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THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY FOR PUBLIC SCHOOLS IN INDIANA A DISSERTATION SUBMITTED TO THE GRADUATE SCHOOL IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE DOCTOR OF EDUCATION BY J. SCOTT BOWLING DR. LORI BOYLAND – ADVISOR BALL STATE UNIVERSITY MUNCIE, IN MAY 2017 THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 1 ABSTRACT DISSERTATION: The Impact of Property Tax Caps on Funding Equity for Public Schools in Indiana STUDENT: J. Scott Bowling DEGREE: Doctor of Education COLLEGE: Teachers College DATE: May 2017 PAGES: 112 In 2008, the state of Indiana implemented a system to limit the amount of property taxes paid by various constituents. Residential property taxes were capped at 1% of assessed value. Agricultural and commercial property was capped at 2% of assessed value. Business property was capped at 3% of assessed value. The caps caused varying losses of tax revenue across the state for units that relied on the property tax as a source of revenue (Bradner, 2010). School corporations lost revenue as a result of the caps, but the losses were not uniform across the state (Indiana Department of Local Government Finance, 2015b). Some districts lost very small dollar amounts and some lost so much money that boards had to consider eliminating their entire student transportation system (Starks, 2014). This study sought to examine the relationship of these differential losses across an array of school corporation characteristics, including: student enrollment, district property wealth, location type (rural, urban/city, suburban), the percentage of English learners served, the percentage of special education students served, the percentage of students who received free or reduced priced lunches, and the percentage of nonwhite students served. The results of this study indicated several important relationships. Significant positive correlations were found between the amount of revenue lost due to property tax caps and the THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 2 following factors: student enrollment (r = 0.696), the percentage of English learners served (r = 0.322), and the percentage of nonwhite students served (r = 0.576). The findings of this study were discussed and ideas for future research in this area were suggested. THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 3 Dedication First, I want to thank God for guiding and directing me towards a career in education. When I was younger, I turned away from what my heart was telling me: that a life that was just about me and not about caring for others was ultimately devoid of deep meaning. I am so glad that my faith ultimately moved me in the right direction. I also want to thank Kelli Bowling, my beautiful and intelligent wife. Going through the process of completing my education in the midst of raising three small children and through several major career changes for both of us has been the greatest challenge of my life. I could not have done it without her support, encouragement, and love. I owe Kelli a debt I can never repay, and I am so appreciative of her dedication to our entire family. Lastly, I would like to dedicate this work to my children, Elizabeth, Thomas, and Caroline. I have told you before that there is no feeling on earth that can compare to watching your child succeed in their endeavors. Even at a young age you each have given me that gift time and again by excelling in your academic work, by giving your best effort in sports, by writing a beautiful essay, by delivering an outstanding performance, or, most importantly, by caring for others. I hope my work on this project will encourage you to set and reach big goals in whatever direction life takes you. THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 4 Acknowledgements I would like to acknowledge my parents for their lifetime of support. They never failed to find a way to fund and believe in my aspirations, even when I did not appreciate it. They have always been my biggest cheerleaders. I would also like to thank my grandmother Lucille Snow for the support that she provided for me before she passed away in 2005. She never failed to mention the importance of education as I was growing up. She believed that it was the key to living a full and productive life, and she instilled this value in me from a very early age. I always think of her and her encouragement whenever I achieve a milestone in my life. I cannot thank Dr. Lori Boyland enough for her steadfast support of this project. She never gave up on me, even when at times I was ready to give up on myself. In addition, Kianre Eouanzoui provided critical support under a tight timeframe, for which I will be forever grateful. I would also like to thank my entire committee, Dr. McKinney, Dr. Quick, and Dr. Hall, for their time and input on this research. Lastly, I would like to acknowledge the school board members and administrators that have guided and mentored me throughout this process and my administrative career. Crawfordsville is a special place where the importance of education has been held as a primary value for well over one-hundred years. I was always encouraged and supported by the school community throughout this process. Their belief in me is humbling. THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 5 Table of Contents ABSTRACT……………………………………………………………………….. 1 DEDICATION…………..………………………………………………………… 3 ACKNOWLEDGMENTS………………………………………………………… 4 TABLE OF CONTENTS…………………………………………………………. 5 LIST OF TABLES………………………………………………………………… 7 LIST OF FIGURES……………………………………………………………….. 8 CHAPTER 1. INTRODUCTION………………………………………………………... 9 Statement of the Problem………………………………............................ 10 Purpose of the Study….………………………………….......................... 10 Significance of the Study………………………………………………… 11 Research Questions………………………………………………………. 11 Delimitations……………………………………………........................... 12 Definitions……………………………………………………………….. 12 Summary…………………………………………………………………. 13 2. REVIEW OF LITERATURE……………………………………………. 15 Overview………………………………….……………………………… 17 Early History of School Funding………………………............................ 17 Major Lawsuits Drive Equity Issues in School Funding…..…………….. 19 Previous Equity Studies……………………………………….…………. 24 Does Money Matter…………………….………………........................... 24 Property Taxes and School Funding Equity……………………………... 26 Policy Issues Related to Funding Inequity………………………………. 30 School Funding in Indiana………………………………………………. 31 Indiana’s Foundation Program…………………………………………... 33 An Overview of the Fund Accounting System in Indiana……................. 34 2008: Monumental Shift in School Funding and the Advent of Property Tax Caps……………………………………………………………….... 36 3. RESEARCH METHODOLOGY……………………………………….. 38 Purpose of the Study…………………………………….......................... 38 Research Questions……………………………………………………… 39 Research Design………………………………………………………… 39 Description of the Sample………………................................................. 40 Data Collection and Analysis…………………………………………… 40 Limitations of the Study……….………………………………………... 40 Summary………………………………………………………………... 41 THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 6 4. RESULTS AND DISCUSSIONS…………………….………………… 43 Data……………………………………………………............................. 44 Findings Related to the Research Questions……………........................... 89 Research Question 1……..……………………………………………….. 89 Research Question 2……………………………………………………… 92 Research Question 3……………………………………………………… 94 Cross-correlational Results……………………………………………….. 96 Summary………………………………………………………………….. 98 5. SUMMARY AND CONCLUSIONS ………............................................ 99 Summary of Study……………………………………………………….. 99 Findings and Discussion…………………………………………………. 100 Research Question 1……………………………………........................... 100 Research Question 2……………………………………........................... 101 Research Question 3……………………………………........................... 102 Conclusions……………………………………………………………… 103 Recommendations……………………………………………………….. 105 Further Research…………………………………………………………. 106 Summary………………………………………………………………….. 107 REFERENCES……………………………………………………………………. 109 THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 7 List of Tables Table 1: Total Enrollment……………………………………………………… 44 Table 2: Property Tax Cap Losses…………………………………………….. 52 Table 3: Assessed Valuation Per Pupil………………………………………… 60 Table 4: Property Tax Levy Per Pupil…………………………………………. 67 Table 5: Classification of School Corporations as City/Urban, Rural, and Suburban………………………………………………………………………. 75 Table 6: School Corporations that Received Protected Debt Service Waiver… 79 Table 7: Student Demographic Data…………………………………………… 82 Table 8: Percentage of Schools Receiving Protected Debt Waiver……………. 92 Table 9: Cross-correlation of Key School Characteristics……………………. 97 Table 10: Summary of Property Tax Cap Loss Correlations……………………. 100 THE IMPACT OF PROPERTY TAX CAPS ON FUNDING EQUITY IN INDIANA PUBLIC SCHOOLS 8 List of Figures Figure 1: Scatter Plot Comparing Property Tax Cap Losses and Student Enrollment……………………………………………………………………... 90 Figure 2: Scatter Plot Comparing Property Tax Cap Losses and Student Enrollment…………………………………………………………………….. 91 Figure 3: Scatter Plot Comparing Property Tax Cap Losses and Property Tax Levy Per Pupil …………………………………………………………… 92 Figure 4: Percentage of Schools Receiving Protected Debt Service Waiver

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