Can you explain the state funding formula and how changes are made?
The state distributes money from revenue it collects in income tax, sales tax, gaming revenues, etc. to the almost 400 Indiana school corporations, virtual schools and charter school associations based on a funding formula the state legislature creates and passes bi-annually as part of the state budget process.
All funding issues begin with the 100 legislators in the Indiana House of Representatives. At least 85% of the revenue from the state funding formula will go in Hamilton Southeastern Schools (HSE) Education Fund beginning in 2024. About 90% of this fund pays for teachers and staff of the corporation.
The funding formula begins with a per pupil “foundation” or base amount. The foundation amount is multiplied by the “complexity index” to determine additional funding required for the education of “at-risk” children. A significant inequity in the funding formula occurs when the money for an at-risk student does not follow the child to another school district. For example, the top funded districts in the state receive over $2,000 extra for each at-risk student. When these same students move to HSE, the extra dollars do not follow those students.
There are additional funding formula inequities that must also be considered related to achievement scores. There are no significant adjustments to the funding formula for a school corporation based upon achievement scores. There is also no accountability for achievement results from those school corporations and charter school associations with higher levels of at-risk students from the additional money they generated. While Indiana legislators have considered merit pay as a reward for individual teachers who improve their students’ achievement results, these discussions often overlook the crucial need for adjusting the school-wide funding formula based on overall achievement scores.
Since the 2008 Property Tax Reform legislation, there has been a continuing decline in school funding when adjusted for inflation. This has exacerbated the inequities in the funding formula, creating a serious school funding crisis. As it stands, the state funding – based solely on the General Assembly’s formula – is now the only source of funding available for classroom instruction. Since 2008, the legislature has considered possible adjustments, such as modifying the base funding amount, incorporating an index for academic outcomes, and making other minor alterations to the formula. However, any changes that do occur are likely to be implemented slowly over the coming years, if they happen at all.
The legislature addressed some of these concerns in the 2022 legislative session. School districts in Indiana received new money from the state this year and HSE is appreciative of the increase. However, even with this percentage increase, when adjusting for inflation HSE is receiving approximately 40 million dollars less compared to the funding it received from the state in 2009.