Iowa public schools’ outstanding debt has reached $5.2 billion, equivalent to 63% of the state’s annual budget.
Schools levy more property taxes than any other category of local government in Iowa. And while a large portion of their funding is driven by the school finance formula, the debt they carry is a direct reflection of local decision-making; paying off that debt is a burden on the taxpayer. Some forms of school debt are subject to voter approval, such as general obligation bonds, while other forms of debt, like revenue bonds, are not.
Iowa K–12 school district debt has ballooned over the last few years. Data showing the outstanding debt held by Iowa school districts in 2023 is available from the Outstanding Obligations Report issued by the Iowa State Treasurer. Since 2015, the total amount of outstanding debt has increased $1.6 billion, or 44%.
As of 2023, 75 of the state’s 327 school districts do not have any outstanding debt. Of the 252 districts carrying debt, the largest amount is the $405 million held by Waukee Community School District (CSD), while CAL CSD holds the least, at $20,730. Among these 252 districts, the average debt is $18.8 million, while the median, or middlemost value, is $7.6 million. The difference between these numbers indicates that some districts with a large amount of debt skew the average higher.
The following table shows the top 5 school districts for total outstanding debt, with Waukee and Iowa City CSDs consistently holding the top 2 spots. Some perspective is necessary, however. Waukee is the fastest-growing district in the state and, as a result, has had multiple bond referenda over the last few years. A $117 million bond in 2018 was followed by one for $205 million in 2020 and another for $180 million in 2023. Iowa City is not growing nearly as fast, but it is one of the largest districts in the state. Its high debt level results from a $191.5 million bond approved by voters in 2017.
While fast-growing and/or large districts may be expected to carry the most debt, when measured on a per student basis, the top 5 lists change drastically.
On this list, the only district consistently in the top 5 in recent years has been Clear Creek Amana CSD. In 2020, it carried the most debt on a per student basis in the state, at $34,481, which has since increased to $35,825. However, other districts now exceed Clear Creek Amana’s per student debt levels; Marcus-Meriden-Cleghorn’s recent bond referendums propelled the district to per student debt of $44,841.
Debt and its impact on taxpayers are the result of local decision-making at the school-board level. Yes, local taxpayers must approve some of the debt through elections, but the choice to request and issue it is solely made by each board.
According to a news story, Marcus-Meriden-Cleghorn’s $20 million bond is costing taxpayers in that district an additional $457.50 per year for a $250,000 home. East Mills CSD followed a similar path, increasing its debt per student from $4,648 in 2021 to $40,647 in 2023 thanks to passage of a $22 million bond. The cost to East Mills taxpayers is an additional $2.70 per $1,000 of taxable valuation.
Iowa has 154 school districts that do not levy property taxes for debt service. Of the 177 districts[i] that do levy property taxes for debt service, the average rate is $2.56 per $1,000 of taxable valuation, with a range from $0.13 in the Pocahontas CSD to $4.05 in 25 other districts. This equates to $294.3 million in property taxes statewide for the school district debt service levy alone. An additional $277.8 million in property taxes are collected for the physical plant and equipment levies (PPELs) also used to pay off debt, bringing the total to more than half a billion dollars of debt service funded by property taxes every year.
Statutorily, voters must approve debt service property tax levies imposed to pay for debt. These ballot questions can propose taxes up to $2.70 per $1,000 of taxable valuation for up to 20 years, although voters can also exceed this limit as high as $4.05. For the most recent fiscal year, 119 districts levy $2.70 or less, while the remaining 58 districts levy more than $2.70 per $1,000 of taxable valuation. To learn more about your district’s debt and how your school board’s leadership affects your property tax bill, visit our school district debt database or look up your school district’s property tax levy rates.
[i] The number of school districts for tax purposes is different than those carrying debt due to consolidations that are still in progress.
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