Gov. Daniels’ School Bond Reform: Will it Matter?

November 26, 2007

Indiana Writers Group column for release Nov. 28 and thereafter
Digital mug shot available on request
581 words

By Jeff Abbott, J.D., Ph.D.
   
Indiana has a petition-remonstrance process that allows local taxpayers a say in whether a proposed bond issue will be allowed to proceed. Less than one-half of such remonstrances, however, are won by protesting taxpayers.

Gov. Mitch Daniels has proposed replacing this with a referendum process whereby voters would decide proposed school bond issues up or down. But will it be any better?

The answer depends on the data used in whatever process is adopted.

Both sides of a proposed bond issue typically play to the emotions of the citizenry. The school boards piously proclaim “it’s for the kids” and that the future of the entire community rests upon the approval of the proposed project. The remonstrators might just as loudly proclaim that businesses will leave and many retirees, poor people and even middle-class residents will lose their homes to foreclosure because they won’t be able to pay the higher property taxes.

School bond issue campaigns in Indiana are always long on rhetoric and short on facts. What is needed is just the opposite: A process that is long on facts and short on rhetoric. The referendum process as proposed by the governor may be just as doomed as the current petition-remonstrance process. That is because it doesn’t matter which process is used. Substantial changes in data collecting, data analyzing and data dissemination need to occur. This data needs to speak directly to the question: Can a particular community afford the school bond issue before it?

The current criteria and guidelines used by the state and local school boards are wholly inadequate to answer that question. School boards tell us that their bond issues will be purchased by the bond market at “normal” interest rates. Indeed, they often use this as evidence that the community can afford the bond issue.

Bond-rating agencies and the bond market, however, are primarily if not exclusively interested in whether the proposed debt will be repaid — not whether it is affordable. They are comforted by the fact that Indiana is one of the few states with a statute that in the event of default allows the interception of state funds that otherwise would go to a school district for other operating expenses. The bondholders are thereby guaranteed they will get theirs — even though the school district may not have enough money left to make the teachers’ payroll.

Currently, the sparse facts typically offered in support of the affordability argument are solely from the perspective of the school district. This limited information tends only to answer the question of whether the school district itself can afford a bond issue. Although this is an important question, there are two other questions that need answered as well:

• Can the community afford the proposed bond issue, i.e., what impact will it have on the community’s overall economic health?

• Can individuals and families afford the proposed bond issue, i.e., will it cause them to lose their homes because they can’t pay the property taxes?

Three indexes have been constructed to help a community address those questions: 1) a school-district affordability index; 2) a community-affordability index; and 3) an individual and family affordability index. These indexes incorporate 54 possible quantitative measurements as criteria for determining affordability.

Without the use of such quantitative data, regardless of whether the governor’s reform is approved, Indiana school bond campaigns will continue to be long on rhetoric and short on facts — to the detriment of Indiana citizens who must ultimately make decisions on school-construction issues.

Jeff Abbott, Ph.D., J.D., an adjunct scholar of the Indiana Policy Review Foundation, was a former Indiana school superintendent and is now a licensed attorney and university professor. Contact him at jabbott@inpolicy.org.



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