A bill that is on its way to Indiana Gov. Mitch Daniels would allow school corporations struggling with state funding cuts to transfer money from their property tax revenues, but the amount of the fund transfers would be tied to limits on employee raises.

The bill, H.B. 1367, would allow schools to transfer up to 10 percent of funds from their Capital Projects Fund for school operating expenses if they do not give employees a raise for the 2010-11 school year. Schools could transfer up to 5 percent if employee raises are granted.

Duneland Superintendent Dirk Baer said it’s his understanding that the bill refers to all school corporation employees, including teachers, and that school corporations that would want to transfer more than 5 percent from their CPF would essentially have to freeze teacher contracts if they include raises.

But, although some clarification on the bill is needed, Baer also said the bill language suggests that school corporations would also be able to transfer money from other school funds. If so, Duneland would likely attempt to transfer funds from its transportation fund.

The bill states that the fund transfers could not be used toward the incremental pay increases for teachers.

Baer said it’s his understanding that the annual incremental pay hikes are not considered a general wage increase, and would not be affected by the restrictions on how much money could be transferred from the CPF.

Baer had mixed reactions to the bill. “I’m glad it gives us some flexibility,” he said, citing the ability for schools to offset state losses for their general funds. Duneland this year is losing about $1.6 million in state funding that it expected to receive.

On the other hand, Baer said that the CPF is needed for various building projects, but that it appears to be a “catch all” fund that keeps being relied upon for other school needs. And now that school general funds have been removed from property taxes and now paid for by state revenues, the CPF is now the largest school fund that comes from local property taxes for many school corporations, Baer noted.

In a statement, State Rep. Ed Soliday, R-Valparaiso, lauded the bill for giving school corporations much-needed flexibility as they deal with state revenue losses.

“Our schools needed to be given the tools to help deal with the result of declining state revenues,” Soliday said. “I felt that allowing school corporations to make decisions at a local level was the best avenue to help alleviate the effects of the cuts. We were able to reach a compromise that ensures students and teachers alike will benefit. It certainly is not perfect, but considering all factors it was the best outcome achievable.”

The bill passed the House 97-0. The bill also passed the Senate, 50-0.

The bill now advances to the governor’s desk for final approval.