The Indiana House voted 77-19 to strip financial and academic control of the Gary Community School Corp. and Muncie Community Schools from the superintendent and school board.
It is expected to go to a conference committee next week where the differences between both versions – including the academic takeover and removal of grants will need to be reconciled.
Various Republican lawmakers expressed support for the bill, arguing the state had an obligation to step in and provide a path of for distressed district leaders and administrators in schools like Gary and Muncie who have been unable to chart a path to solvency.
The measure needed to "create consequences for when that doesn't happen," said Rep. Todd Michael Huston, R-Fischers.
"We don't want to voluntarily pursue these kinds of things, but when they do come to us, we need to take action," he said. "You reach a certain point where they are in our interest and that's where we are today."
Rep. Vernon Smith, D-Gary, spoke Thursday in opposition to the changes, but ultimately said he would vote for the bill. On Wednesday he unsuccessfully tried to introduce several amendments to give some local control to the superintendent and school board and place academics back in the hands of local officials.
"We are trying, we are striving. What we got was what is before us," Smith said. "I have mixed emotions."
The bill had "too much emphasis on management," too little on instruction, he said.
"You are taking all of the local input out of it. There's no infusion of support money," Smith said.
Several lawmakers also expressed concerns on the implications that the academic and financial takeover for Muncie Community Schools was made with minimal notice and without a clear threshold to meet.
"If it's today Gary and Muncie, who is next? By what criteria is it announced that you no longer have control over your own community," said Rep. Scott Pelath, D-Michigan City.
"These two just happen to be on the bottom of the list and wrapped into this bill," he said. "There are precedents here that we have to wrestle with. Because if we don't, slowly but surely our state is going to begin taking over local schools."