August 1, 2005
87 school districts must repay $35 million: State says the funds were
wrongly claimed for youths in private and religious schools.
By Staci Hupp
staci.hupp@indystar.com

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Eighty-seven Indiana school districts have been forced to repay the state more than $35 million they collected for claiming thousands of children from private and religious schools as their own full-time students.

At least two of those school districts owe millions of dollars in additional penalties because of inflated enrollment counts that included children who had moved away or otherwise had no proven academic connection to their schools.

One of the districts, Bartholomew in Columbus, is fighting state efforts to collect the money.

At stake are already-lean school budgets or higher property-tax bills for residents, some of whom already are drawing battle lines.

"Local property taxpayers would not accept issuing debt bonds to pay this back," said Russ Barnard, a Bartholomew School Board member. "It would seem like they were being punished for someone else's misbehavior."

State aid hinges on a school district's enrollment numbers. Some Indiana school administrators benefited from an old state law that was vague about how to count children they served only part of the time. Unusual enrollment growth at some schools prompted lawmakers to close the legal loophole in
2000.

"I think in essence they were cheating and they got caught," said retired Sen. Morris Mills, a Montgomery County Republican who led the effort to clarify state law so that school districts are paid according to how much time they spend teaching children.

School administrators contend they followed the law according to the state Department of Education's interpretation, which said they could include children who essentially took one class a day. Education Department officials haven't stepped into the fray, saying only that they must follow orders to collect the money.

Gradual payback


Districts that had enjoyed a financial boost from inflated enrollment counts were ordered to repay the difference only for the year 2000, even though Mills believes school districts overreported enrollment numbers for several years.

The financial fallout, however, will last at least until 2007. Until then, the state will continue to reduce the monthly checks to those 87 school districts. For some, that means thousands of dollars a month. For others, it's hundreds of thousands, money that must be made up by scaling back spending in other areas, such as on payroll or new programs.

The gradual payback process, however, has softened what would have been a devastating financial blow for the school districts.

Wayne Township school administrators, for example, have cut administrative and technology jobs in response to state budget cuts that aren't related to the $354,000 they have owed for overstated enrollment figures.

"We've had other impacts that have been far greater than that," said Superintendent Terry Thompson.

Penalties have been heftier for the Hammond and Bartholomew school districts, which state officials say counted children who had no academic ties to their schools.

Millions in dispute


Bartholomew school administrators in Columbus have fought the state's three-year effort to collect almost $6.1 million.

State payments to the district already have been trimmed for the $4.9 million it owes the state for private or parochial school children who were counted as full-time students in 2000.

The $6.1 million dispute is over more than 2,300 children who were counted from 1996 through 1999. They included elementary-age children from private and Christian schools who shared a school bus computer laboratory for about 30 minutes a day for less than one month, a state audit shows.

The audit also mentions foreign students, special education students from other school districts and patients from a "behavorial health care center" who had no known connection to Bartholomew classrooms.

John Quick, Bartholomew's superintendent, acknowledged close ties with two K-8 private schools that are within 100 yards of the public schools. "Those kids played on our athletic teams," he said. "They walked across to take classes. They were in and out of our buildings. They ride our buses."

But Quick directed other questions about the 1996-99 enrollment figures to his predecessor, Michael Copper, who left the district three years ago.

Copper, now superintendent of Lawrence Township Schools in Indianapolis, did not return telephone calls last week.

Quick defends the district's former administrators, who "were counting as they thought they were directed," he said. "We don't think it would be fair to penalize the local taxpayers for disputed numbers going back to '97, '98 and '99."

Administrators have paid an attorney an unspecified amount of money and asked for help in the past three years from various state officials.

Bartholomew officials turned down an offer from a former Gov. Joe Kernan aide to shave off $1 million from the total, Quick said, because they didn't think it was enough of a compromise.

State education officials last month gave Bartholomew school officials about a month to pay back the money. The July deadline has passed, so state officials expect to withdraw about $168,500 from the district's monthly check for three years, starting in February.

"The time has come to pay the proverbial piper," said Kevin McDowell, an attorney for the state Department of Education. "We can't let these things sit open like this."

Quick hopes for a break before then.

"I don't think IDOE is in the business of trying to pull money away from schools," he said. "I think it's a matter of restarting these conversations."

If Bartholomew officials don't get their way, however, they'll try to avoid cuts to their $62 million general fund. That could mean a property tax increase, an idea that rubs some taxpayers the wrong way.

"I would be opposed to any bond issue because it would cost you double what you borrow," said Paul Boaz, who leads a local taxpayer watchdog group. "We've already paid for it once."

Boaz, who also runs an aerial mapping company in Columbus, wants the money to come out of state aid.

"The taxpayers will have to pay it, but at least we wouldn't have to pay double in interest," he said.

Other miscounts

State education officials say Bartholomew's case is rare, although administrators in Hammond counted students who had moved or dropped out of the school district.

Administrators in the Northwest Indiana district of 13,694 students blamed their inflated numbers -- about 500 students from 1997 to 1999 -- on the high numbers of children who regularly move in and out of schools. They also blamed a computer system that failed to detect the problem.

School officials borrowed money to repay a $6 million penalty for overstated enrollment numbers. Local taxpayers will pay off the debt this year, school officials said.

The state is in the process of collecting another $1.7 million from the district for private and parochial students who were counted as full-time Hammond students in 2000.

The chances of similar enrollment discrepancies should be slimmer, school officials say, under a new state system that assigns each Hoosier student an identification number. State officials will use the system for enrollment purposes.

McDowell, the state education official, emphasized that none of the school districts broke the law in the past.

"In their shoes, I would feel like I was treated unfairly, that the rules were changed and backdated," he said.

Mills isn't so forgiving.

"I think it was abuse of a situation," he said. "Who knows how long this had been going on."

Eighty-seven Indiana school districts were forced to repay the state $35.1 million for counting private and religious school students as full-time students.

Top 10 amounts owed:
" Bartholomew Consolidated Schools: $5 million *
" Michigan City Area Schools: $4 million
" East Allen County Schools: $2.8 million
" Lake Central Schools: $2 million
" Portage Township Schools: $1.8 million
" Crown Point Community Schools: $1.8 million
" Hammond Schools: $1.7 million *
" North Adams Community Schools: $1.5 million
" Munster Schools: $1.2 million
" Mishawaka Schools: $1 million

Central Indiana school districts:
" Franklin Community Schools: $400,000
" Wayne Township Schools: $350,000
" Beech Grove City Schools: $260,000
" Lawrence Township Schools: $220,000
" Greenwood Community Schools: $200,000
" Mount Vernon (Posey County) Schools: $173,370
" Greenfield-Central Community Schools: $155,000
" Shelbyville Central Schools: $31,000
" Washington Township Schools: $26,000
" Warren Township Schools: $11,000
" Indianapolis Public Schools: $10,000

* Not including penalties.

Source: Indiana Department of Education

Call Star reporter Staci Hupp at (317) 444-6253.