Investing in Indiana’s future requires sustainable school funding

By DR. JAKE ALLEN
Guest Columnist

Each year, over 90 percent of Indiana’s school-aged children – more than one million students – attend our public schools. These students will grow up to be our coworkers, neighbors, and community leaders. Their success is Indiana’s success.

That’s why we must ask ourselves: are we giving our schools the resources they need to prepare the next generation? That is a prevailing question being debated by the Indiana General Assembly.

Public K-12 education makes up nearly half of Indiana’s state budget, reflecting its importance. Yet few public systems are more complex or less understood than school funding. As lawmakers again consider tax reform, it’s essential that taxpayers understand what’s at stake – and why sustainable school funding matters.

Indiana’s current fiscal approach leaves our public schools in a tightening squeeze. As the state caps property tax revenues, with further constraints pending, local governments – especially schools – are left to absorb the impact. Potential budget shortfalls could force districts to freeze teacher salaries, defer maintenance, increase class sizes, and eliminate programs that enrich student learning.

The financial foundation for every school district includes three critical funds, two of which, the Operations Fund and the Debt Service Fund, rely on local property taxes. Operations cover day-to-day costs – support staff, transportation, fuel, utilities, insurance. Debt Service repays bonds for capital projects like renovations and new construction. The third critical fund is known as the Education Fund, and it contains the monies provided by the state, which are primarily used for teacher compensation. Together, these three funds represent the backbone of local school budgets.

In 2024, Indiana’s average school property tax rate was roughly $1.03 per $100 of assessed property value. But the costs of running a school district – fuel, buses, insurance, utilities – have surged well beyond that. School buses cost 60 percent more than just a few years ago. Fuel prices have doubled. Insurance premiums have more than doubled and continue to rise, driven by increasing property values.

Yet local property tax revenue hasn’t kept up. A state-imposed cap limits how much property tax collections can grow. In 2023, that growth cap was 5 percent. In 2024, it dropped to 4 percent. Proposed legislation would constrict the levy dollars in 2026 even further.

This mismatch – between rising costs and capped revenues – puts districts in a very difficult position. In Mooresville alone, we estimate a $2 million loss over the next three years if the proposed property tax relief measures pass. It’s worth noting that Mooresville Schools has held a tax rate of $0.7874 for 15 consecutive years. This rate is in the bottom 20 percent of schools in the state – and has been intentionally held flat to better serve our community taxpayers. Now, imagine how much the costs of goods and living have increased since 2010.

So how are schools managing? Increasingly, districts are redirecting money from the Education Fund – which is primarily intended for teacher salaries and benefits – to cover essential operational costs like transportation and utilities. The state permits an annual transfer of up to 15 percent from the Education Fund, and in 2024, more than 10 percent of these funds – totaling over $900 million – were used in this way.

At the same time, state leaders are pushing mandates to increase teacher pay – while restricting the very funds districts rely on to operate.

We all want well-paid teachers and high-quality schools. But we can’t get there if we do not provide our schools with the resources they need. Fiscal responsibility is not just about balancing state budgets – it’s about ensuring communities can thrive.

Indiana’s students, and its taxpayers, deserve a funding framework that keeps pace with the times. We must prioritize a long-term, sustainable solution – one that honors our commitment to public education and the future of our state.

Dr. Jake Allen serves on the Board of Directors for Our Public Schools Work and as the Superintendent of Mooresville Schools.