Indiana

State Issues Affecting P–12

• • On March 26, 2013, the Indiana Supreme Court ruled that Indiana tax dollars may be used to finance private school tuition under the state’s school voucher program. Indiana passed its school voucher law in 2011. It’s considered one of the most expansive in the country because students don’t have to attend a failing school to be eligible for the statewide program.

• • House Enrolled Act 1003, enacted two years ago, builds on what was already the nation’s most open voucher program. The expansion allowed even more students to receive vouchers to cover the costs of private school tuition. Included are disabled students whose family income does not exceed 200% of the maximum allowed to receive free or reduced-price lunch; any student living in the attendance area of a school corporation that has been graded “F” and whose family income does not exceed 150% of the maximum allowed to receive free or reduced-price lunch; the sibling of a student already receiving a private school voucher; and military dependents, tweaking a rule that required students to first attend a public school to receive state money for private school. Currently, 55% of Indiana school children qualify for free and reduced lunch.

• • Requirements on referenda have increased, making it more difficult for local school districts to secure bonds for construction projects.

• • Property tax circuit breakers have had a significant impact on districts, with many reaching the statutory limit. Because of the current protected levy legislation, debt service has to be the first priority, leaving little or no additional revenue for capital projects, transportation, and bus replacement. This is forcing many districts to consider consolidation.

Funding Priorities/Trends for P–12

• • Full-day kindergarten funding is included in the state distribution formula. The state continues to provide funding to school districts in the form of a grant. However, it does not fund full-day kindergarten students in the same manner as full-time students in other grades. Grant funding is $2,400 per full-time kindergarten student, while funding for a full-time student (ADM) at other grade levels is approximately $5,500. Hence, the grant provides less than half the funding the district would receive if the kindergarten student were counted as a full ADM under the distribution formula.

• • The legislature has earmarked bills (e.g., achievement test grants). School districts would receive additional funding under grants given for high performance on achievement tests.

• • Tax credit scholarships for preschool education: The allowable amount for tax credits for donations made to scholarship-granting organizations was increased $5 million, resulting in a comparable loss of state revenue.

Changes to the Funding Formula for P–12

• • There have been no recent changes to the formula, with the exception of the addition of full-day kindergarten. Multiple ADM counts and adjustments to state distribution during the current fiscal year are still an issue. Previously, the complexity index used eligibility for the federally funded free and reduced-price lunch program as a proxy for vertical equity. The index will now use free and reduced-priced textbook rental assistance, as the latter measure is a state measure and state auditing can be used to verify eligibility.

• • In 2008, with passage of P.L. 146-2008, the Indiana General Assembly changed the school funding formula ratio of state to local support. The state then funded all tuition support for schools. The major change involved the elimination of the local portion of the tuition-support levy. The state sales tax was raised 1% to support the funds formerly paid through local property taxes. The state also took over the funding of the special education preschool fund. This eliminated two local property tax levies (DeBoer 2008). In another major change, lawmakers gave homeowners a circuit breaker cap on their total annual property tax bill. The cap was set at 1% of the homestead’s total assessed value. The law required that a school’s debt service fund must meet all of its obligations. This resulted in a cap on the remaining local levy funds for capital projects, transportation, and bus...