Midwest school bond, finance referendums face headwinds
6 min readOn Thursday, southeast North Dakota residents voted down a $14.84 million bond referendum for the Oakes Public School District. The district is about 114 miles from Fargo, near the border with South Dakota.
The general obligation bonds were to go toward HVAC and window replacements, Americans with Disabilities Act-compliant restrooms, underground sewer pipes replacements and electrical and plumbing upgrades, according to the
In 2023, school districts proposed 2,192 bond issues worth $106.2 billion total, according to data from
This year is already shaping up to be “a big year,” said Rachel Wisnefski, SchoolBondFinder’s chief revenue officer, with $9.59 billion of bonds passed in the first two and a half months of 2024 and the major months for referendums, May and November, still ahead. By comparison, in 2020, the last presidential election year, schools passed $62.3 billion of bonds.
In the Midwest, Illinois, Wisconsin, Michigan and Ohio have seen the largest volume so far, according to a SchoolBondFinder.com map.
“There’s going to be a lot more school construction [this year], and I think it’s either going to be new construction or it’s going to be renovation and reconstruction,” said Vivian Altman, head of public finance at Janney. “Because of code upgrades, modernization needs; certainly technology improvements require electrical improvements, as well. Even if there are areas where enrollments are fluctuating, overall I think improvements need to be made.”
While the increase in bond referendums suggests more school districts are trying to go to market lately, the lower share of approvals suggests taxpayers may be voting them down more often.
“I think that people got spoiled because we were in such a low interest rate environment for so long,” said David Erdman, a Wisconsin-based managing director at Baker Tilly. “So rates have gone up and there’s a little bit of sticker shock… But people shouldn’t be shy about accessing the capital markets. Yes, rates are higher than they were a couple years ago, but long-term rates are quite attractive.”
As for which factors determine passage in the Midwest, it’s a complex picture. Some studies point to socioeconomic data and population growth; others point to a given area’s share of seniors.
Kaneland Community Unit School District serves a 140-square-mile territory
The district’s $57.5 million bond referendum failed last April. The bonds would have financed an addition to the high school.
Overall, said Superintendent Dr. Todd Leden, enrollment has declined over the past decade, and district officials believe that likely corresponds to a drop in the share of young families in the communities they serve.
The district’s current enrollment of 3,922 students is projected to remain flat for the 2024-25 school year. It had 4,600 students in 2014-2015, according
“Feedback indicated that we need greater staff and parent information and support,” Leden said of why the referendum failed. “Feedback also indicated that financials including the economic landscape were a challenge for some community members.”
Leden added that the district needs to give community members a fuller understanding of how outstanding district bonds will be incorporated with new bonds in any future referendum. The administration is considering a November 2024 referendum but is now consulting with stakeholders and reviewing survey data. In the meantime, projects will “need to be prioritized” more carefully given the district’s capital project needs.
In neighboring Wisconsin, schools must get voter approval to spend beyond a state revenue limit for operations.
Districts with declining enrollments are more likely to go to referendum and more likely to get them passed, according to a
Poorer districts are more likely to approve operating referendums in Wisconsin. The bottom 10% of districts by household income approved 74% of their referendums from 2005 to 2023, while the top 30% of districts by household income approved 62% of their referendums.
Wisconsin passed the school revenue limit law in 1993. By 2022, over 5% of statewide educational spending was funded through referendum dollars.
“The vast majority of districts now have some of their funding coming through these referendums,” said WCA Director of Research and Analytics Dale Knapp. “This ‘funding by referendum’ is the unintended consequence of the [school revenue limit] law… The law did not account for so many districts seeing declining enrollment, which further exacerbates their revenue problems because the revenue limits are tied to student numbers.”
The Milwaukee Public Schools district has a referendum April 2 in which it will seek to surpass state revenue limits by $252 million and raise property taxes. According to the
Knapp said that for the first 15 years after the school revenue limit law passed, the relatively high property taxes in the state constrained referendum approval rates.
“That has changed since 2012,” he said. “It has been fairly easy for districts to document their financial woes to voters… [There have been] cuts in some programs in some school districts. Despite relatively high property taxes, [voters] seem to be choosing to pay more to ensure their schools are adequately funded.”
Not all states are hewing to those patterns, though. Indiana voters only approved
The
Hammond had a median household income of $52,368 in 2022, according to
In 2023, Indiana residents saw an average property tax increase of 17%, Purdue University economics professor Larry DeBoer wrote in a
“Indiana is a state where the rules for debt issuance have been a little more open,” Baker Tilly’s Gray said. “There were a few different mechanisms for debt issuance that didn’t require projects to go to referendum… A lot of our schools in Indiana were able to issue long-term debt to take care of facilities, do a lot of safety and security-type projects. So if you look at Indiana… [many of those] needs have been addressed.”
In Michigan, voters rejected four of five school bond referendums on local ballots in February, according to the
In Minnesota, 66% of November’s school bond referendums passed, per the
In Missouri,
Missouri school districts have underperformed the national average in passage of bond referendums. Over the past decade, they had a mean passage rate of 72%, according to SchoolBondFinder.com. The likelihood of a bond referendum passing there drops as the share of the population over age 55 rises,
In Iowa, Underwood Community Schools’ November referendum on $13.7 million of bonds failed to meet the state’s 60% approval threshold for passage,
The bonds were to finance HVAC and athletic facility improvements, building an early childhood center drop-off and paving the high school parking lot, the district’s website said. That vote was one of several recent school referendum failures in the state.
Iowa has a median property tax rate of $1,569 per year for a $122,000 home, compared to a