The Indiana legislature is calling on school districts to spend at least 45% of their state funding distributions on teacher salaries. Some districts will find it easier to meet the goal than others. One reason: referendums that let districts supplement state funding with local property taxes.
According to a December 2020 report from Gov. Eric Holcomb’s Next Level Teacher Compensation Commission, teacher salary costs as a share of state funding vary widely. In 2020, they ranged from about 30% in some districts to over 60% in others.
The report found that 109 of Indiana’s nearly 300 school districts paid less than 45% of their state funding for teacher salaries in 2020. (The figures are in Appendix 15). Those districts will have to increase teacher salaries – in some cases, significantly – or cut other spending to meet the legislature’s target. Collectively, they fell $52.4 million short of paying enough for teacher salaries in 2020.
The new law, part of the state budget legislation, doesn’t force every district to spend 45% on teacher salaries right away. But if a district can’t spend that much, it will have to apply to the Indiana Department of Education for a waiver and develop a plan to spend more.
In many of the highest-spending districts, voters have passed school funding referendums. Districts with referendum funding can use some of their property tax revenue to pay teacher salaries. They don’t have to rely exclusively on state money, so it’s easier for them to get to 45%.
Ten of the 13 school districts that spent the highest percentage on teacher salaries benefited from property tax referendums. In the very top-spending districts – Hamilton Southeastern at 61.9%, Culver at 61.1%, Monroe County at 60.3% — voters have approved referendums to boost funding.
At the other end, 16 districts spent less than 40% of their state funding on teacher salaries. Only three of those districts – Gary, River Forest and Hobart, all in Lake County – have passed referendums.
Statewide, districts with referendums are something of a rarity. In 2020, only one in five Indiana districts had passed a referendum for school operating expenses, according to the teacher pay report. (Districts also have to get voter approval for certain building projects, but that’s another issue).
The teacher compensation commission suggested more districts should try to pass referendums, and they should use the funds to raise teacher salaries. “While there are challenges to passing a referendum,” the report says, “the passage rate for local referenda has significantly improved in recent years, and more districts should leverage them to raise teacher pay.”
It’s true that the approval rate for referendums has increased. But that may be a result of school leaders becoming smarter about when to try, and when not to try. The vast majority of districts have never tried, probably because they rightly suspect local residents won’t vote to raise their own taxes.
Questionable claims about school funding
Republican state legislators boasted that the budget they approved last week would increase funding for K-12 schools by about 4.5% each of the next two years. But a big chunk of the funding increase is going not to public schools but to a radical expansion of Indiana’s private school voucher program. Raising income guidelines for the program and making the vouchers more generous will cost the state $146 million over two years, over 14% of the school funding increase.
For public schools, the increase will be about 3.5% each year, Terry Spradlin, executive director of the Indiana School Boards Association, explains in an update for members. That’s the biggest increase in Indiana school funding in years, but it’s still only a little higher than the inflation rate.
Meanwhile, state funding for private school vouchers will increase by an astonishing 32% in the first year of the budget and by another 16% in the second year. The voucher expansion will pay private school tuition for families that make between 150% and 300% of the cutoff for reduced-price school meals: up to $145,000 a year for a family of four.
Legislators also claimed the budget provides $1.9 billion in new funding for education. That’s also misleading. As Spradlin points out, the figure includes $600 million to pay down the balance in a teacher pension fund, which reduces future state obligations but does nothing for schools or teachers.