Indiana public school funding inequality a 40-year-old problem

The issue is inequality in school corporation funding, and the year it began was 1973.

Indiana’s K-12 school corporations receive money for their general funds from the state based on a complex formula. In no uncertain terms, the GOP’s to-do list for the 2015 session includes, “Fix the funding formula.”

Lawmakers say they hope to address both the formula’s complexity and fairness in the upcoming session. Both issues have been taken up in the past several meetings of the General Assembly, and the 2015 Legislature represents a continued effort to fix a 40-year-old problem.

“Our aim is to have every student get the same tuition,” said state Sen. Dennis Kruse, R-Auburn.

“Tuition” is the basic level of funding each school district receives for each student. While some funding differences are inevitable between schools, Kruse said, the goal is give Indiana students the same basic level of funding.

Historically, tuition has differed between districts. It still differs today, in some cases, although not nearly to the degree that it once did.

Why the inconsistent funding? It has to do with property taxes.

Before 1973, each school corporation had “virtually complete control over its own General Fund tax rates,” according to an article from the Center for Evaluation & Education Policy. A school corporation’s general fund pays for teacher and administrator salaries, as well as classroom supplies, among other things.

Because school boards had such freedom with their property taxes, school funding varied greatly from community to community.

“I still remember Whiting School Corporation getting $17,000 per student on their property tax, and there was another school corporation in southern Indiana that got $2,000 on their property tax per student,” Kruse said at a public forum on education issues Nov. 24.

But in 1973, the General Assembly passed Public Law 146, which put restrictions on the school boards’ ability to increase or decrease their property tax revenue.

The law, in effect, set a precedent for funding. Generally, school corporations that had high revenues in 1973 continued to have high revenues for decades after. Meanwhile, low-revenue schools were stuck with lower funding.

One reason for this, according to the Center for Evaluation & Education Policy, was the way the state’s funding formula worked: the previous year’s funding partly determined a school’s revenue for the current year.

Over the past decade, however, the General Assembly has taken a series of steps toward equalizing school funding.

For one, it removed property taxes from the general fund equation in 2009, replacing them with a one-cent increase in the statewide sales tax. Each district’s general fund became 100 percent controlled by the General Assembly.

The Legislature also reduced and then eliminated the parts of the funding formula that made each school’s funding dependent on previous years.

This move was done as part of an overall effort to have state dollars “follow the students,” rather than school institutions, said Tory Flynn, communications director for the House Republicans.

But even in 2009, funding levels were unequal among school districts. So the Legislature passed another bill.

This law began a grant program called “Transition to Foundation,” which sets up every school district in the state to equalize tuitions between 2012 and 2018 at the “foundation level,” which is set by the Legislature for each year. As a result, some schools went up in basic tuition, while many still are coming down.

Seven of northeast Indiana’s 13 school corporations currently have a basic tuition of $4,579, the current foundation level. Hamilton Community Schools, meanwhile, gets a basic tuition of $4,882 per student, and Prairie Heights School Corp. gets nearly the same.

Schools outside northeast Indiana have even higher basic tuitions. Gary Community Schools, for example, receives $5,053 per student.

Since the transition began, however, the General Assembly has increased the foundation level and aims to continue increasing it as the schools with higher tuitions come down.

Kruse, with other local legislators, has expressed hope for increasing the foundation level again this year. But that will depend on how strong the state’s tax revenue is. A projection for that revenue will be released in late December.

“Hopefully it will pick up, and we’ll get more money,” Kruse said. “If that doesn’t happen, if we don’t get more income coming in, then (funding) will just be like it is now, pretty much.”