Daniels signs school budget bill

INDIANAPOLIS | Indiana schools gained budget flexibility and third-grade students will have to know how to read under a new law signed Wednesday by Gov. Mitch Daniels.

The law permits schools to transfer up to 5 percent of unused money sitting in certain funds into their general fund. Schools can transfer up to 10 percent if all school corporation employees agree to forgo salary increases next school year.

The extra ability to transfer money is intended to partially blunt nearly $300 million in cuts to education funding ordered by the Republican governor to fix the state's budget deficit. About $82 million statewide could be transferred under the new law.

State Rep. Don Lehe, R-Brookston, said the transfer option is intended to prevent teacher layoffs and increased class sizes.

"Despite the economic downturn, education should never be sacrificed," Lehe said. "I support giving schools the flexibility they require to continue to head in the right direction and provide students across the state the education they deserve."

The second component of the new law requires the Indiana Department of Education to develop reading standards and a reading skills program for students in first through third grades. Third-graders still unable to read after remediation may be held back.

An earlier version of the legislation would have required illiterate third-graders to be retained. Lawmakers deemed the requirement too costly.