MICHIGAN CITY — Indiana’s circuit breaker law is continuing to have an enormous impact on Michigan City Area Schools’ finances.
During its meeting last week, the MCAS Board approved a $69.5 million budget for the school corporation for 2020. While presenting the numbers, MCAS business manager Lance Werner told members that circuit breaker caps – state-mandated limits on local property taxes – are estimated to have an impact of $4.86 million on the district next year.
“Hopefully, it does not come out to be the $4.9 million that we’re projecting here, but that’s what we have in our calculations,” he said. “Obviously, that’s a very significant amount to have to cut back on.”
That figure is up from the $3.96 million effect the caps are projected to have on this year’s finances, Werner said.
First introduced in a 2008 property tax reform – and later added to the state constitution in 2010 via voter referendum – the circuit breaker caps limit how much property owners must pay in property taxes. The limits restrain homestead tax bills to 1 percent of gross assessed value, 2 percent for other residential and farmland, and 3 percent for business real and personal property.
Though intended to bring relief to taxpayers, the caps have frustrated MCAS officials for more than a decade. The caps have had a $26.1 million impact on MCAS since they took effect across Indiana in 2009, according to figures Werner provided the board.
In the past, the state has granted waivers to the district to lessen the sting of the caps. Werner expects the state to issue MCAS another waiver for 2020, but in 2021, he said, the caps may pose a more severe threat to the district’s financial health.
Officials have allocated spending next year across four categories:
• Debt service fund, $11.77 million
• School pensions, $886,805
• Education fund, $37.72 million
• Operations fund, $19.13 million
The budget’s advertised tax levy is $26.75 million, or a tax rate of $1.11. The district will devote $13 million of the levy to the debt services fund, $1.25 million to school pensions, and $12.5 million to the operations fund.
District officials estimate the Department of Local Government Finance will set the actual levy at $22.5 million, or a tax rate of 87 cents. That number is a slight increase from the 2019 levy of $22.04 million, or an 83-cent tax rate.
In other financial matters, the board approved a 2 percent pay increase for district transportation employees and a 3 percent pay increase for food service workers. The raises will cost the school corporation an additional $47,000 per year.
The board also agreed to set the minimum wage for workers in those departments at $9 per hour.