A Citizen's Guide to Indiana

Masson's Blog

School Corporations Lose Round In Charter School Takings Lawsuit

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The Indiana Court of Appeals has ruled in favor of the State of Indiana and against several school corporations, Lake Ridge School Corporation, School City of Hammond, and West Lafayette, in their suit against the State. The suit challenges a statutory provision requiring them to sell school property not used for class room purposes to charter schools for $1. The Court of Appeals held that schools can’t sue the state for taking without just compensation because municipalities are just divisions of the State. Under this rationale, the State is just taking from itself.

The Court of Appeals opinion did not discuss the fact that these buildings were built with local tax dollars. In West Lafayette’s case, the citizens of the community invested in what has recently been appraised as a $6 million asset. Under this opinion, there is no recourse if the State commandeers that asset for the benefit of the State generally. The Court of Appeals only considered federal opinions that held that there was no claim under the Fifth and Fourteenth Amendments by a municipality against state government. It declined to conduct a separate analysis under the takings clause in the State Constitution: Article 1, section 21. The opinion does not grapple with Board of Commissioners of Tippecanoe County v. Lucas, 93 U.S. 108 (1876) ( “the legislature of a state possesses the power to direct a restitution to taxpayers of a county or other municipal corporation of property exacted from them by taxation, into whatever form the property may be changed, so long as it remains in possession of the municipality.” (emphasis added)

If there is no recourse under either takings clause, my position has been that this is a violation of Art. 10, §1 of the Indiana Constitution which provides requires the General Assembly provide a “uniform and equal rate of property assessment and taxation.” Happy Hollow was paid for by property taxes that were not “uniform” to those that you would find in, say, unincorporated Tippecanoe County. That non-uniform taxation is appropriate insofar as it is used to benefit the school district. It is inappropriate to use taxes peculiar to the District to benefit the State at large.  See City of Richmond v. Scott, 48 Ind. 568, 572-73 (Ind. 1874) (determining that unequal rates of municipal taxation do not violate Art. 10, §1 because “taxes for corporate purposes cannot be equal. The wants and necessities of towns and cities cannot be equal. Some require a higher and some a lower rate of taxation.) I don’t know that this issue was raised to the court. I assume this will be appealed to the Indiana Supreme Court. If the Justices say that there is no recourse under the takings clause because the State is merely taking from itself (because municipalities are merely subdivisions of the State), then perhaps subsequent litigation could challenge the $1 sale requirement based on the uniform taxation requirement.

Statewide: Voters Reject Three School Operating Referendums

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Eric Weddle, writing for WFYI, reports that voters rejected three operating fund referendums in the state: Delphi schools in Carroll County; Brown County Schools; and Medora Schools in Jackson County. State legislators are increasingly putting their thumbs on the scales against these local school funding referendums by requiring confusing or misleading ballot language:

Education leaders and advocates had warned new language required on the ballot could give voters the wrong idea of how much property-tax they could face. Last year, a law was enacted that requires the ballot question to include the estimated average percentage of property tax increase paid to the school district if the levy is approved.

Local government finance and your property tax bill is something the average citizen doesn’t understand very well. If the supporters of the school system don’t have the resources or know-how to engage in some serious voter education prior to these votes, your average voter is just going to see “should we raise your taxes by BIG PERCENTAGE for your local schools?” As ever, my focus is on West Lafayette Schools. I believe we have to renew our referendum in the 2024 election. I suppose I can count myself lucky that my kids will have graduated by the time that funding source is as risk. But I think schools are of critical importance to the community, not just the families who currently have kids in the system. As long as the State inadequately funds our schools but allows local communities to choose to provide adequate funding to their schools, communities should take advantage of that option. It’s a shame they have to navigate State imposed procedural hurdles designed to trip them up. (I haven’t researched the language, but I assume that – just to keep our existing referendum rate in place, we’ll have to put language on the ballot that pretends the rate is not in place, insinuating that voters will see their taxes increase from present rates if the referendum is approved.)

It’s not all doom and gloom though, four communities voted “yes,” to operating referendums: Monroe County Community School Corp., MSD of Southwest Allen County, Southern Wells Community Schools, and Westfield Washington Schools.

 

Pro-tip: Don’t take a homestead deduction in one district and run for office in another.

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I’ve been so focused on West Lafayette school board stuff, that I’ve neglected to follow up on the state’s Secretary of State race. As I’ve said before, you should absolutely vote for Destiny Wells and against Diego Morales. This is not primarily a partisan thing. You’ll notice any number of D v. R races where I’m not going out of my way to publicize a particular opinion. I know plenty of Republicans who think that Morales will particularly be bad for this position. James Briggs, writing for the Indianapolis Star, has a column noting the rumors and the evidence that Morales — running for the top election spot — did not actually live in the district where he was running in 2018.

This struck me because it touched on a running joke in my family. Back in 2018, the kids were on YouTube pretty actively. They were getting absolutely hammered with Fourth District primary campaign ads. Someone who opposed Morales was running ads pretty heavily on that platform such that my kids started joking about it. “Dishonest Diego Morales: He Doesn’t Even Live in Our District.” So, the “doesn’t even live in our district” tagline somehow worked itself into our family’s catalogue of inside jokes. When he became the Republican nominee, I sent a news article  to our family group text. The response was immediate.

Basically what Briggs notes is that Morales was running in the primary for the Fourth District which does not include Marion County where he was taking his homestead deduction. Per Briggs column:

Morales’ record suggests he committed a Level 6 felony by voting in a precinct where he did not live, said Luis Fuentes-Rohwer, an Indiana University law professor who specializes in election issues and provided analysis for me based on available information.

Morales’ version is that he lived in a condo in Plainfield rather than the 4,000 square foot home in Marion County that he and his wife owned. The column is worth a read. Regardless of that, Destiny Wells is the better choice.

West Lafayette School Board: Campaign Finance Reports

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Candidates in Indiana are required to file campaign finance reports at various times of the year. One of them, the “pre-election” report was filed on or before October 20, 2022. I went ahead and compiled the reports for the West Lafayette School Board candidates. Before I offer any commentary, I’ll go ahead and remind everyone that I’ve already recommended that West Lafayette voters would be well-served voting for Karen Springer, Rachel Witt, and George Lyle for the reasons I articulated an in an earlier blog post.

Click for West Lafayette School Board Candidate 2022 pre-election campaign finance reports.

It’s public record, but I’ve redacted the street addresses and phone numbers for the individuals involved who show up on the reports. Some observations:

  • Rachel Witt did not have to file a CFA-4 because her receipts and expenditures were less than $500 — a limitation she imposed on herself at the beginning of the campaign. She had posted a summary of expenditures which I went ahead and included for completeness. She made “Proud of our WL Schools” signs (in the hopes they could serve a non-campaign function in the future) and cut up other old signs and painted them (she’s an artist!) with “Rachel Witt” sign toppers.

 

  • Laurence Wang is the “big” spender (in the context of this race) with expenditures of $3,047.78. The problem is that his report is opaque. I think he maybe didn’t understand the form? As written, it looks like he’s paying himself and no one else which I’m pretty sure is not the case. Unless he’s making campaign signs in his garage, he’d be paying third party vendors who he does not list in his report. The donations and debts also don’t line up with the expenditures. On the income side, he has $400 in donations and $1,189.37 owed to himself (for $1,589.37) but $3,047.78 in spending. It’s the kind of thing that could result in audit findings!

 

  • Karen Springer has spent $2,156.66 on signs, campaign flyers, web design, and web hosting. I’m not sure if I neglected to copy a page or if there were no receipts or debts submitted. If it’s the latter, that would be an error. My presumption is that this is self-funded. If that’s the case, I think candidates are either supposed to list themselves as donating to their campaign or as their campaign being indebted to themselves individually. Also, you’ll see Sumy Designs as the web designer. Long-time readers of this blog will recognize that name from the bottom of my page – my wife is a web designer and also a supporter of Karen, Rachel, and George. (Members of the community will perhaps recognize the name as being splattered on marching band t-shirts and GLRSA soccer teams which Sumy Designs has also supported over the years.)

 

Station break/[Baseball announcer voice]: This blog post is brought to you by Sumy Designs. Sumy Designs, creators of great web sites since 2006. And now, back to our blog post.

  • Dacia Mumford has raised and spent $1,416.64. She lists her donors anonymously as 36 local residents who have contributed $40 or less. (Contributions of less than $100 need not be disclosed). Her sign expenditures (as well as those of Angie Janes) would be less than other candidates because they presumably would have already had signs on hand from their 2020 campaign efforts.

 

  • Angie Janes lists $1,352 in contributions and receipts: $733 in itemized receipts and $619 in un-itemized receipts; along with $733 in debts owed by the committee. The debts say “personal loan from candidate.” Given the specific number, I assume the $733 debt is the same thing as the contribution.The expenditures list $589 in itemized expenses (Angie and Dacia use the same sign vendor and printing company – AGE Graphics out of Little Hocking, Ohio and GotPrint out of Burbank, California) and $149 in un-itemized expenses, leaving $614 cash on hand and that $733 debt.

 

  • George Lyle lists $2,853 in donations and $2,318.48 in expenditures, leaving cash on hand in the amount of $535.27. He lists his small dollar donors (you’ll notice my wife as an in-kind donor of web design services and a $50 contributor) and larger donors alike. His big expenditure was signs, not having them on hand prior to the election, with that expense coming in at $1,647.80.

Given the nature of Indiana’s campaign finance reporting, I think that’s the last peak we’ll get into the candidates’ receipts and expenditures until after the election.

School Referendums, Real Estate Taxes, and Tax Caps

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Idea: Write increasingly obscure and dry posts on local government finance until readers abandon the blog altogether.

This one will probably be a snoozer. But in the course of school board elections, I’ve seen some people get things wrong about the interaction of real estate taxes, tax caps, and the school referendum rate. And, even as I write that, I want everyone to take this explanation with a grain of salt, because I might get things wrong. Here’s your big NOT LEGAL ADVICE disclaimer. I’m going to take West Lafayette as my point of reference, but a lot of this would be applicable anywhere.

Tax Caps

In most cases, Article 10, section 1 limits a taxpayer’s tax liability on residential property to 1% of the gross assessed value of the real estate. However property taxes approved by referendum are not subject to that tax cap. That means, for example, a residential property with an assessed value of $240,000 can’t have a tax bill of more than $2,400 for the year plus additional taxes approved by referendum.

Non-Referendum Property Taxes and Circuit Breakers

A resident in the West Lafayette school district is also in the City of West Lafayette, Wabash Township, Tippecanoe County, the West Lafayette Public Library District, and the Tippecanoe County Solid Waste Management District. Each of these districts has different rates. According to the tax statement I’m looking at for the 2022 tax bill on a property assessed just over $240,000, the taxing units rates are:

  • County – 0.4281
  • Township – 0.0028
  • School – 1.2725
  • City – 0.9120
  • Library – 0.1880
  • Special District – 0.0523 (I think this is the Solid Waste Management District)

All of that adds up to $2.8557 per $100 of assessed value. Now, it’s not as easy as ($240,000 / $100) * $2.8557 = $6,856.80. The $240,000 is your gross assessed value. You have to find the net assessed value to get your tax bill.

The State of Indiana takes a homestead deduction of $45,000 and a “supplemental standard” deduction of 35% (for homes under $600,000 which, in this case is $68,530) off the top of the AV to give homeowners a break. (Some taxpayers will get further deductions for various things, the most common of which would be a mortgage deduction.) In the case of our $240,000 home, those standard deductions give us a net assessed value of $126,470. Multiply that by our $2.8557 and we get $3,611.60. But we’re not to the final tax amount yet! Tippecanoe County has devoted a portion of its income tax to property tax reduction, lowering this particular bill by $314.36, so now we’re at $3,297.24. Compare that to the 1% tax cap of $2,400, and you get a “Circuit Breaker” credit of $897.24, reducing the tax bill to $2,400 (plus any referendum rates.) That “Circuit Breaker” gets allocated to the varying taxing units pro rata based on their tax rates, reducing the tax revenue they would otherwise expect to receive. So, that $897.24 “circuit breaker” credit gets allocated between the School, City, County, Library, etc.

At present, the debt service component of the school’s tax rate is $0.5375 (see below). An issue in the West Lafayette school board race has been the contention that the facilities improvement projects were too expensive. So, for kicks, let’s reduce that a dime to $0.4375 (lower than it’s been since before my college freshman started at Cumberland) and see what happens to our hypothetical tax bill in light of the tax caps and the circuit breaker credits.  Our combined $2.8557 now becomes $2.7557 multiplied times our net assessed value of $126,470 gives us $3,485.13 then reduced by the $314.36 (for the income tax reduction) which takes the bill down to $3,170.77. But, we’re still above the circuit breaker, so the taxpayer’s bill remains $2,400 (plus any referendum rates). The Circuit Breaker Credit has been reduced from $897.24 down to $770.77. What that means is that, because the School’s debt service rate has been reduced, the other taxing units collectively experience a smaller hit from the circuit breaker. The City, County, Library, Township, etc. will get slightly more money even though the taxpayer’s bill remains the same.

Keep in mind that I have been using $240,000 residence as my example. People with expensive homes (and therefore a higher 1% cap), landlords (2% cap), and owners of non-rental commercial properties (3% cap) are going to have a higher tax burden and are more likely to have cause for complaint.

Referendum Rates

As it turns out, West Side’s overall school property tax rate of $1.2725 *does* include a referendum rate. So, let’s look a little closer at the school’s $1.2725 rate. That itself consists of three components. First is the debt service rate which, as I mentioned in a previous post, has more or less stayed steady for that last dozen years at $0.5375 per $100 of assessed value (it got down as low as $0.4913 in 2013). Second is the operations rate which, as it turns out, is $0.365. And, third is the referendum rate of $0.370, most recently approved by the voters in 2017. Because it’s a referendum rate, that last $0.370 isn’t subject to the tax cap, so on our $240,000 home with a $126,470 net assessed value, that rate generates $467.94 in taxes. You add that to the 1% cap and end up with a tax bill of $2,867.94.

The school’s debt service rate can only be used to pay for long term debt obligations. In West Lafayette’s case, that means bonds issued for its buildings. It cannot be used for operations or personal services such as teacher’s salaries. The operations fund is a consolidation of some older funds such as the transportation fund, capital projects fund, bus replacement fund, and a couple of smaller items. It is mainly used for non-classroom expenditures that support school functions. That rate seems to be based on a combination of historical rates which increase based on something called the assessed value growth quotient, an explanation of which is beyond the scope of this particular post. The referendum rate is based on whatever the voters approved. It can be used for any lawful school expense. In the case of West Lafayette, it is not being used for debt service.

The question about how much this referendum money is going to the classroom or to non-classroom expenditures is more complicated for reasons having to do with legislation the State passed in 2019 regulating the Education Fund. The money in the Education Fund comes from the State via statewide sales taxes and is the primary means of paying for teachers. Prior to 2020, I think it was more evident that referendum money was going to funding classroom activities and extra-curriculars. However, the State threw up some road blocks when it comes to transferring more than 15% out of the Education Fund into a school’s Operations Fund. To meet the 85% target on the Education Fund, West Lafayette took some of the Education Fund money that used to go to the Operations Fund (supporting school functions) and left it in the Education Fund for classroom expenditures. It then swapped out some of the Referendum money that used to be used for classroom expenditures and shifted it into the operations fund.

And … now I’m pretty far afield from my original project.  But, hopefully that helps illuminate more than it obscures.

West Lafayette School Board: My Recommendations – Springer, Witt, and Lyle

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Three school board seats are up for election.

I have not been mysterious about who I support in the West Lafayette School Board race. If you live in the district and read this blog, there is a fantastic chance you already know. But I’ll go ahead and be clear that I would recommend folks vote for Karen Springer, Rachel Witt, and George Lyle. There are three seats at issue, and they are all “at large.” So, everyone in the District gets three votes. Karen and Rachel are both incumbents, running for re-election. Alan Karpick, the third incumbent who would otherwise be up for election has decided not to run again. George would be a good choice to fill his vacancy.

I have personal connections with Karen and Rachel. I count them as friends. But a lot of those personal connections started with the School Board. So, it’s not so much that I think they’ll do a good job on the board because they’re my friends. In a real sense, they became my friends because they were already doing a good job on the board. (With Rachel, there are other connections as well — our kids were in the marching band together. More on that in a bit.)

Aside from the personal connection, however, there remains the fact that West Lafayette has the best school district in the state. Let me repeat that: West Lafayette has the best school district in the state. As the man said, “dance with who brung ya.” That’d be Karen and Rachel. New blood and fresh eyes are a good thing, and from that perspective, I think George would be a good choice. He has young kids in the district, a quick mind, an even keel, and no agenda other than a general willingness and desire to do right by the community.

George Lyle

Let’s start with George. I don’t know him as well as I do Karen and Rachel. What I have seen has all been good. Professionally, he’s a lawyer and an works with Purdue’s IT security team. He is a father to young kids with a future at West Side. He is sharp and willing to work with others. He’s got a great sense of humor, a laid back demeanor, and seems able to get along with anyone. With George, I sense a guy who will seek to learn fast but recognizes what we have in West Lafayette and will proceed with caution in those areas where he is still learning. George would bring a fresh and different viewpoint to the board. As a white guy, I can’t talk much about race without getting it wrong, but representation does matter. There was so much discussion around diversity back during the 2020 election that it’s a little odd that George’s background and perspective hasn’t received more attention. As a friend put it, “he has a diverse educational and experiential background, cares for the community and for students, and I think he’d be an asset to the board.” On his website, George emphasizes that “every student should have the opportunity to see where their talents can take them, no matter what those talents might be.” That’s a valuable point of emphasis for a place like West Lafayette which has a reputation for being rough on students who don’t fit a particular mold.

Karen Springer

I know Karen quite a bit better. She has been on the board for a long time now, serving from 1996 – 2004 and 2006 to the present. I started getting to know her when I was briefly on the Board in 2015 and 2016. Karen has helped West Lafayette navigate a lot of ups and downs: the backlash to decisions about remodeling the junior-senior high school, the firing of Stella Batagiannis and her subsequent lawsuits against the school, the State’s takeover of school funding, the State’s subsequent slashing of public education funding in 2010 in the wake of the Great Recession, two school referendums, the rise of vouchers and charter schools, the pandemic, and so forth.  West Side’s present strength owes a great deal to Karen. I helped out with a policy review committee over the course of several years where we did a decennial review of all of the School Corporation’s policies and put them online. Karen’s institutional knowledge, consistent preparation, and attention to detail is remarkable. She is a pleasure to work with. She volunteers for the community in any number of ways: Global Fest, Food Finders, the Tippecanoe County Public Library, and Music Boosters, among other things. Finally, she received the 2022 Outstanding Boardsmanship Award from the Indiana School Board Association indicating an extraordinary level of respect on the state level. She is a real asset for the school and our community.

Rachel Witt

Of the candidates, I know Rachel best. We have kids of a similar age with similar interests, and our paths have crossed in any number of ways over the past decade.  With respect to her service as a school board member, I’ll observe that knowledge of state and federal education law, municipal finance, and all of the rest of the bureaucracy that goes into running a school is not something you are born with. Serving since 2014, Rachel has diligently built up that foundation to complement what I already regarded as her strength in terms of knowing the ins and outs of how the school looks to parents and students on the ground. She has brought several children up through the ranks of West Side with abilities, interests, and needs that — from what I can tell — have run the spectrum. In a community that’s chock-a-block with professors, it’s good to have Rachel’s perspective as a single mom who is the art programming coordinator at Westminster. My experience is that Rachel often sees issues and concerns for students and parents of which I am, frankly, oblivious (until she points them out.) That’s the type of synergy that complementary perspectives create. It’s not something you get by combining similar or antagonistic perspectives. A few weeks ago when I recommended “voting for the builders,” Rachel is one of the people I had in mind. This is true literally — she was a key driver in the design and construction of a 20 foot tall horse for the Sound of West Side’s State Fair marching competition. But it’s also true in the metaphorical sense — she is always contributing to the schools, helping with seemingly every play, involvement with marchathons, turning lockers doors into book spines, etc. etc.

The remaining candidates

As for the other candidates, I don’t see a need to go on at length or in public about my reservations. I’ve already mentioned my concern about Laurence Wang supporting charter schools and the Indiana General Assembly’s proposals that teachers post curriculum a full year in advance and restricting teacher’s ability to teach “divisive concepts.” From what I’ve heard at public forums, he also seems to be making more of a set of SBOA audit findings than the circumstances warrant. I think Mumford and Janes have overstated their claims about the school’s financial state, and while speaking about “transparency,” they have been coy about their use of a Facebook group, ostensibly a “community forum,” and related web page as campaign tools. The Facebook group, in particular, has been corrosive.

If your mind is made up or you are friends with someone I’m not recommending, go ahead and disregard this. But, if you’re still persuadable, I definitely think West Lafayette Schools will be well served if you vote for Springer, Witt, and Lyle. Also, tell your friends. This election is important.

West Lafayette School Board: About that Audit Report

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Is all of our money gone? No. No it’s not.

“Ok Doug, ” says the voice in my head, “you told me not to panic about the bonds used to finance school improvements. But what about that State Board of Accounts Audit? An audit is pretty bad, right? $7 million off the books?? Lack of internal controls??? School board members are just stuffing wads of bills into their pockets, right?!?!”

Fine, that last one is a complete straw man that I made up. But people are spooked. The short answer is that nobody likes audit findings and there were things that needed to be fixed, but there is no indication that there was any substantive harm to the school because of the issues that needed to be corrected.

The School was audited because every political subdivision is audited all the time.

So, why was the school audited in the first place? Because all political subdivisions are routinely required to be audited. I looked at the SBOA’s audit database and it looks like they issued 43 audit reports for various political subdivisions in the state over the course of two days in October. Point being that every unit of government is being audited by the State pretty much all the time.

$7 million of the total bond proceeds were put into a School construction account; the remaining bond proceeds were put into a Building Corporation construction account. All of the money was used for construction. The School construction account should have been reflected on the School financial statements rather than the Building Corporation financial statements.

What happened to that $7 million? Nothing. It was put in a construction account just like the rest of the bond money in 2017. For reasons I’ll explain in more depth later, $7 million was put in a school construction account and the remainder was put in a building corporation construction account. This was proper. However, the school had the mistaken belief that the $7 million school construction account should show up on the Building Corporation financial statement along with the reset of the bond money. So, disclosure here: I’m getting out in front of my skis a bit. I’m reading the school’s response to the audit report (included in the document linked above) and my own experience with municipal bond issues. I have not talked to anyone at the school about this, and I am not an accountant. Also, this requires some background, so bear with me.

Back in 1836 (not a typo, and yes I’m serious), Indiana adopted the Mammoth Improvement Act. The young State got in way over its head borrowing money for roads, canals, and railroads. Andrew Jackson’s fight with the Bank of the United States helped trigger the Panic of 1837 which wiped out a lot of the economy. Indiana got hit particularly hard. The Mammoth Improvement initiative fell apart, and the finances of Indiana were strained for a generation. The Constitution of 1851 restricted the ability of Indiana to take on debt. However, there was a need to take on debt to build capital assets, so by at least 1920 an artifice had arisen by which the political subdivision itself did not take on the debt. Rather, a municipal building corporation would be created to receive the money and guarantee payment to bond holders. The municipal corporation would own the improvements built with the bond money, and the unit of local government leases the improvements from the municipal corporation. The lease amount is enough to cover the bond payments. The lease payments are funded with real estate taxes. I have no idea if this was considered financial chicanery 100 years ago, but it is absolutely standard operating procedure in Indiana — codified and blessed by the Indiana General Assembly. When the bonds are paid off, the lease agreement concludes and the land and improvements are transferred to the unit of local government.

“Thanks for the history lesson, Poindexter. Do we have any information about the $7 million in our future?” I’m getting there.

So, West Lafayette wants to build a new school. The Building Corporation is going to own the improvements it constructs using the bond money, but until something else happens, the School owns the land underneath and existing improvements where Burtsfield is located. For reasons I can speculate on but don’t know (e.g. the Burtsfield gym was being incorporated into the new improvements?), West Lafayette is going to transfer this land to the Building Corporation so that the Building Corporation owns both the land and the improvements. So, the school gets the land appraised for $7,444,000, and when the $47 million in bond money comes in, $7.4 million of it goes into the name of the School. The rest is deposited in a Building Corporation construction account. I think both of the accounts were placed with Huntington Bank in escrow agreements that were probably identical, and the terms of both escrow accounts (at the demand of the bond issuer, I’m sure) both dictate that all of the money be used for nothing other than construction costs. Construction draws on both of these accounts were handled the same way except that, I presume, the School Board approved draws on the school construction account while the Building Corporation board members approved draws on the building corporation construction account. Ultimately, the question is, how should the $7 million be reflected on the various financial reports? State Board of Accounts said that the School got it wrong.

When responding to the State Board of Accounts audit finding, the School said that it believed that it was required to hold the $7 million in a separate account from other school funds to track it for federal tax purposes. (Municipal bonds get certain tax breaks which come with strings attached.) Because it was being held in a special account and could only be spent in the same way as other construction funds, the School mistakenly believed that these funds had to be reflected on the Building Corporation financial report and not reflected on the School’s financial reports. This caused problems with the School’s books, however, because draws on the School’s account were approved by the school board as part of the monthly Accounts Payable approval.  So, on the School’s end, you have payments approved, but the payments are coming from an account that is not, itself, listed on the School’s financial sheets. (Meanwhile, in a parallel process, the Building Corporation will have draws on its own $40 million construction account approved through its own claim approval processes. I’m guessing they had their own error – with the $7.4 million being drawn down but no corresponding claim being approved by the Building Corporation).

That’s a long way to go, but ultimately, the $7 million should have been reflected on the School’s account and not the Building Corporation account. You can say there are “two sets of books” and be technically accurate, but blame the Mammoth Improvement Act. The two sets of books are there for a reason and it’s not nefarious.

Aside from the construction account issue, the internal control finding had mostly to do with documenting training attendance.

“But you have to have internal controls, right Doug? People are going to rob the school blind without internal controls.”

I mean … yes. But, not all internal control problems are created equally.The State Board of Accounts describes controls as follows:

Control activities are the actions and tools established through policies and procedures that help to detect, prevent, or reduce the identified risks that interfere with the achievement of objectives. Detection activities are designed to identify unfavorable events in a timely manner whereas prevention activities are designed to deter the occurrence of an unfavorable event. Examples of these activities include reconciliations, authorizations, approval processes, performance reviews, and verification processes.

If you have the same person opening the envelopes, recording the deposits, writing the checks and balancing the books, sooner or later you’re going to have a bad time. But, in the case of the $7 million, the School was aware that it was approving claims being drawn on an account reflected on the Building Construction financial sheets. They just thought it was the right thing to do. So, in this case SBOA considered the error to be a problem with internal controls, but I’m not so sure. But I think it’s fair to call it a reporting error.

There was another “internal control” problem having to do with the School not retaining training records in 2019-2020 and not conducting the annual training due to COVID during 2020-2021. The State requires employees to take annual training on the school’s internal control standards. I think these days, that training consists primarily of going through a computer module every year. The School is required to submit a certification to the State that this training has happened and retain proof of the training. For the year 2019-2020, the School reports that during that year, the annual practice was for Central Office to meet with the school secretaries (who presumably handle whatever money goes through at the building level), go over the internal control and policies at the building level including cash management expectations. They have attendees sign a copy of the agenda at the meeting. In 2019-2020, the School apparently didn’t retain the signed sheets and, so, got dinged for the lack of paperwork by SBOA. In 2020-2021, COVID set in, and no such training took place. The school filed the form or checked a box in the State’s system or something saying that the training had happened, so the School got dinged again. Going forward, the School indicates that it is using training software that will track attendance.

[Edited to add: I had intended to add some links to several other SBOA audit reports that cite internal controls. Browsing around the other day, I know I found one for Purdue and think I recall seeing one for TSC. Point being that the concept of internal controls covers such a wide range of potential issues, it is not something uncommon to see. Again, you want to make them stronger. But, this report does not suggest that West Side has internal control problems that are anything like unique.]

There was a contract employee who had a contract indicating that he or she was only supposed to work eight days per month. The employee ended up working more days than that during several months. Finally, there were bookkeeping errors having to do with how certain software recorded transfers between accounts and from the School giving Form 9 (which excludes Clearing Funds) to the Auditors rather than giving the Auditor Form 13 (which includes Clearing Funds.) No, I am not familiar with those forms.

So, now I’ve written upward of 1,700 words that almost none of the voting public will read wading through the minutiae of the State Board of Accounts audit finding. That took time and effort, and the conclusion is – there is some stuff there that had to be fixed, but there’s no money missing, there were people minding the store, and anyone suggesting that the School lost millions of dollars due to poor internal controls is badly misinformed. But it’s so easy to erode trust by carelessly jamming together words like audit, millions, dollars, and internal controls while expressing grave concern. So, be careful out there!

DON’T PANIC (about school finance)!

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One thing you’re looking for in an elected leader is steadiness and the ability to differentiate between a bump in the road and a cliff. If it’s a cliff, maybe you risk steering the car into the ditch to avoid it. If it’s a bump in the road, you’ve just wrecked the car for no good reason. In a complicated world, it’s easy to alarm the public and undermine valuable institutions through careless rhetoric. This is true even where the rhetoric is well-intentioned. Intemperate claims are all the more tempting in the middle of a political campaign or in the quest for clicks and eyeballs.

Should we panic?

Like a Lannister, West Side always pays its debts.

Which leads me, as all things do these days, to the West Lafayette School Board campaign. Claims are being made that West Side is drowning in debt. Its finances are precarious. Every student owes $40,000! We’ve lost $50 million because the school has no financial controls! The more extreme claims are not from candidates themselves, but rather social media reactions from people who have been spooked by less inflammatory but still overheated campaign rhetoric. We have debt to be sure. We built a new elementary school, renovated another elementary school, constructed a science wing, constructed a performing arts center, replaced a failing pool in a way that opened up space in the high school, and constructed a new aquatic center. Turns out those aren’t free. But we aren’t drowning. We’re strong swimmers (I just mentioned the aquatic center).

Overview

The short version is that in the first half of the 2010s, West Side was getting close to retiring bonds for construction from building we did in the 90s. The school developed a priority list of building projects it wanted to complete. Back in 2016, the school corporation’s debt service tax rate of $0.5375 per $100 of assessed value (are you asleep yet) could sustain a debt burden of about $50 million. The old debt was about to be retired, the school corporation had building needs, and the school wanted to do as much as it could while maintaining a steady tax rate. In the years since 2016, West Lafayette’s assessed value has gone up so that the school corporation is able to assume more than $50 million debt without raising the tax rate. Ultimately, the school borrowed quite a bit more than $50 million, kept the tax rate steady, and was able to get deeper into its priority list. The candidates trying to knock out the incumbents are looking to make hay out of the school spending more than $50 million — which is fair game — but they’re doing it by steadfastly ignoring the tax rate and intimating that the school is on the precipice. Not incidentally, this is the same argument made unsuccessfully during the 2020 campaign. (I wrote a blog post addressing many of those issues* as part of my own 2020 campaign — which was also unsuccessful, I’m sad to say.) Back then, as I recall, they were saying that the school was going to run out of money in 2022. The school’s municipal building corporation — something standard in Indiana municipal finance — was characterized as a “shell corporation” which tells you that generating heat was at least as important as generating light with that campaign rhetoric.

In 2016, the Capital Improvement Program had three related but independent variables: Project list, tax rate, and overall price.

I served on the school board for a year or so filling out someone else’s term in 2015-2016 and was part of the vote in 2016 that resulted in the issuance of about $47 million in bonds. Minutes from October 2016, reflect the priority list, the $50 million, and the $0.5375 tax rate. Quote from those minutes:

If bids come in over $50 million, then the administration will set priorities based upon the following criteria:
1) New elementary school at Burtsfield
2) Additional classrooms, internal systems’ improvements (HVAC, plumbing, etc.), media center/cafeteria improvements at Cumberland & Jr/Sr HS (includes Jim Guy Wing)
3) Aquatic center – Jr/Sr HS; external components at Cumberland
4) Performing arts center – Jr/Sr HS; Early Childhood/Kdg. Center – old HH site
5) Straley Field (athletic improvements)
The administration believes that in the coming years WLCSC’s A/V will dramatically increase. So the same debt service tax rate that now generates just under $50 million will generate additional revenue in 2018 without increasing the debt service tax rate. If this holds true, additional bonding can occur without increasing the school district’s tax rate.

(Emphasis added). Given the actual construction prices for these projects, I don’t think getting through that entire list was realistically on the table for $50 million.  My sense is that, at the time, the folks involved thought we’d be able to get further than we did. But, for example, I don’t think anyone was seriously talking about being able to improve Straley Field back then or being able to build a new early childhood center at Happy Hollow without funding sources other than that original round of debt. There may have been hope that we could get some of the high school renovations done through a combination of lower construction costs and private donations. For my own part, I recall having the sense at the time that I’d be inclined to skip the aquatic center if construction prices forced us to choose. Then I lost the 2016 election and that became someone else’s decision. Also, as it turned out, getting rid of the old pool was part of the plan to open up more academic space, so ultimately the decision was not as simple as “pool or no pool.”

After 2016, the assessed value in the school district grew, allowing the same tax rate to sustain a higher overall price and allowing the school to accomplish more on its project list.

In any case, part of the discussion getting lost in the current election rhetoric is that, even according to the October 2016 minutes, the calculation was that the tax rate would support a debt burden of $50 million but also, the school anticipated that assessed valuation would go up and support additional debt without raising the rate. Since 2016, the school has, in fact, issued additional debt  supported on the $0.5375 debt service rate and, with the additional money, the school worked its way down the priority list. It also bears mentioning that decisions made in 2015 and 2016 are not cast in stone. In the intervening years, we’ve had new elections, new board members, new challenges, and new decisions. Schools, like any other organization, adjust and adapt.There’s nothing inherently wrong about deciding that maintaining the tax rate and getting further down the priority list was more important than sticking to a price point that wouldn’t provide the schools with the facilities they need.

According to a Winter 2021 update from the school, the amount of debt ultimately issued was $83 million. Bonds were issued in 2017 ($47 million), 2018 ($15 million), 2019 ($15 million), and 2020 ($7.5 million). According to that same Winter 2021 update, the new elementary school (grades 4-6) came in at $29 million, renovations to our K-3 facility came in at $15 million, the Aquatic Center and Cafeteria came in at $12 million, James R. Guy Academic Wing (our new STEM area at the high school) came in at $13 million, the Bob Kelly Performing Arts Center came in at $8 million, and stair tower/second floor classrooms at $1 million. That’s $84.5 million in bonds and $78 million in construction. I think there is some bond money left over and there may be other renovations I have missed.

Growth in West Lafayette and Tippecanoe County is strong. The increased assessed value and a steady tax rate are adequate to support West Side’s bond payments.

The school’s September 2022 fiscal plan, reflects that revenues from the existing debt service tax rate will continue to meet bond obligations.The take aways: we spent more than $50 million, the tax rate has remained steady, we are financially stable, and we have good facilities for our students. And let’s not minimize that last point. We got something for our money. Adequate facilities are important to education and to the community. The candidates criticizing the expenditures were doing so at a candidate forum held in a room built with that money.

Predicting the future is fraught, but growth in West Lafayette and Tippecanoe County is strong. All indications are that assessed value will increase in our school district — in part because people want to move here because we have good schools with good facilities — and that rate will generate more revenue than the bond obligations require. Meanwhile, the existing bonds were obtained at favorable rates and, while in recent years, construction costs have escalated, it’s anyone’s guess whether they will decrease any time soon. In other words, the time to act on the improvements that West Side needed was in the past few years. Waiting likely would have made the process more expensive.

Debt Service revenue is not available to pay teachers or fund other operational costs.

The way the tax caps work in Indiana, spending less and reducing the school’s debt service tax rate below $0.5375 probably wouldn’t reduce taxes for most people, at least not on residential property with a 1% cap. (Landlords and owners of more expensive homes may have a beef, however.) For residents with less expensive homes, reducing the school’s debt service rate would mainly just mean that more of the money under the 1% cap would go to the other taxing units in the school district (e.g. city, county, library.)

Finally, the commentariat makes the predictable suggestion that we could spend more on teachers or other operational costs if only we had not wasted so much money on facilities. That’s not how these funding sources work.  The education fund and the debt service fund revenues come from different sources, so money not spent from the debt service fund could not be spent on teachers or other operational costs.

That’s my take on the situation anyway. I took the hint from my last run and am not on the ballot, so you don’t even have to vote for me!

West Lafayette School Board Race: Support for “Transparency” and “Divisive Concepts” Legislation

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I went with the General Assembly image because a picture of a turd in a punch bowl would be gross.

Cast your memory back, gentle reader, to February of 2022. In some ways, it was a simpler time. Reproductive rights were still mostly legal in Indiana. Russia mostly had not invaded Ukraine. And pretty much every person I knew who was involved with the educational system in West Lafayette agreed that HB 1134 concerning “transparency” was a terrible idea.

I know I’ve been critical of the General Assembly for its approach to educational policy over the years, but its really outdoing itself with the fire hose of shit it’s directing at our local schools this year.

The biggest turd in the punch bowl is HB 1134. Let’s start with its “transparency” requirements. (Transparency is good, right? Can’t be against transparency any more than you can be against God, Mom, and Apple Pie!) The new IC 20-30-17 requires school corporations to post a ton of curricular material for classes in the August preceding the school year. I’m not sure you can tell exactly what’s required because, IC 20-30-17-5(b), which really seems like it’s going to be the critical bit of that chapter does not seem to be written in a complete sentence. Not later than August 1 of each year, the school corporation is required to post, in a manner that is disaggregated, in a manner that is accessible, and in a manner that shows bibliographic information, …. something. It’s not clear what. The next subdivision says that a summary of educational activities (which is a broadly defined term) has to be posted as far in advance as possible, but it’s not at all clear what has to be posted by August 1. In any case, this is just another administrative burden heaped on the shoulders of teachers and administrators that is extremely unlikely to have any real world benefits. If a parent has questions about their kids’ education, how about just asking?

A similarly misguided effort at transparency or parental input or some other glittering generality would mandate a “Curricular Materials Advisory Committee.” Right out of the gate, it’s clear that the advisory committee has no jurisdiction over standardized tests. That could obviously cut into the College Board’s bottom line, and that just wouldn’t do. The advisory committee is directed to have more parents than educational professionals and to have a majority of people who don’t work for the school corporation. The advisory committee is charged with making sure educational materials “are representative of the community’s interests and aligned with Indiana academic standards.” Most communities have a wide variety of interests that sometimes conflict with one another, so that’s not terribly helpful guidance. They also will make recommendations about how to comply with the incomplete sentence about posting curricular materials.

Then there is the “CRT” inspired provisions that I discussed in an earlier blog post. All sound fairly inoffensive taken on their face (e.g. no one should be taught or forced to embrace the idea that a person can be racist simply by virtue of their race). But it’s more than suspicious that these bills are reactive to efforts to teach, for example, that racism has resulted in structural inequality that persists regardless of anyone’s individual intent. Politically, I think the right has deemed it advantageous to take advantage of a panic among parents that little Johnny might be taught to believe that he should feel guilty about being a racist because he’s a white boy. Regardless of the underlying substance, I’m on record as not liking the General Assembly dictating curriculum. Additionally, there is a provision that would create an incentive to bring suits by awarding attorney’s fees to a prevailing plaintiff (which could be an out of district advocacy group) while not awarding such fees to a school that successfully defends against a suit. (To get fees, the school would have to prove that the out of district advocacy group or whoever was litigating in bad faith — which is a very heavy lift.)

Finally, there are provisions limiting a school’s ability to provide social-emotional support to students. Candidly, I do not understand the nuances of these provisions. I don’t know the support services and recommendations schools are currently providing, how they are objectionable, and what schools would be permitted to do in terms of addressing social emotional problems that are affecting the students’ educational progress if this legislation passed. Friends of mine seem to indicate that this is sparked by questions of sex and gender.

One of our local journalists, Dave Bangert (whose Substack I would recommend to anyone in Tippecanoe County) asked the six candidates for the West Lafayette School Board their opinion.

Question: The Indiana General Assembly debated a pair of bills in spring 2022 that would have provided more oversight of classrooms, including asking teachers to post lesson plans at the start of the year so parents could review them and limiting how schools teach what were termed “divisive concepts.” Do you back those proposals. Why or why not?

Laurence Wang: Those proposals make sense to me. Communication and information sharing are two major ways to improve classroom transparency. Parents are ultimately responsible for their children’s education. When parents are more comfortable with what their children are taught in classroom, they will be more willingly to send their kids to our school. I believe classroom transparency will help WLCSC’s enrollment.

(Emphasis added). Perhaps not incidentally, Wang was also one of those who expressed support for charter schools. So, I differ strongly with him. Also, the idea that West Side’s enrollment is suffering because teachers are not posting their curricular material in August strikes me as not aligning well with the available facts. I’d say our biggest challenge in that regard is that we are landlocked. Unlike, say, our neighboring Tippecanoe School Corporation, there aren’t any cornfields waiting to be turned into subdivisions that will add more students. And, not for nothing, but teachers hated HB 1134 with a white hot passion. If you want to see teacher retention plummet, start embracing those sorts of policies.

West Lafayette Schools: Vote to Re-Elect Karen Springer, Winner of the 2022 Indiana School Board Association “Outstanding Boardsmanship Award”

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Re-Elect Karen Springer to the West Lafayette School Board

Continuing my advocacy for the West Lafayette Schools, a quick post to anyone paying attention that you should vote to re-elect Karen Springer to the board of the West Lafayette Community School Corporation school board.  It was recently announced at the Indiana School Board Association’s Fall Conference that Dr. Springer is the 2022 winner of the ISBA Outstanding Boardsmanship Award. Karen has done great work for the West Lafayette schools, and its fantastic to see her get recognition for that work not just locally, but state wide.

Our district has the best schools in the state. Niches.com released its 2023 rankings. West Lafayette is ranked the number 1 district in the State and number 8 in the nation. It is ranked #1 in the State as a place for teachers.  Karen is part of the reason. She and the school board have hired superintendents and administrators who, in turn, have managed the school in a way that has allowed the school to provide an environment where teachers can teach and students can learn.

As many of the readers here know, I filled a vacant Board seat in 2015 and 2016. During that time, Dr. Springer served as an outstanding mentor, happily and effectively answering any questions I had. Since 2017, I’ve had the opportunity to work with Dr. Springer more closely as a citizen member of the school corporation’s policy review committee. (My utility to the committee had more to do with my legal drafting skills than my policy sensibilities, I think.) Initially, the committee undertook a comprehensive review of all of the school’s policies, which then served as the basis for recommendations to the Board as to amendments. Following that, the committee met periodically to review existing policies as laws changed or the need otherwise arose. Dr. Springer’s institutional knowledge and meticulous attention to detail were and are invaluable. She had been through a similar review process a decade earlier and was able to provide insights from that experience. This is not glamorous work, but it is important work of the type which Dr. Springer performs diligently. And, obviously, that policy review process is just one small slice of the kind of thing that she is called upon to address as a member. Her steady service through the school corporation’s highs and lows has served the corporation well during the last several years which have been more turbulent than usual. During these times of passionate public interest, Dr. Springer has been able to respond in a manner that has been calm, reasoned, informed by experience, patient, and, where necessary, firm.

Dr. Springer has helped the school navigate so much — the Batagiannis superintendent drama, the state’s slashing of education funding in 2010, passing 2010 and 2017 local school referendums in response, and hiring quality superintendents, just to name some high profile stuff. Frankly, when a school board is working well, you never hear about the work they are doing. And, I can tell you, when it was time to drum up support for renewal of the referendum in 2017, Karen was there putting in the work to help it succeed. She wasn’t just passing the necessary resolutions for the board, she was helping with canvassing efforts to ensure public support.  She’ll be there again in 2024 when it comes up again.
West Lafayette voters get three votes for school board. If you like our schools, keep a good thing going, and cast one of them for Karen.

West Lafayette’s Karen Springer receiving the 2022 Outstanding Boardsmanship Award from the Indiana School Board Association at its Fall Conference for her work with the West Lafayette School Board.