School spending — it’s often controversial and misunderstood.
Parents and community members frequently greet school officials with suspicion and accusations of misplaced priorities when teachers don’t receive raises and programs are cut while administrators green light building renovations.
“It’s just the system,” said Dennis Costerison, executive director of Indiana Association of School Business Officials. “It’s not that board members don’t want to give them more. It’s just the system won’t allow it.”
Indiana’s school funding formula is a complicated system, which regulates how much money schools receive and where it’s spent.
Simply put: School districts receive money from the state of Indiana and local property taxes.
This is where it gets complicated.
The majority of the money school districts receive from the state for the general fund comes from the foundation amount and the complexity index. The foundation amount is the tuition amount per student that schools receive based on enrollment. The complexity index provides additional dollars to school districts with a high poverty rate, as those students often need more services.
“IPS students in poverty score on average 15 percent lower than their non-poverty IPS peers on standardized tests,” said Indianapolis Public Schools (IPS) chief financial manager Weston Young.
Funding for the complexity index has decreased in recent years, school officials say. Students’ needs, however, haven’t, forcing school corporations to squeeze as much as possible out of limited resources.
“We can’t just grow the funds exponentially; they’re capped,” said David Holt, chief financial officer for the Metropolitan School District of Warren Township. “It’s not growing very much a year. Long term it’ll be difficult for us to continue to be competitive with teachers, with class sizes, because it costs more per year to do business.”
When enrollment drops, so does the general fund. For example, a decrease of 100 students in a district with 12,000 could result in a loss of $650,000, Holt said.
“It would be difficult to cut because it’s spread,” Holt said. “A 100-kid decline doesn’t mean I can cut $650,000 worth of expenditures real easily.”
Indiana also gives schools additional dollars for the general fund for special education, career and technical services, and honors graduates.
The rest of a school district’s budget comes from local property taxes. Those funds include debt service fund, capital projects fund, transportation fund and bus replacement fund.
Unfortunately, school budgets aren’t like personal ones; when one fund is low, Indiana law prohibits schools from moving funds around to cover expenses. This is why a school district could renovate buildings — as that money comes from capital projects — while unable to give teachers a raise — since that money is from the general fund.
“I can’t take money out of one for transportation and spend it on a building,” Holt said. “I can’t take money out of our general fund, which is really tuition per student, and put it toward building maintenance, so there’s a lot of restrictions.”
Because Indiana law places strict rules on how money is spent, the state does allow school districts to have a rainy day fund for use at the board’s discretion.
“We usually say you ought to have enough money put back for one month’s expenditures,” Costerison said. “Eight to 12 percent of your money ought to be set back — two or three payrolls. That’s sort of their safety blanket, and so there’s always misunderstandings about that. School corporations are not banks, either. They should not be accumulating and accumulating and accumulating. Those dollars, of course, come from local taxpayers’ property taxes. They were levied for a specific purpose, and they ought to be used for that purpose.”
