The 2025 Budget Session will be trying to balance several issues at once. Lawmakers have to figure out how to balance multiple issues while also staying within revenue forecasts. How do we increase per-student funding, provide local taxpayer relief, and continue to fund previous policy initiatives while we deal with potentially less funding than in the past?
The budget process is never easy. Policymakers have to balance many concerns while also being fiscally responsible and documenting a Return on Investment. There have been years where the General Assembly has been very generous and also some lean years. No one really wants to have to run a referendum. Why are they needed now, but rarely existed in the past? This budget analysis looks back to when there were no school referendums and asks why and what were the per-student funding levels with state and local dollars.
In the last few years, one of the primary methods Indiana Schools have been allowed to supplement state funding has been the voter-approved referendum. However, there was a time when a referendum was unheard of and never implemented. The first referendums evolved as Indiana moved away from local support for the general or what we now call the education fund in 2008. This was part of Indiana’s property tax reforms. Indiana voters and policymakers decided to raise the sales tax from 5% to 7% and then remove or end a local property tax to support the education or general fund that supports teacher or classroom-focused dollars.
This file documents all Indiana referendums attempted, passed, and failed since 2008. There were no records of referendums on the DLGF data before 2008. Referendum Data sheet.
This list documents there have been over 280 requests to local taxpayers to increase their property taxes to fund their schools for various reasons since 2008. Why? What has happened with the current funding model that didn’t happen prior to 2008? Construction referendums are typically a local question on what type of school and facilities the local community wants to have. However, operational or what our list calls general fund referendums fund teacher salaries and student programs.
Indiana has been very dependent on referendums to fund teacher raises. There has been a lot of data in the news in the fall of 2024 documenting the increase in Indiana teacher salaries. The average salary can measure teacher retention as much as anything. The more senior staff the school district has, the higher salaries tend to be. Average salary has been the variable tracked in the last few years, so it is the variable analyzed here. The data should also be examined through the lens of how much local taxpayers contribute to the teacher salary calculation. What would happen if the local property tax support via referendums went away? According to the 2024 Teacher Pay data from IEERB, the average Indiana teacher’s salary is $60,556.35. However, if averaged across districts, the average school district salary is $58,188.73. The next question is, what would the salaries be if 51 school districts had not passed a local referendum to support teacher salaries? We did this calculation, and the local taxpayer contributed $191,243,983.63 to teacher salaries in our state. If Indiana Schools did not have this local support, the average teacher salary would be $ 57,542.83. Our data analysis can be found here. The data is taken from the raw data supplied to IEERB by schools. Referendum Dollars for Teacher Compensation.
Again, we believe it is significant to note that asking local taxpayers to increase their property taxes via a referendum was nonexistent before 2008. In order to answer this question, we would have to apply a 2024 overview of school funding to the model that existed in 2007. Indiana funded schools in 2007. Indiana funds students in 2024. This analysis looks at the 2007 budget based on 2024 type parameters of dollars available for tuition support divided by the number of students funded. This is the basic formula used to produce the biannual school budget runs each budget year. School Funding Run
We took the time to take the 2007 budget and school funding dollars and convert them into a per-student funding amount based on 2007 enrollment. The first step was to take the sum of all the local dollars used. This file was the source of the funding. https://www.indianasmallandrural.org/wp-content/uploads/2025/01/SchoolBudgetLevy2007.pdf We found out that local property taxes provided $1,681,277,154.00 in funding to Indiana schools in 2007. $1.6 billion is a big number. One of the major goals of Governor Daniels’s property tax reforms was to pull this general education funding off the levy. The state would take over this funding based on an increase in sales taxes. The local property tax amount was, in theory, added to the state funding amounts found in the state budget to provide a total amount appropriated for general fund/tuition support in 2007. This led to a huge increase in what the state paid for, and the tuition support fund increased greatly. It was clear to everyone the state was paying more.
The results of the per-student calculations were placed in a table for summation and converted to 2024 values based on inflation. https://www.indianasmallandrural.org/wp-content/uploads/2025/01/2007-Budget-Converted-to-a-per-student-funding-amount-2024-.pdf
The results had to be converted into 2024 dollar amounts. An inflation calculator was consulted to document what the inflation adjustment would be from 2007 to 2024 so the results could be converted. The inflation calculator documented a difference of 1.466. The funding amounts for 2007 were multiplied by 1.466 to translate them into 2024 dollars for comparison. In 2024, the per-student funding will be based on the total number of students supported by the taxpayers. In 2007, this denominator was 1,041,999 students. When the per-student funding was calculated, The results showed that when we look at the funding available by state and local dollars per student, funding in 2007 would have been $8,365.95 per student in 2024 dollars.
The first step of analyzing the 2024 data was to calculate how many students are being supported by taxpayers. The calculation used the enrollment numbers from the DOE voucher report and predicted enrollments for virtual schools from the last state budget. The voucher student count was multiplied by .9 since the students are funded only at 90%. The goal is to provide a full-time adm equivalent for each new category of students. The virtual student count was multiplied by .85 since voucher students are funded at an even lower level. The total enrollment for these categories was added to DOE public enrollment school data. The results are found in this table linked in the next sentence. One key note is that the number of public virtual school students was subtracted from the total public school enrollment in the calculation linked here.
The second step is to take all the categorial funding in the budgets in 2024 and line it up with 2007 data. Many fund names have changed, and new categories have been funded and created compared to 2007 to 2024. The summation of dollars can still be compared.
The process was repeated for 2024 and 2025 based on each year’s real and estimated enrollment projections provided by the IDEA. This table documents the summation and calculation for per-student funding. The calculation step takes the total funding and divides it by the total number of students. This method was selected because it mirrors what the Indiana General Assembly does on its budget runs for school funding. We found that using the actual virtual, voucher, and public school data, the per-student funding levels equated to $7,931.94 in 2024 and $7,652.47 in 2025. This is clearly less than $8,365.95 per student funding found in 2007. Indeed, the 2024 dollars in the State Budget are more than state and local support found in 2007 when we control for inflation. When we control for inflation, the difference is $121,538,638.46 more dollars appropriated in 2024 than in 2007.
The flip side is that Indiana is supporting more students in 2024 than 2007. This is what causes the per-student funding to be less. Our analysis converts the 90% and 85% funding into a full student funding count equivalent for the purpose of calculating full-time student enrollment. Indiana’s budget documents and DOE enrollment attendance reports note that the total number of students being supported by taxpayers in 2024 would equate to 1,113,194 and 1,178,722 in 2025. This is much greater than the total number of students being supported in 2007, which was 1,041,999.00. This is the policy of Indiana. Indiana funds students. We are funding more students. The facts are also clear: per-student funding, when compared to 2024, was $574 higher in 2007. The difference is even more in 2025. The difference between 2025 and 2007 per student funding will be $713.48.
We started our analysis by noting that we chose 2007 because this was the last year there were no school referendums in our state. The Indiana Small and Rural Schools see a clear connection between student funding and referendums. 51 different communities have made a choice to ask their local taxpayers to pay more property taxes, making up the difference between past funding and current funding by bringing back local property tax supports. The best way to decrease pressure on property taxes is to increase per-student funding. We realize there are limits based on revenue.
Many communities will not support a property tax increase. The General Assembly has increased funding; it just hasn’t kept up based on the number of students being served and inflation pressures. One policy idea we support is allowing school boards to use a Local Option Income Tax. A small amount of $400,000-500,000 could go a long way for many schools to make up for the funding differences we have documented. A local option income tax could follow the same process as a property tax referendum. The local citizens could vote on whether they want to support an increase in their income taxes. The pressure would be taken off property taxes, and the majority and local control would still rule.