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Consultant: State tax changes and falling enrollment could squeeze Decatur County Community Schools’ budget
Summary
At a community briefing, Jay Sale of Baker Tilly told attendees that legislative changes to property and school‑funding rules, combined with net student losses, could reduce the district’s assessed value and force difficult budget choices unless enrollment or revenue patterns change.
Jay Sale, a municipal financial adviser with Baker Tilly, told a community meeting that recent state legislative changes and ongoing enrollment losses create a “buckle up” outlook for Decatur County Community Schools’ finances over the next five years.
Sale said the district faces two linked pressures: fewer students attending district schools — driven by transfers to charters, private and online options — and changes to state tax and funding rules that shrink the district’s taxable base. “The next 5 years are going to be interesting in the school finance,” he said.
Why it matters: Indiana funding formulas and property‑tax deductions determine how much money a school receives per pupil and how much local revenue is available. Sale summarized the 2025 budget and formula changes in House Enrolled Act 1001, saying the foundation amount rose but some complexity and categorical dollars were reduced, and curriculum‑materials dollars were consolidated into the education fund. He warned those shifts can mask, not eliminate, structural budget pressure.
Sale presented 2017–fall 2025 data showing that while the number of students living in district boundaries rose by about 70 since 2017, the number who actually attend district schools has declined because more families are choosing other options. He laid out three enrollment scenarios for the next decade: a high case with continued in‑migration (+≈200 students), a baseline with roughly a 200‑student decline, and a low case with accelerated losses that would further reduce per‑pupil revenue.
On how local taxes will change, Sale cited provisions in Senate Enrolled Act 1 that shift homestead and rental/agribucket deductions toward percentage‑based reductions and raise the de minimis threshold for new personal‑property exemptions (from the prior $80,000 threshold to $2 million for new property). He said those deductions will reduce net assessed value for the district and could force higher tax rates simply to collect the same revenue. “If it doesn’t cover it, it means your 1% bucket as a school district is going to decrease,” he said.
Sale gave concrete figures: he said about 96% of the district’s 2025 education‑fund spending went to salaries and benefits; he reported the district ran deficits of roughly $854,000 in 2023 and $819,000 in 2024 before rebounding in 2025 to increase cash balance by about $600,000. He said the changes in the 2025 funding formula were projected to add roughly $141,000 to district revenue for the 2025–26 year, but that homestead credits were estimated at about $266,000 in lost levy revenue for the district this year, citing a Department of Local Government Finance (DLGF) document.
Sale described a short list of options the district can use to manage the squeeze: place an operating referendum on the ballot, issue bonds for capital purchases, recover indirect costs through grants, restructure service delivery (outsourcing or insourcing), shift capital purchases such as buses to bond financing, or—if necessary—reduce or eliminate programs that are no longer mission‑aligned. He cautioned that personnel costs dominate the budget (he estimated roughly $16.5 million in salaries and benefits), so even modest pay raises can materially affect the budget: “Every 1% pay raise is about $160,000,” he said.
Officials present discussed technical choices for 2026: Sale noted a temporary cap on operations‑fund maximum levy growth at 4% for 2026 that was later removed for 2027 (allowing roughly 5.6% growth), and he said the state has delayed elimination of local income tax receipts for schools until 2029, providing one more year of that revenue stream.
The presentation concluded with questions from the board and attendees. Sale credited district budgeting actions with reversing recent deficits and increasing cash balance, but he emphasized that continued enrollment declines or attempts to fund larger pay increases without additional revenue would quickly reopen structural gaps.
The presentation and slides will be posted on the district website, the presenter said; the board opened the floor to questions after the briefing.
