The future of Indianapolis Public Schools could hinge on whether voters approve a tax increase proposed not by the district’s elected school board, but by a new corporation with appointed members.
The Indianapolis Public Education Corporation, or IPEC, is slated to take control of several aspects of the district’s finances as soon as April, under state legislation passed last month. That bill gives the corporation, not the IPS school board, the power to put a proposed tax increase on the ballot. The corporation’s members must first be appointed by the mayor.
IPS’s current operating referendum, which voters approved in 2018, expires this year. The district already projects ending this year with a $40 million cash deficit, and by next year will have entirely depleted its reserves, according to IPS documents.
In other words, without that voter-approved funding, the district will be out of money by 2027, producing consequences that could range from staff layoffs to school closures.
Although IPEC could decide not to put a tax referendum to voters, observers have not expressed fears about that possibility. Declining to propose one could also undermine the corporation’s other work related to operations for district and charter schools. In creating IPEC, lawmakers also outlined specific ballot language that IPEC must use for a referendum.
While some recent developments in the state’s fiscal climate could make voters less inclined to approve the referendum in November, others could make its path easier.
In a statement, IPS said that it is committed to “critical collaboration” with IPEC.
“We have a great sense of urgency to promote the stability for all students in the IPS boundary through this transitional period,” the district said.
Mayor Joe Hogsett has until March 31 to appoint IPEC’s nine members, who in turn will have four months to place a referendum question on the November ballot.
One factor that might aid a November tax referendum is that, for the first time, local charter schools that enroll students living within IPS borders can opt into receiving money from it. That shared interest could help IPS and the charter sector work together, which has often proven very difficult recently.
“IPS and the charter schools may be fighting it out, and IPS may not like having to turn the money over. But once the referendum is on the ballot, the charters and IPS go for it,” said Larry DeBoer, a professor emeritus at Purdue University who specializes in tax referendums. “Even if they don’t like each other, they’re on the same side.”
IPS finances struggle after years of extra support
Recent property tax relief is projected to leave IPS and government entities statewide with less property tax revenue than they would have otherwise collected.
That tax relief lawmakers passed last year will reduce the district’s local property tax base by 1.9% annually through 2031, according to the district. Although the referendum’s odds of success might benefit from charters’ support of it, charters would also benefit from revenue that in past years would have gone to IPS.
All that could lead IPEC to propose an operating referendum that is more expensive than the current one, which added roughly 19.6 cents in taxes per $100 of assessed value.
The last time voters approved a referendum to fund district schools with 72% of the vote, it produced better results than IPS expected.
IPS projected the current operating referendum, passed in 2018, to bring in $220 million over eight years. But changes in property values led the total anticipated amount to soar to roughly $323 million, a nearly 47% increase over the initial projection, IPS documents show.
The district credits that funding for increasing teacher salaries significantly. In 2017-18, the district’s minimum starting salary of $40,000 was among the lowest in Marion County. Today, IPS offers the highest out of all districts in the county. In 2021, the district also agreed to share some of the funding with charters in its Innovation Network.
Not all plans for referendums have turned out as smoothly.
In 2022, the district proposed another operating referendum. But amid pressure from charter parents and supporters to share that funding with all local charter schools — and facing opposition from the city’s chamber of commerce — the school board tabled the measure.
IPS officials said the proposal would have generated about $50 million in additional funds annually over eight years to help fund the expansion of specialized academic programs under its Rebuilding Stronger reorganization, and to support continued competitive staff compensation.
The district continued with its Rebuilding Stronger organization, closing six schools and expanding programs such as dual language and Montessori, without the tax increase. Officials said at the time that they would cut costs in central services and operations to implement the reorganization plan.
Tax hike could be tougher sell than in 2018
Several factors could make a referendum harder to pass.
Under a change to state law in 2025, Indiana now requires school districts to float referendums in general elections in the fall — when historically they were less likely to pass than in the spring, DeBoer said. At the same time, voters are more likely to approve a referendum that is a continuation of the current one, he said.
From 2016 to 2019, 76% of referendums statewide passed. But from 2020 to 2025, that fell to 68%, according to an analysis from DeBoer.
“I would guess that the environment now is a little less favorable than it was back in 2018,” he said. “We were eight years into an economic expansion. People were probably in a somewhat better mood than they are now.”
Another concern is that having an appointed board receive property tax dollars raises serious concerns about accountability, said Monica Shellhamer of the Indianapolis Education Association.
“We’re not quite sure yet what it means to have our new IPEC board,” Shelhamer said.
But most voters don’t care about such technicalities about how referendums work, DeBoer said.
Taylor Hughes, chief strategy officer for the Indy Chamber, said the organization wants to balance the need for a “world-class education” in the state’s capital without overburdening the taxpayers.
“We’ve had significant inflation for a long time. The politics of affordability is a bipartisan cry. This is something that everybody is feeling squeezed on,” Hughes said. “I think that is a dynamic that we need to be mindful of.”
IPS supporters have called for adequate funding for public education. But the Chamber would want to know what a fully funded school system looks like, Hughes said. If there is a need for a referendum, he said, it’s really important that everyone is “singing from the same song book.”
“If this becomes a fight,” he said, “I think that’s probably a lose-lose for everybody.”
This article was written by Chalkbeat Indiana reporter Amelia Pak-Harvey.