means that taxing units in Hendricks County (schools districts, libraries, and town and county governments) must absorb tax cap loss in 6 out of every 10 homesteads compared to 2 out of every 10 statewide.

    For school districts in Indiana all property tax supported funds are affected by tax caps. Danville Community Schools has five such funds that are affected by tax caps: Debt Service, Pension Debt, Capital Projects, Transportation, and Bus Replacement. Definitions of these funds and the expenses included in each fund can be found in the Questions and Answers document link on the left of this page. From 2008 until 2012 the tax cap loss was distributed across all five tax supported funds; in 2012, House Enrolled Act 1072 removed Debt Service and Pension Debt from tax credit loss, those two funds became “protected” from this loss.

    Our transportation and capital projects funds will be hurt the most by these losses. While transportation of students to and from school is required by the state, there is a process for discontinuing transportation services. This process requires the school district to notify the Indiana Department of Education a minimum of three (3) years prior to the discontinuation of services. While our Board of School Trustees have approved a resolution to notify our Department of Education, it is our Board’s sincere hope that discontinuation of services will not be necessary. If the Indiana Legislature removes the “protected” status from the Debt Service and Pension Debt Funds or takes other action to reduce the impact of tax cap losses to these funds it is the intent of our Board to rescind this recent action.