Thursday, April 10th, 2008

Tax Reform Trouble

As I sit here contemplating the impending arrival of the date when I have to send the IRS a check for several thousand dollars, it is crystal clear to me why we should want to have efficient, lean government. I’m not a fan of high taxes by any means. On the other hand, sometimes cost cutting can be counter-productive.

One of the side-effects of Indiana’s property tax fiasco last year was that the state Department of Local Government Finance, an agency chartered with reviewing and approving local spending plans, has stopped being a rubber stamp agency. However, I believe there is a huge danger that they will turn 180 the other direction with significant negative ramifications for the state, namely the undermining of democracy and hurting Indiana’s long term competitiveness.

A case out of Johnson County shows the trend. The Clark-Pleasant school district, which covers the rapidly growing city of Greenwood and which is the state’s fourth fastest growing distrct, put forward a $60 million building plan to keep up with growth. A group of citizen opponents initiated a remonstrance by obtaining sufficient signatures to challenge the building plan. This led to a petition drive where for and against camps collected signatures from voters in the area on competing positions, with the pro side winning 2-1. Notwithstanding this victory, a DLGF bureaucrat rejected the proposal, saying that even though remonstrators lost their petition drive, the district should have reduced the project scope anyway.

This is bureaucratic arrogance to say the least. Now a petition drive isn’t an election, but it’s a fair approximation of the democratic will of the people, particularly when the winning side had had such a lopsided margin of victory. The state supreme court even recognized a similar type of vote as a valid expression of the will of the people when it ruled that an informal ballot by an unincorporated citizens group called NOAX was enough to be valid to settle a remonstrance suit against an annexation. Had this been some stealth project, or the remonstrance extremely close, then perhaps some action would have been justified. But if a project handily survives a remonstrance in a petition drive competition, this should be taken as a strong evidence that the people support it and at a minimum state bureaucrats should show some respect to the will of the people. That does not appear to be the case here.

What’s more, this sends a chilling message to the rest of the state about trying to provide high quality governmental services. (Expect another message to be sent shortly, as another similar case is ruled on. Westfield is planning to build a new library, and again beat a remonstrance through a petition drive, but some bureaucrat is recommending that the DLGF reject it). This endangers Indiana’s future economic competitiveness.

As I noted in a previous posting, Indiana can no longer compete in the world by trying to be a purely low cost player. Not only will it never have the lowest taxes or the lowest costs in the US, it will never be cost competitive with the likes of China. That’s a loser’s game. Instead, Indiana has to be selling a product that people actually want to buy on its own merits. If the state forces every community into the same least-common-denominator, el-cheapo, one-size-fits-all model, even where the voters feel differently, it will be killing the ability of places like Greenwood to continue attracting residents and jobs to the state. Who wants to live in a town where the kids don’t even have a real classroom to sit in?

And of all the things to cut costs on, education has to be the worst choice. As Richard Longworth noted in his recent book, “Caught in the Middle” – to be the subject of a forthcoming long review here, btw – the traditional twin engines of the Midwest economy, agriculture and industry, are being squeezed by globalization. The jobs of tomorrow require high education levels, and Midwesterners have traditionally not valued education. This action by the DLGF appears to be an example that backs Longworth up in that regard.

Now I don’t think we ought to continue pumping unlimited sums of money into failing districts. I think we need serious education reform in Indiana and around the country. Clearly there is a lot of bloat and fat in the education budget just as in many government programs. But Clark-Pleasant appears to be an at least decent district, one with an 86.8% graduation rate according to the state. This is a capital program designed to keep up with growth. Might there be some fat in it? No doubt. But it seems largely needed to prepare for future growth, and to avoid having students huddled in trailers instead of attending to lessons in actual classrooms.

The project isn’t dead. The district can appeal to the State Tax Court and/or schedule a full referendum. Whichever route it chooses, you can believe that the appeal itself will cost money and the delays, assuming the project is eventually approved, will raise the total price tag. At a minimum, if the state loses, it should be forced to pick up both of these costs.

The remonstrance process as it exists today is not ideal. But it is reasonably democratic. I believe the new tax bill provides for a proper referendum on major school capital programs. I think that’s a good idea and I do think that school boards should be forced to justify their programs to the community at large. With a process like that, there should be no place whatsoever for bureaucratic second-guessing.

To sum up my beliefs on the issue:

  • Bureaucrats should show a high degree of deference to democratically arrived at results when it comes to government spending.
  • Indiana must build communities that people want to be a part of, to attract talent needed for the 21st century economy.
  • Better education is absolutely vital to the long term economic future of the state in a globalized economy.

Of course leaving school funding levels up to local areas brings its own set of problems. Places that value education will vote for high quality schools. Those that don’t will end up with second rate schools. That’s not fair to the children, as it isn’t hard to see that it is likely to be already educated and affluent districts that will vote to provide lots of funding. This is where the state needs to ensure not that the affluent districts don’t spend too much, but that other districts don’t spend too little. I believe in local control, but there’s a definitely a state role to play, which could include income based funding assistance even for capital projects, to make sure that every child gets a good education. Because today an education isn’t a nice to have, it is an absolute necessity to compete in the global economy.

Update: One commenter in a thoughtful posting said the following, “Also, school districts compete with each other currently to build the most wow-inducing schools in the city for reasons of pride instead of what substance it brings to the students. Allowing the school districts to play like a real business with real customers, they will have to meet their real needs.” Believe me, I’m sympathetic to the idea of school choice.

However, this effectively implies that the competition is between local districts when the real competition isn’t between say Greenwood and Carmel, it’s between the whole Central Indiana region and places like Columbus, Ohio. Consider this thought experiment. Indianapolis has been trying to raise its cultural diversity and international profile, something that was again highlighted in Mayor Ballard’s State of the City speech. Well, Greenwood has become home to a sizable Sikh community. I believe many of them are truck drivers who moved from California to take advantage of Indiana’s lower costs and high quality of life. The value that Indian people put on education is well-known. Will Greenwood continue to attract more Sikh families if the kids have to go to school in a trailer? Or will those families looking to relocate from California decide to take advantage of the similar low costs and good quality of life in Columbus, Ohio, where their kids can actually sit in a real classroom? Let’s assume some do. Now a distribution business comes knocking looking for a place to set up shop. They ask, “do you have qualified truck drivers in the local labor force so we can staff up?” To which is the answer is, “Actually, we’ve got a terrible shortage, since all the truck drivers started moving to Columbus, Ohio.” Wonder where that company will locate? What’s more, the city’s ethic diversity is less than it otherwise would be.

The key resource is people. Businesses want to set up shop where there is a qualified labor force. If you can’t attract that labor force, you won’t attract businesses. This applies equally to truck drivers and biochemistry Ph.D’s. The real competition to attract them isn’t between various towns in the same region, but between regions and states. Indiana has to be able to build an environment where the labor force of the future wants to live. And it isn’t likely to be a place that is chopping education funds.

5 Comments
Topics: Economic Development, Education, Globalization, Public Policy, Talent Attraction
Cities: Indianapolis

5 Responses to “Tax Reform Trouble”

  1. SpeedBlue47 says:

    Reading this makes me think that Hoosiers need to consider what many around the country are considering – that the apparatus of government, local, state, or federal, is the ideal facilitator of education. It’s an extremely private choice that is, despite the political reality, important to every parent. But what can a parent do right now to change the direction their school is going in? Spend massive amounts of time working with their kids and the school district, try to start a debate with people at meetings, or move. These alternatives are costly, time-consuming, and usually not very effective. If you are one parent in a 10,000+ kid school district, you can feel that your voice is drowned out. But if the parent can take their kid, and the money that the school gets for him, away from that school, he or she knows that it made a real and immediate impact on the school.

    Also, school districts compete with each other currently to build the most wow-inducing schools in the city for reasons of pride instead of what substance it brings to the students. Allowing the school districts to play like a real business with real customers, they will have to meet their real needs. Seperating the districts from the local government would also allow them to tap into private capital markets and let their capital expenditures be based on real expectations instead of political rhetoric. It would also have the government budgeting effect of furthering weakening the role of township government, allowing this unneeded layer of government to either devolve or merge efficiently in community or county hands.

    Just my two cents. Thank you for the thought exercise.

  2. Anonymous says:

    AS a parent of kids that attend school in the Clark Pleasant school district I can’t even begin to tell you what an outrage this is. There is no valid resson the state should have stepped in to stop these progject. As noted in you post this is the 4th fastest growing school distric in the state. I believe it was the number 1 fastest for a coupole of years ago. These kids are going to class in trailiers sitting in the parking lot at the hish school.
    You have drive through a road circuit just to navaigate around the high school. The peoploe against this had all the time in the world to air the issues with this and they did and lost. So, the went off an cried to the state…unbelieveable. My quess is most of the people that are against this don’t have kids in that school system anymore or yet.

  3. Anonymous says:

    Additionally I would say not to build these schools and complete the project borders on negligence toward these kids. If these people aren’t willing to pay for these kids to have decent buildings, ( and no this school district has done a good job of builing reasonalbe functional schools), then they need to re-district the enter northern part of Johnson Co. Let Greenwood, Franklin and Center Grove take some of these kids. Funny Center Grove doesn’t have any problems building outstanding facalities for their kids…5 miles from Whiteland H.S. and Franklin also just about 5 miles south just built and entirely new High School and did an almost complete redo of it’s largest middle school.

  4. Anonymous says:

    Aaron, good article. Were you going to comment in the future about Westfield’s proposed library? I’d like to forward your blog to bureaucrats who are trying to stop it.
    It’s aggravating to see key people who want to drive their personal cause against the will of the people. In Westfield, they want to wait a few years, even though our library has run out of space NOW. They want to relocate it in the downtown area, where land costs are 3 times as much an acre instead of where it is proposed now. Here is a link to a seemingly long video of the meeting. Thanks.
    –http://www.in.gov/dlgf/boards/local/minutes.html

    Click on Westfield (03/27/08)

  5. The Urbanophile says:

    anon, feel free to forward this posting, of course. I was not planning on a separate article about the Westfield library.

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