Indiana shorts high-poverty schools via ‘complexity’ funding

It’s been a trend in Indiana K-12 education finance since 2015: While overall state funding for schools has increased modestly, funding targeted to high-poverty schools has gone down. By a lot.

Education advocates are trying to reverse that trend as the Indiana General Assembly gets to work on a new two-year state budget. They are calling on lawmakers to put more money into the “complexity index,” the part of the funding formula that directs more dollars to schools with more needy students.

Mug shot of IUSA director David Marcotte
David Marcotte

“There’s an equity issue here,” said David Marcotte, executive director of the Indiana Urban Schools Association. “The most complex students are getting short-changed.”

Complexity index funding is 39% lower than it was 2015, according to a study by Indianapolis-based Policy Analytics for the association. In 2015, total complexity index funding was $1.15 billion. Today, it’s $700 million. Schools are getting $450 million less than they used to via the index.

In effect, that means the legislature has shifted education funding away from high-poverty urban and rural schools and toward low-poverty schools, including those in affluent suburban districts. Since 2015, the Policy Analytics study says, overall state funding for the lowest-poverty quartile of districts has increased by over 5% compared to less than 3.6% for the highest-poverty quartile.

The idea behind the complexity index is that it costs more money to effectively teach students from low-income families. Research has consistently tied child poverty to behavioral, social and health challenges and to lower test scores and graduation rates.

“When you have children who are struggling, you have to have more people,” Marcotte said. “You need lower class sizes, pull-out programs, tutoring programs and other support structures for those children.”

Indiana used to do a good job of directing extra funding to the neediest students. Its complexity index, adopted in 1993 and initially called the at-risk index, was effective at getting school districts the funding they needed. But lawmakers redesigned the program in 2015.

Previously, a district’s complexity index was based on the percentage of students who qualified for free or reduced-prize school meals. But some legislators didn’t trust that approach because qualifying for subsidized school meals is largely an honor system. Only a few families have their applications audited.

So, in 2015, Indiana shifted to what’s called direct certification. Students only count toward the complexity index if they receive benefits through the Supplemental Nutrition Assistance Program (food stamps) or Temporary Assistance for Needy Families, or if they are in foster care.

Complexity index numbers immediately went down, and high-poverty school districts got a smaller slice of the state funding pie. It’s considerably harder to qualify for and stay on SNAP or TANF than to receive free or reduced-price school meals, both because the income guidelines are different and because families have to jump through hoops to participate in the benefit programs.

“I think the biggest problem with TANF and SNAP is, now you’re relying on families actually engaging in a state system,” Marcotte said. “And whenever you rely on a system like that, it’s going to undercount.”

Indiana is an outlier when it comes to relying exclusively on direct certification for its complexity funding, according to the Policy Analytics study. It’s one of two states – Illinois is the other – that use the approach. Nineteen states use free and reduced-price lunch figures and 16 use multiple factors.

Further complicating the situation for high-poverty schools is Indiana’s inadequate funding for special education and English language learner programs. High-poverty schools tend to have more students who qualify for special education. Marcotte said 65% of the state’s English learners are in the 35 districts that make up the Urban Schools Association.

Indiana did boost special education funding in the two-year budget approved in 2021. But there’s still a gap of about $130 million between what the state provides for special education and English learners and what districts spend on those programs, Policy Analytics says. Districts have relied on complexity funding to make up the shortfall.

“If we can fully fund special education,” Marcotte said, “if we fully fund English language learners, then the complexity money would be available for its intended purpose. And that’s to educate children in poverty.”


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