Someone emailed me last week and wanted to know how Indiana's new law, coined the "2% circuit breaker" was going to affect the Wawasee school system. Evidently they had seen the TV coverage of the South Bend school system fretting about how this law could hurt them badly.
The "2% circuit breaker," passed by the Indiana General Assembly in 2006 is designed to cap property taxes at 2%. That sounds simple enough, right?
Yet, this law could have a devastating impact on some municipalities, towns, cities and schools but little or no impact on others.
Here is how it works. To make the example simple, let's assume you had a home and property that was valued for property tax purposes at $100,000 and your total property tax exceeded $2,000. In this example the "2% circuit breaker" kicks in and then anything over that $2,000 is noncollectable and the taxing entities would not receive their portion of that money.
What if you live in a town that has a library tax? What if your town provides sewer service? Maybe they collect your garbage or plow your streets and pick up your leaves? These services are provided for those that live in the taxing area. But if your total property taxes including school taxes exceeds 2% (or in the $100,000 example - $2,000) then the taxing entities do not receive their portion over the $2,000 amount.
This seems a little weird to me. Just because you live outside these municipal areas doesn't necessarily mean you don't use such services. Maybe you pay for your own garbage pick up. When the private gravel drive to your subdivision is drifted in you may have to pay separately to have it plowed. You probably pay every year to have it scraped and potholes filled. Maybe you pay for septic tanks to be pumped and when the systems go bad you may pay privately to put in a new system. These items are not covered on the property tax rolls but that doesn't mean you don't have to use those services. I suppose the thinking is that at least you have a choice. I suppose so. You could let the garbage pile up at the roadside I guess! :-)
But, here are the real problems with the "2% circuit breaker:"
1. These towns, municipalities and schools already have their budgets set and services developed long before they are informed about how much revenue is not collected.
2. The Indiana General Assembly passed the law without solid information on how and who it would affect.
3. They did not pass any alternative revenue sources.
As far as Wawasee Schools is concerned, it does not appear to have too much of a direct effect. Wawasee Schools tax rate is low enough that even adding all the other property taxes up inside the towns it should not have a major impact on our schools. But time will tell.
To see Wawasee's property tax rate and current ranking (Click here) then scroll down to "Delve deeper into data" and select "top 10 corporations," then select "tax rate (before CAGIT)" and you will see Wawasee ranked 292 of 293 school districts.
The Wawascene was created by Dr. Mark Stock, former Superintendent of the Wawasee Community School Corporation. Due to its local popularity, Dr. Stock has left the blog site to future Wawasee administrators.
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