It’s a funny thing how America chooses to fund its public schools. Using local property taxes as the main funding mechanism makes some modicum of sense given the local-ness of public education. But it has led to some real, harsh inequities given property values directly feed property taxes and thus rich neighborhoods naturally produce more property taxes than poor neighborhoods and thus schools in rich neighborhoods are more financially secure than those in poor neighborhoods.

Excuse the long sentence but it’s a visual metaphor for our country’s long history of purposefully creating or allowing inequity. And while federal and state funding often tries to minimize or eliminate this inequity created by the intersection of geography and socioeconomic status, the inequities remain. In turn, the debates go on regarding the best way to fund public schools (or even, increasingly, whether to fund them at all).

So it is with some interest that I’m watching three bills wind their way through the Indiana Legislature this year. Each could have wide-ranging impacts on how property tax revenue is used to fund public schools.

Senate Bill 336 (Revoking Property Tax Sharing)

Senate Bill (SB) 336 is the simplest of the three. It proposes to eliminate current “provisions that require public school districts in certain counties to share operations fund property tax levy, operating referendum tax levy, and school safety referendum tax levy funds with charter schools.”

The underlying system goes untouched, just who benefits is tweaked following the previous tweak in recent years that allowed for property tax sharing with public charter schools.

A not-so-small diversion before I go on.

Remember how property taxes fund public schools? Well, when charter schools were introduced in different states, they were never included in the calculation there. They are funded entirely through state grants, federal mechanisms, and sometimes supported by private philanthropy or foundations. I’m not expressing an opinion against or in favor of this difference in funding, only pointing out that charter schools (a type of public school) do not benefit from local property tax dollars in the same way that traditional public schools do.

That changed slightly not too long ago when Indiana passed legislation that required certain counties (with a high preponderance of charter schools) to share new referendum dollars with some charter schools (when those referendums were related to operations or school safety, not capital projects).

Back in 2018, Indianapolis Public Schools passed their most recent operating referendum and chose to share dollars with their Innovation Network Schools (a type of hybrid between charters and traditional public schools). Then more recently, wrangling over whether or not IPS would share referendum dollars with all charter schools operating within district boundaries, and not just Innovation Network Schools, wound up being a decisive factor in IPS not pursuing an updated operating referendum alongside the capital referendum that passed in relation to their Rebuilding Stronger initiative.

SB 336 would do away with public school districts sharing referendum dollars with charter schools. It stands very little chance of making any headway given the makeup of the legislature and the other bills under more serious consideration. To which we must turn next.

Senate Bill 518 (Full Property Tax + Referendum Sharing)

Senate Bill (SB) 518 takes what is already on the books and expands it by indicating that all school corporations must share referendum dollars with charter schools (with a handful of restrictions that would rule out some charter schools, namely those that operate virtually). This bill, as currently written, actually goes one step further than that and requires that school districts share their referendum dollars, when applicable, with other public school districts.

Confused and wondering when might that be applicable? Take Marion County, where IPS is just one of 11 different public school districts. Families who live in one district can, and often do, choose to send their students to a school in another district. So a student might live within IPS boundaries but attend a Pike Township or Lawrence Township school. Conversely, they may live in Wayne Township yet choose an IPS school. Were this to pass, multiple of Marion County’s districts would benefit any time one of the others passed a referendum, even if the benefit would be quite small in most instances (since it is scaled proportionately to the number of students who live in one district yet enroll in another).

But that piece is small potatoes compared to how the bill would require public school districts to share general property tax dollars with local charter schools. The bill, in essence, encapsulates the “money should follow the student” ethos that often appears in the vernacular of school choice advocates.

This is far and away the part that’s drawing the most controversy. In fact, it isn’t just controversial, it’s unprecedented. No other state currently has legislation on the books that requires school districts to share property tax dollars with local charter schools. Indiana could be the first (and, not to be all tea leaves and crystal balls about it, I think we will be).

Controversial. Unprecedented. But is it bad?

I don’t think so. I’m one of those people who believes that charter schools are public schools (because they are). They are not the same as traditional public schools. And those differences matter (I for one, as a long-time charter school supporter, will readily admit the lack of unionization for charter school educators is a bad thing). But they are also not private schools. They still have to play by the same rules (and do so with considerably less per-pupil funding) as traditional public schools, however much their detractors pretend otherwise.

The referendum sharing piece is an easy nod of support. And while I understand the pushback on the more general sharing of property tax dollars, the reality is thousands of families are choosing charter schools. The vast majority of them are either families of color or families from low-income backgrounds. Those schools are public. I think they ought to benefit from local property tax dollars in the same way as traditional public schools and hopefully eliminate or decrease the funding gap in the process.

For years, charter schools in Indianapolis have been doing just as much or more than traditional public schools with less per-pupil funding. Funding parity won’t guarantee even better results, but there’s enough evidence to indicate it just might help.

House Bill 1229 (The Abolition of Property Taxes)

And then comes House Bill (HB) 1229, which straight up says no more property taxes in Indiana. The economics of this I do not like, since the elimination is a regressive change in tax policy. Meaning, on the whole, affluent people will disproportionately benefit from such a shift. Own a home? You now get another tax break. Just rent? Likely nothing for you, as per usual.

Pure economics aside, it does accomplish untethering school funding from local property taxes. Since, well, property taxes wouldn’t exist any longer. In the words of this bill’s digest, it “abolishes the assessment of tangible property after December 31, 2025, and the imposition of property taxes after December 31, 2026.” It also, in essence, eliminates the school district referendum as we know it.

If you’re anything like me, that leads to two major questions. 1) How will schools be funded? 2) What happens to referenda that are on the books (let alone what schools will do long-term in their absence?)

On the first, this legislation would establish a “local revenue sharing fund” by “[extending] the sales and use tax application to transactions involving services.” On the second, the legislation notes “a school corporation may impose an annual fee to replace the loss of revenue previously collected by the school corporation from the imposition of an operating referendum tax levy or school safety referendum tax levy.” By which I take it to mean existing referenda can be seen through to their conclusion. New referenda remain off the table.

If I can crack out my crystal ball one last time, my thoughts on the three proposals are as follows:

• SB 336: From my perspective, there is no chance that this legislature revokes referendum sharing altogether.
• SB 518: I think it’s highly likely this bill expanding referendum sharing advances out of the Senate. If it does, I think the House will pass it as well.
• HB 1229: I don’t think this one will pick up enough steam to make it out of the House, leaving property taxes in place across Indiana. But then again, it is one of the Braun administration’s signature priorities so maybe enough momentum will build to topple this long-standing piece of state tax code.