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Last modified: Monday, February 14, 2005

Demystifying school funding in Indiana

IU report discusses the good, the bad and the unknown

Editors note: The Indiana House Ways and Means Committee will meet on Monday to receive public testimony and to consider an amendment to House Bill 1001, the state budget bill. This committee will meet again on Tuesday to vote on HB 1001 (as amended). Included in HB 1001 will be a proposed school funding formula that will determine school funding for the 2005-06 and 2006-07 school years, if adopted by the Indiana General Assembly at the end of the bill process.

BLOOMINGTON, Ind. -- Indiana's method for funding its 292 public school corporations is complicated. Yet it is effective in achieving goals such as reducing variations in property tax rates across communities and breaking the connection between the wealth of communities and their level of education funding, according to a new Indiana University report released today (Feb. 14).

The report, "Demystifying School Funding in Indiana," is the latest publication in the Education Policy Brief series produced by IU's Center for Evaluation and Education Policy. The brief, while not advocating any specific changes, urges state legislators to carefully consider how changes to the state's funding system will affect schools before such changes become law. Any change likely will benefit some schools at the expense of others, the report states.

Currently the state determines a local corporation's target revenue -- how much money the corporation receives to provide a general education -- by using the highest dollar amount calculated using one of three formulas. One illustration in the report describes how reducing the number of formulas could affect education revenues. In the worst-case scenario, target revenue statewide would have dropped by more than $250 million last year. Either the state would have had to make other changes in the funding method to make up the reduction in target revenue, or local school corporations would have been faced with significant reductions in revenues.

"Policymakers need to understand that even minor changes in the funding method may affect the total funding for schools, how this funding is allocated among schools and the overall equity of the funding method," said Robert Toutkoushian, an associate professor in the Department of Educational Leadership and Policy Studies and co-author of the CEEP report.

To help in this effort, CEEP has developed a simulation model that may be used to examine the impact of potential changes in school funding before legislation is adopted -- something that could happen later this spring. The model shows how various changes would affect the state in terms of dollars spent, as well as the impact on individual school corporations. The model also shows how changes to the funding method would affect the state's goals for its financing of public education, such as breaking the relationship between a community's property wealth and its funding for education.

The new report describes in detail how the funding method works and includes essays written by Sen. Luke Kenley and Pat Pritchett, superintendent of the Indianapolis Public Schools, on their widely differing views on the school funding issues before the state legislature. The report can be found at

Since 1999, CEEP has been commissioned by the state to study and evaluate the state's school funding system. CEEP promotes and supports rigorous, nonpartisan program evaluation and policy research primarily, but not exclusively, for education, human services and non-profit organizations. Its research uses both quantitative and qualitative methodologies. To learn more about CEEP, go to

Toutkoushian can be reached at 812-856-8395 and