Financial advisor warns Eastern Pulaski school board that Indiana tax changes could reduce local revenue and shift tax burdens

At a school board presentation, financial advisor Brock Ber Tilly told members that recent state tax-law changes and credits mean “record” K‑12 funding at the state level may not translate into larger operating revenue for Eastern Pulaski Community School Corporation.

Tilly, who said he and his firm advise school corporations and libraries on property‑tax and funding matters, outlined a multi‑year phase‑in of property‑tax changes beginning in 2026 and a statutory shift in how local income tax (LIT) is distributed that, under current law, would prevent school corporations from continuing to receive the same LIT payments after 2028. He estimated that, based on 2025 figures, Eastern Pulaski could lose about $183,000 in LIT revenue if distribution rules remain as they are.

Why it matters: the district’s operating fund is sensitive to both net assessed value (taxable value after deductions) and levy decisions. Tilly said state changes expand deductions (notably a rising supplemental homestead deduction) and add homeowner credits that reduce taxable value or tax bills for some taxpayers; because deductions lower net assessed value, the district’s tax rate could rise to generate the same levy, or total local money available for operations could decline depending on county decisions about replacement credits.

Tilly summarized three elements driving the effect: 1) the state is phasing out a flat homestead deduction ($48,000) and increasing a percentage‑based supplemental homestead deduction (the transcript shows the supplemental deduction rising from 37.5% toward 66.7% by 2031); 2) the legislature created a property‑tax replacement credit (PTRC) and other homeowner credits that reduce tax bills but affect net assessed value calculations; and 3) changes to LIT distribution mean counties — not school corporations — may control replacement LIT rates beginning in 2028 unless lawmakers alter the design.

He illustrated the mechanics using U.S. Census median home values and district data: for an example home valued at $133,900, after subtracting the $48,000 deduction and applying the supplemental percentage the presenter showed an illustrative net assessed value near $53,000. Tilly emphasized these are model assumptions (he assumed a 3% annual increase in market value in the example) and said the figures are illustrative rather than predictive.

On business and farm property, Tilly said the rules are changing as well. The 2% property class (rental, long‑term care and many agricultural parcels) will begin receiving deductions in 2026 (initially 6%, then phasing up), and the business‑personal‑property exemption threshold the presenter showed rises from $80,000 in 2026 to $2 million in 2027. Those shifts could shrink certain portions of the tax base and change where tax burden falls.

Tilly also noted immediate cost pressures unrelated to the property‑tax changes: beginning teacher pay is required to be at least $45,000 effective July 1 (transcript statement) and the share of compensation (salaries plus benefits) tied to state funding must increase (his presentation cited a rise from 62% to 65%), both of which raise near‑term personnel costs.

On district finances, Tilly presented Eastern Pulaski figures: certified 2025 net assessed value about $677 million (2026 certified about $681 million after withholdings), a net levy after circuit breaker of roughly $4.27 million, and an outstanding annual debt service of about $1.1 million (bond maturities noted through 2034). He said the state Department of Local Government Finance estimated a net operational impact to this district on the order of tens of thousands of dollars in the near term and that general‑assembly numbers show complex offsets once curricular materials and credits are accounted for.

Tilly’s recommendation to the board was process‑oriented: run multi‑year projections (five years plus), schedule working groups and trainings, collaborate with the county (which controls certain replacement rates) and consider financing options such as operating referendums or general‑obligation bonds only if the district determines it must replace lost revenue. “If your net assessed value goes down tax going to go up,” he said in the presentation, stressing the counterintuitive math that deductions can raise tax rates even as some taxpayers receive credits.

The presentation closed with an offer to schedule follow‑up meetings and supply detailed calculations. The board did not take formal action during the session; members and staff raised procedural questions and asked for further analysis to inform any future decisions.